On October 5, the Consumer Financial Protection Bureau issued
its much anticipated final rules regulating prepaid card accounts.
The final rules follow the proposed rules that the Bureau issued in
December 2014, and are mostly unchanged from the proposed rules.
The new rules apply to "prepaid accounts," which the
Bureau defines as accounts that are marketed or labeled as
"prepaid" and that are redeemable upon presentation at
multiple, unaffiliated merchants for goods or services, or that are
usable at automated teller machines (ATMs). The term also covers
accounts that are issued on a prepaid basis or capable of being
loaded with funds, whose primary function is to conduct
transactions with multiple, unaffiliated merchants for goods or
services, or at ATMs, or to conduct person-to- person (P2P)
transfers, and that are not checking accounts, share draft
accounts, or negotiable order of withdrawal (NOW) accounts. The
term prepaid accounts also includes certain digital wallets that
can hold funds. Prepaid accounts include payroll cards and
government benefits cards, but do not include gift cards and gift
certificates, or accounts used for savings or reimbursements
related to certain health and dependent care.
The Bureau set forth the proposed rules shortly after issuing a
bulletin reminding employers that Reg E applies to payroll cards to
the extent that employers cannot force employees to receive their
wages through payroll cards. The new rules further confirm that Reg
E applies to all prepaid accounts. In particular, prepaid account
issuers' losses are limited to $50 when funds are stolen or
cards are lost as long as the consumer informs the issuer about the
lost or stolen card. In addition, issuers are required to
investigate and resolve errors when a customer finds unauthorized
or fraudulent charges, or other errors on their accounts. Issuers
must provisionally credit the disputed amount to the consumer while
it finishes its investigation if it cannot resolve the
investigation within a certain amount of time. Issuers are also
required to give consumers free and easy access to account
information by telephone, online, and in writing upon request,
unless the issuer provides periodic statements.
In the final rules, the Bureau did not deviate from the proposed
rules' efforts to respond to consumers stating that they were
not aware of the costs associated with using prepaid accounts.
Specifically, the final rule requires two forms of
"easy-to-understand" disclosure – one short and one
long. The short form must include information about periodic fees,
per-purchase fees, ATM withdrawal and balance inquiry fees, cash
reload fees, customer service fees, and inactivity fees. The long
form must provide a complete list of fees and certain other key
information, and consumers must be able to get or access the long
form prior to acquiring the account.
With respect to Reg Z, the Bureau addressed prepaid accounts
with credit features. Issuers of prepaid accounts must determine
that a consumer has the ability to repay the debt prior to offering
credit on a prepaid account under the final rule. Consumers are
also required to wait 30 days from the date of signing up for a
prepaid account before being allowed to obtain credit from the
issuers. The final rule also requires issuers to provide consumers
with a monthly credit billing statement, provide consumers with a
"reasonable time to pay," and limit late fees for tardy
payments. In addition, the final rule forbids an issuer from
automatically taking funds uploaded into the prepaid account to
satisfy a credit repayment. The rule requires consumer consent
prior to automatically withdrawing funds from the account.
The new rule will generally apply to prepaid accounts starting
Oct. 1, 2017, though the requirement for submitting agreements to
the Bureau takes effect in October 2018. The final rule includes
other accommodations in certain situations.
The Troutman Sanders' Consumer Financial Services
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services industry to inform you of recent changes in the law,
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