Prepaid cards’ popularity as a bank alternative catches regulator’s eye

WASHINGTON—Prepaid cards, which started out as simple gift cards from retail stores, have morphed into popular financial-management tools with functions that rival bank checking accounts. Now regulators are playing catch-up, with plans to roll out a new rule this fall that will bring oversight of the sector closer to regulations covering banks.

The coming rule from the Consumer Financial Protection Bureau marks the federal government’s first comprehensive effort to police the rapidly growing market catering to tens of millions of Americans, many of whom are lower-income and have either no or limited access to regular bank accounts.

The products—known as general purpose reloadable, or GPR, cards—carry at least one of the major payment card network brands such as Visa V, +0.07% or American Express AXP, -0.27% and can be used to make purchases at various stores and withdraw cash at ATMs.

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