Senate Bill S7608

                                 BILL NUMBER:  S7608

 TITLE OF BILL :

An act to amend the general business law, in relation to general use
prepaid cards


 PURPOSE OF THE BILL :

This bill would require issuers of general use prepaid cards to
disclose all fees associated with the use of such card, prior to their
sale.

 SUMMARY OF PROVISIONS :

Section 1 of the bill would add a new General Business Law (GBL) §
396-ii which would include the following provisions:

* GBL § 396-ii(1) would set forth definitions, as follows:

o "General use prepaid card" would be defined as a card or other
payment code or device issued by any individual, firm, company,
partnership, limited liability company, corporation or entity that
upon presentation is (i) redeemable at multiple, unaffiliated
merchants or service providers, or automated teller machines; (ii)
              

issued in a requested amount, whether or not that amount may, at the
option of the issuer, be reloaded to increase its value a later period
in time; (iii) purchased or loaded on a prepaid basis; and, (iv)
honored by merchants for goods and services, or (v) used to access
cash at automated teller machines.

o "Clear and conspicuous" or "clearly and conspicuously" would be
defined as notice in larger type than the surrounding text, or in
contrasting type, font, or color to the surrounding text of the same
size, or set off from the surrounding text of the same size by symbols
or other marks, in a manner that clearly calls attention to the
language. In the case of an audio disclosure, "clear and conspicuous"
and "clearly and conspicuously" means in a volume and cadence
sufficient to be readily audible and understandable.

* GBL § 396-ii(2) would provide that a general use prepaid card must
provide clear and conspicuous notice that "important terms and
conditions affecting the balance apply" on the card, and prior to the
sale of a general use prepaid card the consumer must receive clear and
conspicuous notice in any such card advertisements or offers made that
"important terms and conditions affecting the balance apply."

* GBL § 396-ii(3) would provide that clear and conspicuous disclosure
of pertinent enumerated terms and fees that contribute to the costs
associated with general use prepaid cards be made available to
consumers prior to purchase. Such notice would be provided to
consumers either via a toll-free telephone number, if an active
toll-free telephone number is clearly and conspicuously provided on an
envelope or the packaging containing the general use prepaid card, or
on a printed document accompanying the general use prepaid card.

* GBL §396-ii(4) would provide that subdivisions 2 and 3 do not apply
to general use prepaid cards that have no terms and conditions.

* GBL § 396-ii(5) would provide that nothing in this section would
prevent any unclaimed general use prepaid card funds become abandoned
property in accordance with the laws therein.

* GBL § 396-ii(6) would provides the Attorney General of the State of
New York with enforcement authority.
* GBL § 396-ii(7) would bar retroactive fees on general use prepaid
cards.

* GBL § 396-ii(8) would require that this statute preempt local laws
on the same subject.

Section 2 of the bill would provide for an effective of the January 1
following enactment.

 EXISTING LAW :

None.

 LEGISLATIVE HISTORY :

This is new bill.

 STATEMENT IN SUPPORT :

General use prepaid cards, also known as "prepaid debit cards" and
"stored value cards," have emerged as a new product in the past
decade. In essence, a consumer may purchase such a card and add a
certain sum to it to use at any merchant that accepts the brand of the
major credit card that is associated with that prepaid card (i.e.
Visa, Master Card, American Express or Discover), or to access cash at
an automated teller machine. The distinction between a general use
prepaid card and a prepaid gift card bearing a major credit card logo
is that a general use prepaid card can be used to access cash via an
electronic payment system that is linked to a deposit account.

As general use prepaid cards continue to grow in popularity with the
"unbanked," those persons who either chose not to use banking
services, or who are unable to access banking and credit services
because of poor credit history or legal status in the United
States.(1) General use prepaid cards offer the unbanked the ability to
make Internet purchases and bill payments, and to learn about
financial transactions, fostering financial literacy. Thus, they can
facilitate an introduction of the unbanked into the financial
mainstream.

Unfortunately, there are often numerous fees associated with general
use prepaid cards. The State Banking Department lists fourteen
different fees that may be assessed against the sum of a general use
prepaid card.(2) Such fees vary greatly. For example, one card imposes
a $99 application fee and the next month charges a $27.95 maintenance
fee.(3) Other charges imposed upon consumers by such cards include
fees for calls made to the customer service number, use of the card to
pay a bill, declining an automated teller transaction, use of the card
for purchases, and balance inquiries.

Recent New York Times and Business Week articles highlight the need
for regulatory oversight of prepaid debit cards.(4) Currently, general
use prepaid card issuers are free to charge whatever fees they choose
for any service provided without informing the consumer that (a) such
fees are applicable and (b) the amount of such fees.

This bill enhances protections for New Yorkers and provides that any
general use prepaid card being offered for sale clearly and
conspicuously disclose on the card that "important terms and
conditions affecting the balance apply." The proposal also requires
that all pertinent terms and fees, which create a cost associated with
the general use prepaid card, be clearly and conspicuously disclosed
to consumers prior to purchase, either via an active toll free number
that is provided on the envelope or packaging of the card, or in
printed material accompanying the card.

Additionally, the legislation requires that clear and conspicuous
notice that "important terms and conditions affecting the balance
apply" be provided in offers or advertisements enticing the sale of
any general use prepaid card.

This measure would define general use prepaid cards by using the
definition recently set forth in the federal Credit Card
Accountability, Responsibility and Disclosure (CARD) Act of 2009.
While the CARD Act of 2009 defines and places limitations on general
use prepaid cards, it only required that dormancy, inactivity, and
service fees be disclosed.

In 2008, consumers loaded about $8.7 billion onto prepaid cards, which
was a 125 percent increase over the previous year. Thus, it is
imperative that consumers be provided with all the information
necessary to make important financial decisions regarding such cards.

 BUDGET IMPLICATIONS :

None.

 EFFECTIVE DATE :
This bill would take effect on the first of January next succeeding
the date on which it shall have become a law.
 FOOTNOTES :
(1) A Summary of the Roundtable Discussion on Stored Value Cards and
Other Prepaid Products, The Federal Reserve Board, (November 12,
2004).
(2) Consumer Help and Information: Cards. Cards. Cards....and What You
Need to Know About Using 171em, New York State Banking Department,
(November 2009).  SEE  www.banking.state.ny.us/brcard.htm
(3) The Card Game - Prepaid, but Not Prepared for Debit Card Fees, New
York Times, (October 6, 2009).  (4) Id., and Let's End the Debit Card
Fee-for-All, Business Week (October 15, 2009).