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Prepaid Cards are suitable for those with any type of credit rating and are useful in times when you need a debit card when you don't have a bank account.
Should the prepaid be pre-approved? Controversy as the financial world considers regulating the prepaid card market
There’s controversy amongst finance experts as talk is turning to whether prepaid cards should be regulated before being approved onto the retail market. With seemingly reputable banks becoming nationalised and companies like Woolworths, the foundation of the High Street for 100 years going bust, some are concerned that consumers who use prepaid cards do not have adequate protection in the event of their chosen service’s administration.
It could be compared to the Farepak situation back in 2006. Millions of people who were worried about the costs of Christmas contributed money to end of the year costs in advance, with the promise of receiving High Street vouchers towards the festive season.
The company’s collapse left millions devastated and many out of pocket over the period, with few being reimbursed. It served as proof to be business world that even companies that work on a prepaid basis can go into administration without any warning.
With the devastation that the administration of Farepak caused fresh in the minds of some experts, some are calling for steps to ensure that the balances of innocent consumers are protected under any circumstances.
Currently, some companies do offer balance protection to their consumers, which acts as peace of mind if the service they use begins to encounter trouble. However, it has been noted that the services which do offer such a liberty are few and far between.
Prepaid cards need to be more than recession-proof
Experts strongly believe that prepaid cards should be immune from any repercussions the recession may bring, as for some prepaid cards could be a last-ditch attempt to improve a debt situation or bad credit rating. There are no doubts that a crisis at a prepaid card company could ruin some families for good.
However, the calls for regulation have reasons beyond the tough financial times that are international news. It is known fact that prepaid credit cards do not leave a paper trail, which can mean less infrequent consultations of card statements. With some prepaid cards offering balances of up to £5,000, some damage could be done if a prepaid card should fall into the hands of a fraudster.
This lack of documentation when combined with the lack of protection against identity fraud offered to the consumer could result in severe implications if the card falls into the wrong hands.
One attorney vented her frustration at this fact. Lauren Saunders, a legal worker, had this to say: “How can you know if you’ve been a victim of identity theft if you’re not seeing what’s going onto your card?”
As expenditure from transactions jumps in leaps and bounds year-on-year through prepaid credit cards due to the global recession, the priorities of financial experts who are trying to make the best out of the tough times are becoming more apparent: regulate credit cards, as the recession could deepen by hundreds of millions of pounds should things worsen in the future.