Report to the Congress on Government-Administered, General-Use Prepaid Cards, July 2017

Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which added section 920 to the Electronic Fund Transfer Act (EFTA), requires the Federal Reserve Board (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. The Board collected 2016 data from 18 bank issuers, three nonbank financial institutions, and two federal government agencies on government programs that used prepaid cards as a method to disburse funds. Across reported programs, government offices disbursed $146 billion through prepaid cards in 2016, a 3 percent decrease from 2015. This was largely driven by decreases in prepaid card disbursements in state and local programs. Across reported program types, the largest decrease by value occurred in the Supplemental Nutritional Assistance Program (SNAP). Bank issuers reported collecting more than $518 million in revenue across reported programs during 2016, with 63 percent from interchange fees, 31 per-cent from cardholder fees, and 6 percent from other sources. Issuers collected 1.1 percent of the value of purchase transactions in interchange fees for these programs in 2016, a slight decrease from 2015. Revenue from cardholder fees as a percent of funds disbursed onto prepaid cards was unchanged at 0.2 percent in 2016. Automated teller machine (ATM) withdrawal fees continued to constitute the largest source of cardholder fee revenue that issuers collected in 2016. Account servicing fees and customer service fees continued to constitute the next-largest sources of cardholder fee revenue, while overdraft fees remained the smallest source.