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Consumer Advocates Take Records Hunt to Court

Fighting a Republican effort to loosen regulations that protect consumers from prepaid card abuses, an advocacy group brought its open-records battle to a federal judge.

WASHINGTON (CN) - Fighting a Republican effort to loosen regulations that protect consumers from prepaid card abuses, an advocacy group brought its open-records battle to a federal judge.

The rule at issue gives prepaid card users protections similar to those regular credit and debit card users enjoy, including overdraft protection. Clocking in at 1,700 pages, it includes requirements for sellers of prepaid card to prominently display their terms and disclose fees, and it limits consumer losses when funds get stolen or lost.

Republican opposition to the law has been moving swiftly, however, and the group Allied Progress filed a federal complaint Tuesday to access Consumer Financial Protection Bureau records under the Freedom of Information Act.

Allied Progress says it wrote to the Consumer Financial Protection Bureau last week, seeking copies of any prepaid-rule correspondence that CFPB officials might have exchanged with 12 Republican senators since Dec. 1, 2014.

The first lawmaker Allied Progress mentions is Sen. David Perdue, R-Georgia, who introduced legislation in February with Rep. Roger Williams, R-Texas, to repeal the rule under the Congressional Review Act.

Perdue, who calls the CFPB a "rogue agency" on his website, explained his opposition to the prepaid rule in a March 9 statement.

“From its initial stages, this rule was shortsighted and so sweeping that it would have stifled innovation in a growing marketplace millions of consumers rely on," the release states.

In addition to Perdue, Allied Progress asks the CFPB for copies of its communications with Sens. Tom Cotton, Johnny Isakson, Ron Johnson, James Lankford, Mike Lee, Mike Rounds, Michael Enzi, John Kennedy, Jeff Flake, John McCain and Ted Cruz.

The advocacy group says it also wants CFPB communications with officials from credit card processor Total Systems Services, prepaid debit card provider NetSpend and some of their respective lobbyists. 

Allied Progress did not immediately respond to an emailed request for comment about the April 18 lawsuit, but said in a press release that NetSpend has given Perdue $33,000 in campaign contributions since 2014.

The CFPB declined to comment on the pending litigation but referred Courthouse News to comments its director Richard Cordray made about the prepaid rule in October.

"Many of these products lacked strong consumer protections under federal law," Cordray had said. "Our new rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone."

Allied Progress says the CFPB denied its request for expedited processing, and has not yet released any records in relation to its request.

Seeking expedited processing, the group says Williams and Perdue’s efforts could come to a head as early as next week.

While their bill was before the Senate Banking Committee, Chairman Mike Crapo, R-Idaho, approved a rare discharge petition from Perdue to move the bill onto the floor without a report from the committee, which frees it from further consideration of the bill before a vote.

Allied Progress noted in its original FOIA petition that Crapo approved the petition just one day before NetSpend reached a $53 million settlement with the Federal Trade Commission, which accused it of deceiving customers about access to funds on NetSpend debit cards.

The group is represented in court by Scott Hodes.

Categories / Business, Consumers, Government, Politics

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