Banking and Finance Law Daily Prepaid products lead CFPB Monthly Complaint Report
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Tuesday, March 1, 2016

Prepaid products lead CFPB Monthly Complaint Report

By Richard A. Roth, J.D.

Complaints about loss of access to funds caused a spike in consumer complaints about prepaid access, according to the Consumer Financial Protection Bureau. The CFPB noted that it has received more than 4,300 complaints about prepaid products and that many of the recent complaints resulted from problems at RushCard and its subsidiary, Empowerment Ventures, LLC. The bureau’s monthly “snapshot” also highlighted complaints originating in the Houston, Texas, area.

Prepaid product complaints. According to CFPB Director Richard Cordray, “Prepaid products provide a crucial financial lifeline to many unbanked and underbanked households,” which means they must function well. The complaints received by the bureau included:

  • extended loss of access to funds;
  • replacement cards being issued that do not include the remaining balance on the older, expired card;
  • loss of access to all of a consumer’s funds while a single charge is disputed; and
  • various fees, either for use or for inactivity.

Complaints nationwide. The bureau said that, as of Feb. 1, 2016, it has handled more than 800,000 complaints. Volume rose by 8 percent between December 2015 and January 2016. In the period between Nov. 1, 2015, and Jan. 31, 2016, complaints about services such as debt settlement, check cashing, and money orders rose by 77 percent, while complaints about payday loans fell 12 percent.

When the periods of November 2014 through January 2015 and November 2015 through January 2016 were compared, Arizona had a 33-percent increase in the number of complaints. Hawaii had a 15-percent decrease in complaint volume, which was the largest decline.

Houston, Texas. Each month the CFPB’s report focuses on a single geographic area, and Houston was in the spotlight for March. As of February 1, Texas consumers have filed more than 63,000 complaints, with about one-quarter of those from the Houston area.

Texas consumers were more likely than consumers nationwide to file complaints about debt collection practices—33 percent of Texas complaints related to debt collections, as opposed to 26 percent nationwide. On the other hand, complaints about mortgages are lower than average—16 percent of complaints from Texas were about mortgages, as opposed to 26 percent nationwide.

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