On March 1, 2023, the CFPB released a new issue spotlight examining how the financial products used to deliver public benefits, like Social Security and unemployment compensation, affect individuals’ ability to fully access the assistance provided through those programs. The issue spotlight outlines how governments often choose to deliver public benefits through financial products, particularly prepaid cards, that may subject recipients to high fees and cut into the amount of funds the consumer receives.
In particular, the issue spotlight highlights that:
Public benefits are eroded by fees;
Fees can result in uneven access to benefits across states;
Individuals experience inadequate customer service; and
Consumers may be trapped by lack of choice and competition.
The CFPB’s issue spotlight focuses in particular on cash assistance provided by prepaid cards because of specific recurring issues arising with the provision of benefits by that method.The CFPB noted that prepaid cards often have numerous fees that reduce the amount of funds available for consumers who are most in need.
The CFPB said that it will monitor and take action against entities who violate federal consumer financial protection laws to ensure that those involved in the delivery of cash assistance comply with their obligations under the law.
Read the CFPB’s press release here.
The issue spotlight can be found here.
