GPR cards could lose functionality due to Durbin

According to a Sept. 26, 2011, Federal Reserve Board of Atlanta blog post, consumers could lose payment functionality with prepaid cards due to provisions of the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Portals and Rails blog said general purpose reloadable (GPR) cards can be subject to the interchange fee cap, which could result in prepaid card providers eliminating card features in order to be exempt from the Durbin regulations.

If cardholders can access funds in certain GPR card accounts using a check, automated clearing house (ACH) money transfer, wire transfer or other account transfer method, then that GPR card is considered a "deposit account" and therefore is subject to the amendment, the blog said. That provision was imposed to prevent card issuers from evading the Durbin amendment by labeling traditional debit cards – and their underlying deposit accounts – as prepaid cards, the blog added.

To gain exemption from Durbin and its interchange cap as dictated in the Regulation II ruling, issuers could eliminate payment functionality from GPR cards, the blog said. "Under this scenario, consumers would no longer be able to use their GPR prepaid cards to auto-draft funds via ACH from the card to pay recurring bills, such as utility bills," the blog stated.

The blog referenced an American Banker article that said Green Dot Corp. may remove features from its GPR cards to claim exemption the interchange fee cap. The blog can be accessed at portalsandrails.frbatlanta.org/.

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