Calderon Refund via Prepaid Debit Card Legislation Signed by Governor Newsom

Tuesday, July 30, 2019

SACRAMENTO, CA – Assembly Bill 1428, authored by Majority Leader Ian Calderon (D-Whittier) which requires any business that offers a refund to a customer via a prepaid debit card to offer the customer with at least one other method of receiving the refund other than a prepaid debit card, was signed into law today by Governor Newsom. 

“AB 1428 will give consumers the choice, allowing them to decide what type of refund meets their needs,” stated Majority Leader Calderon. “While there may be some instances where refund via prepaid debit card is preferable – likely for the unbanked consumer – by and large, given the usage restrictions, maintenance fees, and expiration dates, these payment instruments are not favorable to the consumer.”

Unlike gift cards, prepaid debit cards may have an expiration date.  Additionally, prepaid debit cards may charge a monthly maintenance or service fee.  Some transactions may not be permitted, often involving purchases at gas pumps or stipulations that the card only be used at restaurants if the card has enough funds to cover the entirety of the bill and a hold for an anticipated 20% gratuity.  These restrictions can often make the card difficult to fully utilize.  That difficulty of use, coupled with the monthly maintenance fees and expiration date, inhibit the ability of the customer to fully acquire the refund they were due at the onset.

At the federal level, the Credit CARD Act of 2009 provides general consumer protections for not only credit cards, but for various types of gift certificates, store gift cards, and prepaid cards.   Section 401(a)(2)(A) of the Credit CARD Act defines “general-use prepaid card” as “a card or other payment code or device issued by any person that is (i) redeemable at multiple, unaffiliated merchants or service providers, or automated teller machines” and “(iv) honored, upon presentation, by merchants for goods or services, or at automated teller machines.”

However, certain types of general-use prepaid cards may be excluded from the Credit CARD Act’s regulations. Section 205.20(b) states that general-use prepaid cards do not include any card that is “(4) Not marketed to the general public.” 

AB 1428 will require any business (excluding retail establishments and restaurants) that offers a refund to a customer via a prepaid debit card to offer the customer a choice among the following refund formats:

  • A refund back to the original form of payment.
  • A refund via a check.
  • A refund via a prepaid debit card.

Contact: Tom White (916) 319-2057