Report to the Congress on Government-Administered, General-Use Prepaid Cards
Section 1075 of the Dodd-Frank Act, which added section 920 to the Electronic Fund Transfer Act (EFTA), requires the Federal Reserve Board to report annually to the Congress on the prevalence of use of general-use prepaid cards in federal, state, and local government-administered payment programs and on the interchange fees and cardholder fees charged with respect to the use of such cards.1
The Board collected 2015 data from 19 bank issuers and five nonbank institutions on government programs that used prepaid cards as a method to disburse funds. Across reported programs, government offices disbursed $150 billion through prepaid cards in 2015, a 1 percent increase from 2014. This increase was driven by increases in federal programs, which were partially offset by decreases in state and local programs.
Bank issuers reported collecting more than $520 million in revenue across reported programs during 2015, with 63 percent from interchange fees, 31 percent from cardholder fees, and 5 percent from other sources.2 Issuers collected 1.2 percent of the value of purchase transactions in interchange fees for these programs in 2015. Although the prepaid cards provided under government-administered programs usually offer cardholders one or more free automated teller machine (ATM) cash withdrawals per month, ATM withdrawal fees constitute the largest source of cardholder fee revenue that issuers collected in 2015. Account servicing fees and customer service fees constitute the next-largest sources of cardholder fee revenue, while overdraft fees continued to be the smallest source.
1. A program is considered government-administered, regardless of whether a federal, state, or local government office operates the program or outsources some or all functions to third parties, so long as the program is operated on behalf of a government office. In addition, a program may be government-administered even if a federal, state, or local government office is not the source of funds for the program it administers. For example, child support programs are government-administered programs even though they are funded by individuals. Return to text
2. Percentages do not sum to 100 due to rounding. Return to text