On October 5, 2016, the CFPB issued a final rule that applies federal consumer protections under Regulations E and Z for prepaid account users for the first time. Prepaid accounts may be loaded with funds by a consumer or by a third party, such as an employer. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits or send money to others.
Specifically, the rule requires financial institutions to: (i) limit consumers' losses when funds are stolen or cards are lost; (ii) investigate and resolve errors; and (iii) give consumers free and easy access to account information. The CFPB also finalized new "Know Before You Owe" disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Finally, under the new rule, prepaid companies must generally offer protections similar to those for credit cards if consumers are allowed to use credit in their accounts to pay for transactions that they lack the money to cover.
The rule covers traditional prepaid cards, including general purpose reloadable cards, as well as mobile wallets, person- to-person payment products and other electronic prepaid accounts that can store funds. Other prepaid accounts covered by the new rule include payroll cards, student financial aid disbursement cards, tax refund cards and certain federal, state and local government benefit cards such as those used to distribute unemployment insurance and child support.
Prepaid accounts are among the fastest growing consumer financial products in the United States. The amount consumers put on "general purpose reloadable" prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012, with the total dollar value loaded onto these prepaid cards expected to further increase to $112 billion by 2018.
Prepaid accounts may be loaded with funds by a consumer or by a third party, such as an employer. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits or send money to others.
The final rule is available at: http://files.consumerfinance.gov/f/documents/20161005_cfpb_Final_Rule_Prepaid_Accounts.pdf and CFPB Director Cordray's remarks regarding the rule are available at: http://www.consumerfinance.gov/about-us/newsroom/prepared-remarks-cfpb-director-richard-cordray-prepaid-accounts-rule-press-call/
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