When Jim McConnell borrowed $400 and loaded it onto a prepaid card he bought at a local check-cashing store near his home in Urbana, Ohio, he didn't realize he was beginning a cycle of debt that would last for more than a year.
When I read that paragraph I wanted to scream and tear my hair out! Nooo! He
BORROWED MONEY and
LOADED IT INTO A PREPAID CREDIT CARD?
Those bastards are going to get that man coming and going.
And, they did.
Here's the rest of the story:
Mr. McConnell, a 47-year-old computer repairman, was required to repay the loan in full in two weeks. But that arrangement still left him short of money. So he would take out a new loan and load those funds onto his card, a process he repeated every two weeks. The result: Fees from the card provider totaled $1,344 by the time he stopped borrowing a year later.
He did figure it out:
It was a very expensive loan.
You can damn betcha he's not the only victim.
The prepaid credit industry is the new booming gold rush for financial industry giants:
Four years after the financial crisis, more than a dozen of the country’s largest banks have jumped into the once-niche market of prepaid debit cards, courting the millions of Americans on the margins of the banking system.
The banks, including JPMorgan Chase, Wells Fargo and PNC Bank, are tapping into the pools of consumers who either don’t qualify for a traditional banking account or can’t afford one. They are cheaper to serve and offer a simple way to recoup the billions the industry has lost to tighter financial regulations.
These efforts offer potential legitimacy to an industry that has existed in the shadows for decades with less government oversight and a reputation for high fees. Some regulators see the market shift as an opportunity to address the growing population of people who have no access to the banking system.
Halah Touryalai of Forbes Magazine warns:
Fees can be high, multiple, and confusing
Not all prepaid cards provide adequate protection against theft of funds using the cards or card account numbers
Promised credit lines or features to build a credit record may be expensive and overstated
Federal deposit account insurance for prepaid cards applies differently than it does for bank accounts and may be capped at less than the value of all of the prepaid cards issued by a particular card program.
Consumer! Beware!
This is only the tip of the iceberg. What about ZERO LIABILITY?
Later.