It seems like a bit of bad publicity has scare off the Kardashian Klan from keeping their usurious prepaid debit Kard on the market. This is progress.
While most of the news stories are highlighting the unexpected wave of criticism levied at the card given its fee structure, I’d like to point out that the threat of legal action by Connecticut Attorney General (and incoming US Senator) Richard Blumenthal undoubtedly played a role as well. Without knowing too much about Senator-elect Blumenthal’s pop culture proclivities, I think he was not as offended by the celebrity shilling as he was by the card’s “pernicious and predatory fees.”
But this Kard has Kompany. Ok, enough with the “Ks.”
The cost of using these products may very well exceed the benefits of offering financial services to those without bank accounts. As the Consumer’s Union has noted, the fee structure of this product is similar to many of those now flooding the market. Specifically, they looked at 19 cards (including Russell Simmons’ RushCard) and found:
- Two-thirds had an activation fee of up to $39.95.
- Almost all had a monthly fee up to $9.95.
- All charged a fee to withdraw cash from an ATM.
- All but one charged a fee to check the balance at an ATM.
The cost of using these products is likely to exceed the benefits of offering financial services to those without bank accounts. Of course, some of the lower cost alternatives are providing a valuable service for cardholders. The problem is that there is poor transparency and it is difficult to distinguish among the products. This means there is a strong case for setting standards both for disclosure and actual product terms. If these consumer protections are not adopted voluntarily by industry, we should expect more legal challenges and/or the imposition of rules by the new Consumer Financial Protection Bureau. Either way, this is a marketplace deserving of greater scrutiny.