I would like to offer some of my reactions to the new prepaid debit card disclosure boxes that were rolled out by the CFPB earlier this week CFPB:
1) I prefer a format that uses different font sizes to emphasize some fee items over others. That is Model 1. Some fees are
more important than others: ATM withdrawal, monthly fee, and load cost.
2) Asterisks are dangerous. Both forms make extensive use of asterisks. In my mind, asterisks undermine the trust that consumers will have with their cards.
3) Cost estimating is useful in this product segment. An "average monthly fee" consolidates the variety of possible expenses. This is why it is a shame that the CFPB has veered from that approach. There are many precedents for an estimate. EPA forms for appliances and car mileage are two examples. Cost estimating is also sensible given the pace of evolution taking place in this space.
4) Retailers will see these disclosures and add complementary ones of their own. Any store that provides free loads at the register for certain cards (BlueBird and Green Dot at Wal-Mart) or free ATM withdrawals (Balance Financial inside a Walgreens) is going to mention that fact somewhere near the j-hook.
5) The CFPB should be using color better. The Liquid box has alternating blue and white rows. NetSpend does too. Using color is by itself not important, but it is if it means that there can be more information on the card. The CFPB's box is short and concise, but...
6) The CFPB box doesn't list all of the fees. Instead, the CFPB box lists a link to a web site address. But that is not necessary, because j-hook packages now have fold-out booklets. Balance has one as does Liquid. With those fold-out sheets, font sizes are in 12 point type and there is plenty of room to explain the cards. The CFPB box should have detail. One way to have it both ways is to have an average monthly fee: then you can incorporate all those additional items into some kind of price expression.
7) There is no box for overdraft. I hope that means that there will not be any overdraft. If overdraft does turn out to be something that the CFPB authorizes, then this is a HUGE oversight.
8) Functionalities matter. Why are both of the boxes silent on the presence of a remote deposit feature? There is nothing about savings sub-accounts, either. What about text-to-pay? Remote deposit is becoming more and more common. It can save a consumer a lot of money because it eliminates the need to cash a check and then load. My suggestion is that the CFPB should assign one of their graphic designers to the task of devising a series of icons which would alert consumers to these capacities.
9) What about costs that are not linear with use? Durbin-exempt cards from big banks have to offer one free in-network ATM. The CFPB boxes are silent to that contingency.
10) I like the left-hand column in Disclosure Box 2 that narrates the flow of money: "Add and withdraw..." and "spend money" add something. This is an element of the Pew prepaid disclosure box.
11) If the CFPB is going to suggest that consumers follow a link to a web page for more information, then the box should also include a QR code. There is room on the box. Sen. Warner's prepaid disclosure bill talked about the value of the QR code. The critique that no one uses a QR code is a bit off, in my opinion. The use of QR codes is only going to increase over time. Look at bitcoin: QR codes are a basic payments tool.
12) Most prepaid cards have no monthly fee or a discounted monthly fee when a consumer facilitates a recurring direct deposit on to the account. Shouldn’t the disclosure speak to that fact?
To sum it up: I would rather a version that integrated the font hierarchy of Disclosure Box 1 with the narrative flow of Disclosure Box 2.
Reading between the lines, there is something here that suggests that advocates will be happy with how the CFPB constructs its proposed rule. There is no mention of overdraft nor is there a mention in the boxes about a credit feature. If those are going to be green-lighted, then there is little sense in offering these box designs. A card with overdraft and/or a credit line will have to come with disclosures to that effect.