A new front in the debate between consumer advocates and industry developed during Last week’s CFPB field hearing in Durham, North Carolina.
Martin Eakes, CEO of the Self-Help Credit Union, insisted that prepaid cards should not have any arbitration clauses. Eakes presented a disclosure from NetSpend.
“For a prepaid card to meet the promise of serving under-served people, I believe it has to have at least the following three key features: The first is that it must have no mandatory arbitration clauses in the account….First arbitration, I pulled last night the account disclosure for NetSpend, one of the largest prepaid card providers. The customers must read and agree to thee terms before signing up for a NetSpend prepaid card online. I challenge anyone in this room to actually read this microscopic print that has six pages on a single front page and six pages on the back…My point is this: buried on page 10 in this microscopic print is a requirement that any dispute be solved by mandatory arbitration and only as an individual not as a group action. For many cases of abuse or discrimination the dollar amount is so small – two or three hundred dollars – that no single individual can ever enforce their claim.
Eakes said that NetSpend CEO promised to fix the size of the print by the end of the week if Eakes’ claim proved to be correct. However, he made no concession on arbitration.
The NetSpend disclosure for the card it manages on behalf of Ace Cash Express includes its arbitration notice on page 14. The notice denies consumers the right to bring any dispute to a court, nor to have any representation through a class action suit. Green Dot’s disclosure for MoneyPak says that it may elect to use arbitration. There is no reference to arbitration in the terms of conditions for the AccountNow Gold Visa card.
Eakes’ claim that most disputes would probably revolve around sums of just two or three hundred dollars is actually generous. One CEO of a large prepaid card provider said that savings sub-account holders generally managed to save an average of 78 dollars after having the account open for a year.
To date, most critiques by advocates have focused on credit, overdraft, FDIC insurance, and Reg E protections.