The corporate swindler behind a Republican lawmaker’s push to strip consumer protections from the prepaid debit card industry recently paid $53 million to settle allegations it willfully deceived its customers for years.
The March settlement between the electronic payments company NetSpend and the Federal Trade Commission does not acknowledge any wrongdoing by the company. But the reported size of the deal amounts to two-thirds of what NetSpend makes from prepaid card overdraft fees each year.
NetSpend isn’t some random player in this drama. Its Georgia-based parent company has given thousands of dollars to Sen. David Perdue (R-GA), who is leading the charge to override recently enacted regulations on the prepaid card market.
Those rules are so modest and narrowly targeted at deceptive practices that Green Dot, the largest company in the prepaid space, endorsed them enthusiastically last year. But NetSpend expects to lose $80 to $85 million a year if forced to change its overdraft policies under the rule.
Republican leadership can take their time with broader efforts to gut Wall Street reforms, with full control of the legislature and White House. But the clock is ticking fast for Perdue’s Congressional Review Act (CRA) bill to revoke the prepaid card rules. In two weeks, the legal window for CRA authority over the rules will close.
Perdue’s quest already faced some headwinds thanks to his campaign finance relationship with NetSpend, as well as the contrast between that relatively exploitative company’s position and the welcoming stance of market leader GreenDot.
But the March settlement with the FTC will likely draw those apparent conflicts of interest to the fore as time runs short for Perdue’s bill. The man leading the corporate lobbying effort in support of the bill is none other than NetSpend CEO Chuck Harris, now President-Elect of the Electronic Transactions Association.
Harris’ prominent role in this conversation changes the optics of the issue. But its substance is the same, as Pew Charitable Trusts consumer finance expert Thaddeus King wrote Tuesday.
“People who turn to prepaid cards do so specifically to gain control of their finances and prevent overspending and overdrafts, and the prepaid card rule takes all of this into account,” King wrote. “Most companies that provide prepaid cards do not oppose the prepaid card rule, which is not surprising because it mainly codifies practices that most companies already use, such as restricting costly overdraft fees.”
Perdue’s bill would not simply make adjustments to the Consumer Financial Protection Bureau’s (CFPB) carefully considered and widely supported rules. It would prevent the agency or any other regulator from trying again. CRA override bills bar executive branch agencies from making any “substantially similar” rule until and unless Congress instructs them to do so in separate legislation.
Prepaid cards have exploded in popularity in recent years, without regulatory oversight of the card companies’ tendency to fleece users. A 2014 analysis by the Federal Reserve found that card users paid an average of $15 to $17 in fees per month for using the cards — a roughly $200 annual hit for a class of financially vulnerable consumers who can ill afford to absorb such fees.
The CFPB took its time studying the market, understanding card companies’ perspective on disclosures and fees, and then pushed out a modest rules package last year which reflects reasonable industry concerns while targeting the most abusive business models in the space.
The agency’s cautious, gradual, inclusive process has nonetheless been portrayed as a foolhardy rush to judgment by ideological opponents of financial regulation. The prepaid cards fight has generally been overshadowed by these ideologues’ broader war on the CFPB itself, which bank-friendly Republicans have relentlessly attacked since its inception.
The appearance that Perdue is doing a favor for a corporate donor with an unsavory business record may help to explain why fellow Republicans haven’t moved as quickly on this CRA as on other anti-regulatory pushes in the early days of President Donald Trump’s administration.
They still have about two weeks — time runs out on either May 9 or May 10, depending on how House and Senate leaders manage the schedule— to heed Perdue, Harris, and NetSpend’s call to permanently block prepaid card regulations.
It used to be complicated to explain what Perdue was up to, why prepaid card regulations are important, and what wonky disagreements still persist about the widely-embraced CFPB rules.
Now, suddenly, it’s all very simple: The prime mover behind Perdue’s bill just paid a powerball jackpot to get the feds to stop pursuing allegations that it had tricked its customers for years.