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Clue on Prepaid Credit Decision in Departure of CFPB Exec?

Adam R.'s picture

Posted January 10, 2014

For those waiting on the CFPB for its now-delayed rulemaking on prepaid cards, the departure of the lead executive in Cards puts a provocative energy into the vacuum of policy related to the products.

The CFPB announced that Marla Blow will leave shortly to take a position at Fenway Summer, LLC.

Fenway Summer is led by former CFPB Assistant Director Raj Date. Blow has served as the Assistant Director for Cards and Payments Markets at the CFPB. Prior to that, she worked at Capital One in their credit card division.

Ms. Blow's assignment at Fenway Summer will include efforts to create better small-dollar credit products.

In my opinion, it is hard to read that news without pausing to imagine what it means for the rule-making. This specific moment does little to give comfort to those hoping for a slam-down against credit. It adds to perceptions that there is room within the CFPB for the idea of making an accommodation to credit.

For almost two years, the CFPB has dutifully committed itself to a process of hearing from all sides on questions related to prepaid cards. From my view, no question has gained more attention than the one surrounding the possibility of offering some kind of loan product.

Credit on prepaid is a litmus test among consumer advocates, many of whom remain preternaturally uncomfortable with the arrival of a new type of transaction account in the first place.

"If you want to give them credit," said Martin Eakes during the CFPB's field hearing that kicked off the rulemaking process, "then give them a credit card."

Implicit in that advocate's statement was the understanding that a credit card application would go through a process of underwriting. To date thus far, iterations of credit on prepaid cards have relied upon the arrival of the next direct deposit for collections. Given that, the products mimicked the terms of payday lending: single/balloon repayment, automatic collection, and potential for rollovers.

Many advocates still insist that the only "good" transaction account is one to be had at a branch bank. I cannot agree with that - ultimately it is the functionality and cost rather than the geography that matters. But for many, prepaid cards are still in a period of infancy in terms of acceptance. 

Another way to say it was that perhaps the true innovation of the prepaid card was that it gave a consumer access to the payments system without leaving them vulnerable to the cost of overages.

But again, this news should tilt tea leaf reading in the direction of a decision for small-dollar credit on prepaid cards.

At the very least, this should put to rest the groundless claims made by a fearful minority that the CFPB is made up of a corps of lifetime government employees with an aggressive anti-business outlook. The truth is that the CFPB hired people with many different experiences and perspectives. It is in the Bureau’s blue-print to create regulation that supports both consumer protection and innovation.  

Lydia DePillis got the culture at the CFPB right in Sunday's Washington Post.

Blow and Date both came from credit cards. Now they are re-united at a firm that is taking on the task of thinking about new possibilities for small-dollar credit. Perhaps that is enough to put her in the category of "Raj's people," the term Depillis used for describing the affiliations that developed in the first few years of the Bureau's existence. Blow's forward trajectory away from the Bureau does a lot to suggest how the CFPB has already been thinking about the "credit on prepaid" question as it prepares its final rule-making.