For Immediate Release - March 26, 2015

AG Healey Makes Push to Protect Residents by Urging Stronger Prepaid Card Regulations, Lower Auto Insurance Costs

Advocates for Stronger Federal Protections for Prepaid Cards Users; Calls on DOI to Reject Increase of Auto Insurance Fees for MAIP Policyholders

BOSTON – To address the needs of economically vulnerable consumers in Massachusetts, Attorney General Maura Healey this week sent letters urging stronger federal protections for consumers who use prepaid financial products and encouraging state regulators to reject auto insurance fee increases for certain policyholders.

“As the people’s law firm, it is squarely on our shoulders to help protect our most vulnerable residents from financial harm,” AG Healey said. “Whether it concerns insurance coverage, financial products, housing, or employment, we are on the lookout to ensure all Massachusetts residents receive a fair deal and the protections they deserve.”

Prepaid Cards

In a letter sent to the Consumer Financial Protection Bureau (CFPB), AG Healey acknowledged that prepaid cards serve as a critical tool for those with weak or damaged credit or who face obstacles in opening more traditional financial accounts. She supported the CFPB’s proposed amendments to federal regulations that would extend many of the same federal protections to prepaid accounts as those afforded to traditional banking customers.

To further protect these consumers, AG Healey proposed the following additional measures:

  • Low and No Fees: Fees should be capped or regulated to promote the low-cost goals of these alternative products. No fees should be charged for account inactivity, balance inquiries, customer service inquiries, and for accounts with zero balance.
  • Insurance: Prepaid deposits deserve the full protection of federal deposit insurance in the event the issuer holding the funds becomes insolvent.
  • Customer service requirements: Prepaid account customers should receive a comparable level of customer service provided to traditional bank accounts, including the ability to speak with a person. 
  • General safeguards: Providers should be required to establish policies and procedures related to succession, joint-accounts and beneficiaries; data security and privacy; and fraud protection features similar to credit cards.  
  • Issuer Registry:  Issuers of prepaid accounts should also be required to register with CFPB in order to monitor and prevent against scam offerings. 

Auto Insurance Fees

In an effort to prevent policyholders from paying higher auto insurance fees under the state’s residual market system, known as MAIP, the AG’s Office also sent a letter to the Division of Insurance (DOI), urging it to reject a fee increase proposed by Commonwealth Automobile Reinsurers (CAR). CAR’s proposal would increase installment fees on MAIP policyholders from $6 to $8 per installment, late payment/cancellation fees from $25 to $29, and returned check fees from $25 to $29. CAR is an industry-operated organization which oversees MAIP, the private passenger auto insurance market of last-resort. 

According to the AG’s letter, a large percentage of MAIP policyholders live in urban or low-income communities with significant minority populations.  Nearly one-third of the vehicles insured in the MAIP are assigned to drivers with perfect or nearly perfect driving records. 

In addition, the AG’s Office has requested that the DOI direct CAR to help lower costs by giving MAIP policyholders access to the same electronic billing and payment methods as voluntary customers and establish associated fee discounts and waivers comparable to those received by voluntary market customers.

The AG’s letter argues that CAR’s fee proposal is inconsistent with sound public policy and ratemaking practices, and exceeds voluntary market norms. Massachusetts law protects MAIP policyholders from pricing discrimination and ensures that residual market policyholders are not charged a premium in excess of what they would have been charged had they been written voluntarily. Under CAR’s Rules of Operation, insurance companies are required to charge MAIP policyholders the lower of the carrier’s voluntary premium or the MAIP premium. 

Consumers seeking assistance can call Attorney General Healey’s Consumer Hotline at (617)727-8400.