A financial company that has spent generously on lobbying Washington may soon see its bets pay off, as the Congressional Republicans who were among its many beneficiaries work to scrap rules that prevent it from charging customers tens of millions in overdraft fees.
Last week, Georgia Republican Sen. David Perdue introduced a resolution in Congress, alongside other Republicans including his fellow Georgian Johnny Isakson, to throw out a new package of rules for the prepaid debit card industry.
The rules, finalized by the Consumer Financial Protection Bureau in October, include limitations on overdraft fees, which have become a significant source of consumer complaints about the financial industry — and an important revenue stream for Georgia-based financial firm Total System Services, whose NetSpend unit is the country’s largest manager of prepaid cards, according to a 2015 financial filing.
The vast majority of prepaid debit cards don’t come with overdraft fees, but NetSpend’s do, and the fees accounted for 10-12% of its overall revenue in 2016, or $80-85 million, the company told investors in October. Its parent has spent big on lobbying and political donations in a bid to kill the rules: in the last three months of 2016 alone, it spent some $270,000 lobbying Congress.
The company’s political action committee has also given its home-state senators Perdue and Isakson $37,500 in campaign contributions since 2010, according to data from the Center for Responsive Politics.
Because prepaid cards are used disproportionately by low-income consumers — NetSpend provides the prepaid cards sold by four of the country’s five largest payday loan companies — advocacy groups have pushed regulators to pay close attention to the industry, and to eliminate overdraft fees.
The rules also bring other features of traditional banking services to prepaid cards, like protection from unauthorized charges and requirements for clear descriptions of fees. An estimated 22.4 million people were using prepaid cards in 2014.
Lauren Saunders, associate director of the National Consumer Law Center, said reversing the rules will be an example of “members of Congress that support Wall Street and predatory lenders over working families.”
“It is outrageous that Congress may block basic fraud protections on prepaid cards so that NetSpend can keep gouging struggling families with overdraft fees,” Saunders said in a statement.