Financial justice activists may have the Kardashian sisters to thank. Unwittingly, the famous trio has helped raise awareness about one of the most abusive financial products on the market today: prepaid debit cards.
The sisters recently introduced -- and quickly pulled, under fire from consumer groups and Connecticut's Attorney General, among others -- the Kardashian Kard (actual spelling). The reloadable spending card, displaying the MasterCard logo along with the sisters' famous figures, cost $99.95 for a 12-month plan, on top of a slew of fees every time someone added money, withdrew money, checked their balance, or basically came within ten feet of the card.
Fans of alliteration will miss the fun of kriticising the kostly kard, now that it's kaput. But the teenagers who were no doubt its target customers are safer with the Kard off the market.
Or are they?
While the Kardashian Kard was an easy target -- SNL even did a sketch about it -- there are countless other fee-sucking prepaid cards that target young people -- as well as low wage workers, immigrants, and other financially-strapped groups.
At a New York City Council hearing last month, NEDAP and other groups testified at length about the predatory fees and weak consumer protections that characterize prepaid cards. Contrary to industry claims that prepaid cards are sound alternatives to bank accounts, groups representing low income New Yorkers underscored how these largely unregulated products further marginalize people who have the fewest resources or who are newest to the banking system. Better options for people disillusioned with banks include community development credit unions, which are not-for-profit and dedicated to reinvesting in their local communities.
Invoking the Kardashian Kard debacle, Democrats in the U.S. Senate recently introduced the Prepaid Card Consumer Protection Act, which would bring the cards under much-needed federal regulations, more on par with bank accounts. And the new federal Consumer Financial Protection Bureau will have authority to rein in abusive financial practices, including by prepaid card companies. These reforms could go far to strengthen basic consumer protections for people who use the cards.
In the meantime, stay away from these inferior pieces of plastic. In their current form, prepaid cards are nothing more than the latest in a long list of "second-tier" financial products for which the poor pay more.