Both bank and credit union trade associations have remained largely quiet about the news that Wal-Mart and American Express have added FDIC insurance to money deposited on their Bluebird prepaid card.
NAFCU CEO Fred Becker sidestepped the question of whether Wal-Mart was trying to obtain banking powers without having to take a bank charter and expressed approval for the fact that Bluebird cards would now carry federal insurance. Becker made the point that consumers are put at risk when they are allowed to think that funds deposited on the card carried FDIC insurance when in fact they did not.
He also noted that having the Bluebird funds carry FDIC insurance opened the cards up to regulation from the FDIC and from the Consumer Financial Protection Bureau, which has already come down on American Express about discrepancies in disclosures around some of its products.
“I don't think American Express can assume it’s only heard from Mr. Cordray once,” said Becker, referring to CFPB Director Richard Cordray. The CFPB is in the process of developing a regulation addressing pre-paid cards.
CUNA had made no comment about the Bluebird insurance change as of press time. Neither has the ABA.
The Independent Community Bankers of America, long a credit union opponent and a leader in the effort to keep Wal-Mart from obtaining a bank charter, was about the only group angered by and opposed to the Bluebird move. The association takes a very dim view of FDIC insurance covering money added to Bluebird cards, according to Viveca Ware, senior vice president for regulatory policy at ICBA.
“These cards are nothing more than checking accounts in prepaid clothing and need to be regulated as such,” declared Ware.
Ware recounted how the ICBA and other bank and credit union groups had opposed Wal-Mart being allowed to have a bank charter in 2007, only to see the giant retailer launch many bank like products and services without a charter.
Wal-Mart has not commented on the addition of the insurance or about the charter question, but has largely left the Bluebird news to American Express.
When the card was launched in October 2012, Amex executives said the noted card brand, which already has three banks to help fund its card offerings, would not seek to cover funds deposited on Bluebird cards with FDIC insurance, but changed their position in order to enable cardholders to directly deposit U.S. government funds onto their Bluebird cards, according to an Amex spokesman.