With the new rules it proposed this week, the Consumer Financial Protection Bureau (CFPB) has moved to make the rapidly expanding world of prepaid and payroll cards a safer and more straightforward place.

The CFPB’S proposal would limit, though not prohibit, overdraft programs that blur the line between prepaid and credit and subject cardholders to fees that can be hard to anticipate or understand. Under the Bureau’s proposal, issuers would have to provide clear and simple disclosure of all fees; prepaid and credit accounts would have to be kept clearly separate; and consumers would have an easier time checking their charges and balances and asserting their rights in case of a dispute. Protections against identity theft would also be enhanced.

Members of our coalition had asked the CFPB to go further, banning overdraft plans entirely so that a prepaid card would be just that, allowing consumers to use it as a way to keep spending under control.

Nevertheless, the proposed rule is an important step forward, and we commend the Bureau for taking action early in the life cycle of this financial product line, making it more likely that it will develop as a useful tool for consumers, and avoid widespread abuses.

The public has 90 days to comment on the CFPB’s proposed rule. Comments may be submitted here.