Keep limits on prepaid debit cards

Will Congress erase a new regulation designed to protect those Americans who use prepaid debit cards? A deadline for a decision is near, and many Republicans, including Sen. Rob Portman of Ohio, have expressed their opposition to the rule. Their stance is unfortunate. The regulation reflects four years of good work by the federal Consumer Financial Protection Bureau, consulting with stakeholders, even pushing back the date for implementation.

The regulation helps make a case for why the bureau was created in the wake of the excesses on Wall Street that deepened the recession, with some harmful effects still felt.

The use of prepaid debit cards has increased dramatically since 2003, from less than $1 billion a year to more than $110 billion today. The cards are attractive to those seeking to avoid adding debt and trying to put their finances in better order. Around onequarter of users do not have a bank account. The cards also have been the subject of many complaints, with the financially vulnerable often exploited by bad actors.

Such circumstances go to the purpose of the bureau: See potential trouble, investigate, listen, and recommend changes.

In this instance, the regulation brings familiar measures of protection, mirroring many best practices in the industry. It establishes greater uniformity in the disclosure of fees, terms and conditions, enhancing comparison shopping and, thus, competition. It limits liability when consumers provide timely notification of lost or stolen cards. It also places restrictions on companies permitting overdrafts, an option that easily compounds the financial troubles of many card users.

Critics argue that the regulation risks narrowing the availability of the cards, and that too many burdens would lead companies to retreat from the market to the disadvantage of consumers. And yet, most companies in the prepaid card industry are not opposed to the regulation.

Put another way, there is a rough consensus for moving forward.

Which makes one element of the opposition most disturbing: Here is another example of Republican lawmakers applying the Congressional Review Act to thwart a regulation of the Obama presidency. The tactic is part of the effort to overturn the helpful Methane and Waste Reduction Rule of the Bureau of Land Management. The regulation promises more efficient use of natural gas, reduced greenhouse emissions and increased royalties for the federal treasury.

The problem with the Congressional Review Act is its severity. It wouldn’t just eliminate the regulation covering prepaid debit cards. It would bar regulators from pursuing any “substantially similar” rule, short of new congressional approval to move ahead.

Actually, there is a middle way. Let the work of the Consumer Financial Protection Bureau stand, and then take legislative steps to make modifications where Republicans deem they are needed. What consumers do not deserve is to be left without the additional protection, the product of much research and thought about how to keep at bay unscrupulous operators.

This isn’t excessive regulation. It is prepaid debit cardholders being treated fairly, and the federal government blunting excess in the marketplace.