ABA to CFPB: Strike balance in prepaid regs

The American Bankers Association believes the Consumer Financial Protection Bureau must walk a fine line to effectively regulate the prepaid card industry. In a July 23, 2012, letter, the ABA said the CFPB must make rules flexible and not over burdensome to the industry, even as they extend to prepaid cardholders the protections already afforded debt and credit cardholders.

The letter said the CFPB must recognize the variety of general purpose reloadable (GPR) prepaid cards and that different GPR cards will thus have different fee disclosure aspects. But the CFPB must also keep in mind that prepaid card programs have costs that must be considered. "[D]eveloping choices among features and functionality is not free," the ABA said. "The systems that support these payment technologies have costs for which the providers require compensation and generate benefits for which people are willing to pay. Any regulatory overlay must take account of the valid economics of innovation." Therefore, the ABA recommended the CFPB not take a top-down approach to regulation. "Allow consumers and the marketplace to determine features, pricing, and terms and not impose artificial constraints that will distort the market, ultimately increasing consumer prices and limiting consumer choices," the ABA said.

The ABA, which represents the U.S. banking system and especially smaller financial institutions, operates the Community Bank Prepaid Program through its Business Solutions subsidiary. The program offers MasterCard Worldwide-branded prepaid card programs to its community bank members.

The public comment period for industry participants to offer input on how the CFPB should regulate the industry ended July 23. The ABA's letter to the CFPB can be accessed at www.aba.com/Issues/commentletters/Documents/7-23-12LettertoCFPBreElectronicFunds%20Transfers.pdf?utm_source=tracker&utm_medium=post&utm_campaign=CommentLetter .

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