Fed Proposed Debit Interchange Fee Cap Rule Could Have Unintended Consequences for Government Benefit Cards, Flexible Spending Accounts and Reloadable Prepaid Cards

/PRNewswire/ -- The Network Branded Prepaid Card Association (NBPCA) is concerned that the interchange fee structure and network routing terms announced by the Federal Reserve in its proposed rulemaking will inevitably increase costs to consumers and issuers. Operational flaws, such as requiring prepaid gift cards and flexible spending account cards to include PIN-based debit, not only serve no purpose but also create inefficiencies, increase risk of fraud and unnecessarily raise costs.

Of particular concern to the prepaid card industry is the proposed rules do not clarify how the critical exemptions for government benefit cards and reloadable prepaid cards would be implemented by the card networks under the proposed interchange fee cap rule, as mandated by the Dodd-Frank Wall Street Reform Act. This fact was noted during yesterday's meeting, when a Federal Reserve official acknowledged the proposed rule permits but does not require card networks to allow a higher interchange fee for government benefit cards, reloadable cards not marketed as gift, or cards issued by banks with less than $10 billion in revenue. The official added if it becomes problematic for the card networks to implement the exemptions, then the lower interchange rate would apply.

"At a time of historic economic hardship, millions of Americans rely upon government benefit cards and reloadable prepaid cards as a secure, convenient, non-stigmatizing payment tool to make everyday purchases," said Kirsten Trusko, NBPCA President and Executive Director.

"NBPCA looks forward to submitting comments to the Federal Reserve and hopes it will clarify how exemptions will be handled in its final rule. Failure to do so could reduce the availability of prepaid cards, resulting in a catastrophic impact on consumers and governments," added Trusko

Financial institutions offer government benefit cards to states at little to no cost because they receive revenue primarily from the debit interchange. Nearly every state in the nation (47 states) either uses prepaid cards or is in the process of setting up programs to administer a variety of benefits, such as unemployment and Temporary Assistance to Needy Families (TANF) to millions of needy Americans.

The US Treasury dispenses Social Security benefits through its Direct Express government benefit card. Not only do states save money from check related costs, which is critical at a time when states are experiencing huge budget deficits, but consumers benefit from receiving their funds more efficiently and quickly through this electronic payment tool. Without the exemption from the lower debit interchange fee, it is likely banks will be forced to reduce or eliminate the availability of government benefit cards to nearly every state in the nation.

Millions of unbanked and underbanked individuals also rely upon prepaid cards to participate in our card based economy. It is quite probable if these cards aren't exempted from the interchange fee cap, prepaid card users will be subject to merchant minimums for credit cards because clerks could confuse the cards with credit cards and deny prepaid cardholders from making basic purchases like milk and eggs.

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Flexible Spending Accounts: Don't Lose Your Hard-Earned Money

(NAPSI)-Flexible spending accounts (FSAs) are a valuable benefit to help pay for medical expenses. Employees can contribute a portion of each paycheck to a FSA, tax-free account that can be used to cover anything from acupuncture to X-rays. However, by law, people who contribute to FSAs must use all of their contributions by the end of the year or forfeit them.

Unfortunately, about one-third of people who take advantage of FSAs leave an average of $168 in their accounts each year. Some people may not realize the range of medical expenses covered by FSAs, which may contribute to their leaving unspent funds behind.

What's Reimbursable

Reimbursable medical expenses cover a variety of health-related products, treatments and procedures, including over-the-counter medication, dental care and even many treatments for vein disorders, including varicose veins and venous leg ulcers.

FSAs May Cover Vein Treatments

Dr. Ted King, Medical Director of the Vein Clinics of America, says FSAs have become a common way for patients to cover treatment for their vein disorders. "While FSAs don't cover cosmetic procedures, many vein disorders are much more than a cosmetic issue," said Dr. King. "Because vein disorders can have an impact on lifestyle and lead to serious complications, FSAs may cover vein treatments, which can improve health and well-being, in addition to self-esteem."

Vein disorders, while often unsightly, can also be painful and, if left untreated, lead to serious problems--even life-threatening consequences. It is estimated that more than 80 million people in the United States have varicose veins.

For more information, please visit www.veinclinics.com.

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