With the CFPB expected to discuss new rules Thursday governingprepaid cards, many groups are chiming in on the proposedchanges.

“These new disclosure requirements are part of our largerprepaid accounts proposal to extend many federal consumerprotections to prepaid products,” Eric Goldberg, senior counsel atCFPB, wrote Thursday in a post on the CFPB's blog.

The proposed new rule would standardize disclosures with a newrequirement: that prepaid companies adopt model disclosure formsthat enable consumers to make better choices between prepaidoptions, Goldberg stated.

The disclosures would require a short form highlighting keyinformation about the account's fees and a long form listing allfees, he said.

For the past two years, the CFPB researchedprepaid cards, gathering comments on topics such as transparentand timely disclosures, fee disclosures to facilitate comparisonshopping and FDIC protections.

The public has 90 days to comment on the proposed rule, whichwill be available on the CFPB's website.

Some groups are already weighing in.

“It's time for consumer protections to catch up with this fastgrowing new way to pay,” Christina Tetreault, staff attorney forthe Consumers Union, said in a press release. “The CFPB hasproposed some important new safeguards that will make a realdifference for consumers. But there's more work to be done toensure consumers get the protections they deserve when they rely onprepaid cards.”

The CFPB's proposed new rules come on the heels of a newConsumer Reports investigation, which found that some prepaid cardshave costly fees that aren't disclosed clearly, the press releasesaid.

Under the CFPB's proposal, prepaid card issuers will be required to provide consumers withclear and simple disclosures of fees before purchase.

In addition, the CFPB is proposing new rules to make it easierfor consumers to check their account records and disputeerrors.

Under the proposal, a consumer's financial liability forfraudulent or erroneous charges on their cards would be capped at$50 as long as they report them in a timely manner, according tothe Consumers Union.

This protection already exists for credit and debit cardtransactions.

The Consumers Union has urged the CFPB to require prepaid cardissuers to provide FDIC insurance with cards, but the CFPB proposedthat card issuers simply disclose their cards don't provide depositinsurance, according to the press release.

The Consumers Union also called on the CFPB to prohibitoverdraft fees on prepaid cards, but the financial watchdog'sproposal falls short of doing so, the press release said.

“More and more consumers are relying on prepaid cards to makepurchases and manage their money,” said Pamela Banks, seniorcounsel for the Consumers Union. “We hope the CFPB will strengthenits proposal by adopting these other critical reforms.”

Other consumer advocates have praised the CFPB for taking stepsto protect card holders.

“The proposal offers strong protections for prepaid and payrollcards that will help ensure that funds are safe, costs aretransparent, and prepaid cards are free from abusive overdraft feepractices,” said Lauren Saunders, associate director of theNational Consumer Law Center, in a press release. “The rules willincrease consumer and employee confidence when they use prepaid andpayroll cards.”

The CFPB proposal restricts, but does not completely ban,overdraft features offered on a few prepaid cards, especially thosesold by payday loan stores, the press release said.

“Some prepaid cards push overdraft protection that makes itharder for families to make ends meet, draining scarce wages withfees and leaving a hole in the next paycheck.” Saunders said. “Theproposed rule requires companies to be honest when they areoffering credit and not disguise it as overdraft 'protection' thatcan balloon into hundreds of dollars of fees a year,” sheexplained.

The CFPB proposal requires prepaid cards that function as creditcards to comply with credit card rules including ability to repay,sufficient time to repay, limits on fees in the first year, and awall between the credit account and the prepaid card funds, thepress release said.

“While these rules are a big improvement, overdrafts should beprohibited entirely on prepaid cards,” Sanders said. “Consumersshould be able to rely on a prepaid card being truly prepaid and asa safe way to control spending.”

The rule would also protect consumers in case of errors, theftor unauthorized charges, and provide clearer information aboutfees, the press release said.

“Prepaid cards will be safer and more transparent with betterfee disclosures and the same protections that bank account debitcards get in the case of identity theft,” Saunders emphasized. “Allfees should be on the outside of the card's package so you caneasily see the full price before you buy.”