Letter to CFPB re November 2014 study of prepaid account agreements, United States Senate, 2015
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<tinitcd �tares �cnatc WASHINGTON, DC 20510 November 3, 2015 The Honorable Richard Cordray Director Consumer Financial Protection Bureau 1700 G Street, NW Washington, D.C. 20552 Dear Director Cordray: We commend the Consumer Financial Protection Bureau (CFPB or Bureau) for its November 2014 study of prepaid account agreements and the protections these accounts provide, including access to account information, overdraft services, and fee disclosure information. We write to bring to your attention to predatory behavior in the prepaid card market that impacts a particularly vulnerable population, formerly incarcerated people. As the Bureau moves forward with finalizing a proposed rule to strengthen protections for prepaid products, we urge you to take a second look at the impact of prepaid cards in the unique prison context. Prison release cards are a critical tool for people leaving prisons to transfer their earned wages and/or commissary account balances to a prepaid card. Any reductions to the wages and account balances of formerly incarcerated people could harm their ability to successfully reenter society. Today, some firms charge high fees on prison prepaid cards that create significant barriers to reentry for formerly incarcerated people. Most corrections agencies that report using prepaid cards also report that fees are imposed on cardholders, including unusual fees such as weekly maintenance fees. 1 These cards often also include forced arbitration provisions. 2 As your recent study on arbitration showed, the rights of consumers nationwide are limited by forced arbitration in the financial services industry.3 As another example, states receive revenue from certain vendors chosen to provide prison release cards. Correctional facilities may also structure their contracts with prepaid card vendors in such a way that costs are entirely passed on to formerly incarcerated people. 4 The CFPB's 2014 study of prepaid account agreements examined 325 account agreements. Only five, or 1.5 percent, of the agreements studied were prison release cards. 5 Additionally, according to the Bureau of Justice Statistics, prison sentences have increased in recent decades. For example, prison sentences imposed increased from an average of 55.1 months during 1988 to 1 Prison Policy Initiative, Comment to the CFPB proposed rule (March 18, 2015), available at http://static.prisonpolicy.org/releasecards/CFPB-comment.pdf. 2 http://static.prisonpolicy.org/releasecards/CFPB-comment.pdf. 3 http://www.consumerfina nee.gov/reports/a rbitration-study-report-to-congress-2015/. 4 http://static.prisonpolicy.org/releasecards/CFPB-com ment.pdf. 5 Consumer Financial Protection Bureau, "Study of prepaid account agreements," Nov 2014, http://files.consumerfinance.gov/f/201411 cfpb study-of-prepaid-account-agreements.pdf