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Attorney Says Prepaid Debit Cards Can Carry High Fees

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Albany, NYFor consumers with a poor credit rating or who are unable to conduct business with a bank, prepaid debit cards may seem like a dream come true. They provide customers with the ability to use a debit card without having to go through the application process with banks. However, many customers have found out the hard way that some of these prepaid debit cards carried high fees. Those customers complain they were not made aware of those debit card fees, which often drain the cards of value.

According to Emily Madoff, a partner at Wolf Popper LLP, a major concern is that these consumers were not adequately notified of the fees before they purchased the prepaid debit cards. She says in some cases, consumers pay $9.95 to purchase a $20 prepaid card. However, the card itself is not necessarily included in the package. Rather, it is mailed to the customer seven to 10 days after the card is activated. The consumer has already paid the $9.95 to purchase the card, plus $20 to load the card, but cannot access that money until the card is first activated and then mailed.

As soon as the card is activated, without the customer having used it, a monthly fee is charged. The consumer then receives the card with that monthly fee (usually between $4.95 and $5.95) already taken off. For customers who have purchased a $20 reloadable card, the fees will include not only the monthly fee but also a $9.95 fee for the reloadable card, meaning the customer has spent $29.95 for a card with $14.05 value left to spend.

That might be okay, if customers were aware they were paying these fees before they purchased the cards. However, many say they had no idea there were such fees attached to the cards.

Madoff says her law firm is currently investigating a possible lawsuit against the companies that offer prepaid debit cards.

"Over the past several months, we have been contacted by a few clients who feel they were deceived by hidden fees when they purchased these cards," Madoff says. "When we saw the article in The New York Times, (October 6, 2009), we realized that these may not be isolated incidents but widespread problems. We are still investigating these claims, and are interested to speak with other consumers who have had a similar experience and feel they were charged fees of which they were not properly made aware."

Customers who used prepaid debit cards from any company may be eligible to file a complaint if they were charged high fees that they were not warned about before purchasing the card.

"A consumer would know if they had a problem with a prepaid debit card because the amount of money that they loaded onto the card would be eaten up by fees of which the consumer was unaware (such as monthly fees, fees to use an ATM, fees to find out a balance and fees for a lost card, to name a few)," Madoff says.

Having documentation regarding the use of the card helps to bolster the consumer's complaint. This includes packaging from the card's purchase, proof of purchase of the card, proof of payments made and proof of fees charged. Although consumers do not have to have all of this documentation, the more they have, the better.

Wolf Popper LLP, a nationally-recognized law firm located in New York City, has vast experience representing aggrieved parties in consumer fraud class actions. The Firm litigates cases across the United States and has a track record of excellent recoveries for the consumers it represents.

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