Sunday, July 21, 2013

The Bluebird Card Challenge - Part Three

This is the third in my series of five posts reviewing the Bluebird prepaid card as an alternative to traditional banking.
This post explains the fine print in the Member Agreement and reviews the top ten provisions consumers might find most interesting.

After abandoning traditional checking and savings accounts last October and converting to Bluebird, I've been cautiously reviewing my statements for hidden fees and unauthorized charges.

Thus far, I'm happy to report that Bluebird has proven to be upfront and consumer-friendly.

In fact, after I signing up, Amex has actually eliminated various fees and added a free bill-pay program and a mobile app.

The fine print on the back of my card reads, "USE OF THIS CARD IS SUBJECT TO MEMBER AGREEMENT".

The Member Agreement turns out to be massive; larger than the US Constitution and a traditional home mortgage loan combined. However, for a multi-part legal document drafted by a team of corporate attorneys, it's fairly easy to navigate.

After reviewing the Agreement in its entirety, I found its provisions to be fairly straightforward. The ten provisions below stuck out as those most likely to interest an average consumer.

10. Liability for Unauthorized Charges; Fraud
Under federal law, a consumer is not generally liable for over $50 in unauthorized charges if they promptly notify their credit or debit card company.

Amex contractually provides consumers with the same protections for unauthorized charges, and promises consumers they will never be liable for fraudulent use.

FINE PRINT: You will not be liable for goods or services fraudulently purchased through your Account or Sub-Account, but you may be liable for other unauthorized use of your Account or Sub-Account.

9. Amex Will Pay Late Fees
Amex contractually agrees to pay late fees up to $50 incurred by consumers resulting from errors in Amex's bill-pay program.

FINE PRINT: We will bear responsibility for any late payment-related charges ... should a Pay Bills bill payment arrive after its due date...

8. FDIC Insurance
Once each day, Amex places all moneys deposited onto its cards into FDIC-insured accounts with Wells Fargo Bank, N.A. and Amex Centurion Bank.

Unless you're unlucky enough to deposit money onto your card the same day Amex files bankruptcy, the FDIC has you covered.

The Agreement doesn't say whether Wells Fargo or Amex may setoff from consumer deposits to pay unrelated delinquent credit cards or lines of credit.

FINE PRINT: Your Bluebird funds will not receive the benefit of FDIC insurance before they are placed in one of the custodial accounts referenced above. FDIC insurance coverage is contingent upon our maintaining accurate records and on determinations of the FDIC as receiver at the time of a receivership of a bank holding a custodial account referenced above.

7. New York Law Applies
The Agreement makes it very clear: New York law applies.

FINE PRINT: Users of this Site agree to submit to the laws of the State of New York, USA and applicable federal law without regard to conflicts of laws principles.

6. Forward Looking Information
A portion of the Agreement warns investors not to treat Amex's Bluebird advertisements as investment advice.

In the event the Bluebird program is a major flop, Amex is looking to avoid securities suits based on its prior "optimistic" statements.

FINE PRINT: The words "believe", "expect", "anticipate", "optimistic", "intend", "aim", "will" or similar expressions are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made.

5. No Warranties
Consumers beware: the Agreement makes clear that Bluebird is provided "as is".

FINE PRINT: All ... products, and services ... are provided to you 'as is' without warranty of any kind either express or implied...

4. Privacy
The Agreement promises Amex will not share your personal information with anyone. Except under eight very broadly defined circumstances, including:

- "as permitted by law", meaning almost any government request may be honored, even if no subpoena or warrant is issued;
- to collect your debts in the event you owe Amex money; and
- with any Amex vendor or business partner.

FINE PRINT: All Internet sites have the ability to collect information about you. We encourage you to read the privacy statements of every site you visit.

3. No Interest
You can deposit up to $100,000 onto your Bluebird card. But expect no interest.

Amex should be commended on a philosophical level for helping reinforce the separation of consumer banking and investment products.

FINE PRINT: You will not receive interest on funds in your Bluebird account or sub-accounts.

2. Free Replacement Cards
Amex bears the expense if your card is lost, stolen, or destroyed. A nice change from many brick and mortar bank policies.

FINE PRINT: If your card is lost or stolen, the member should call customers service immediately and we will issue a free replacement card.

1. Mandatory Arbitration
Amex requires consumers waive their rights to jury trials in order to use Bluebird.

This means if a deranged Walmart greeter pistol-whips your newborn with a rolled up copy of the Member Agreement, you cannot file suit in court.

Amex also requires consumers waive their rights to participate in class actions in order to use Bluebird.

This means if a careless banking error causes Amex to wrongfully deduct one penny from a million different consumers' cards, each consumer must file their own costly arbitration proceeding against Amex to recover their penny.

FINE PRINT: Other rights that you would have in court also may not be available or may be limited in arbitration, including your right to appeal and your ability to participate in a class action.

Overall I give Amex's Member Agreement a B. Amex could earn an A+ with high paper distinction by simply making arbitration voluntary.

The mandatory arbitration provision promotes careless large scale corporate policies and is likely to surprise less-sophisticated consumers.

My next post will focus on the realities of using Bluebird and cash as an alternative to traditional banking.