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October 24, 2016 • Issue 16:10:02

CFPB, prepaid companies
both dealt blows

Bureau of Consumer Financial Protection Successful but controversial
Prepaid Debt Card Regualtions
The bureau said its enforcement actions have provided
BILLINGCODE: _AM_P over $12 billion in relief to 27 million consumers in the past
five years. Illustrating the scope of the CFPB's regulatory
12 CFR Parts 1005 and 1026 reach, the agency has taken several payment processors to
[Docket No. CFPB-2014-0031] court in recent years for initiating and clearing payments
RIN 3170-AA22 tied to criminal activities, such as online and telephone
Preapid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth Inc scams (see "CFPB to processors: Don't turn blind eye to
Lending Act (Regulation Z) fraudsters," The Green Sheet, June 27, 2016, issue 16:06:02).
AGENCY: Bureau of Consumer Financial Protection
On Sept. 8, 2016, the bureau created headlines when
By Patti Murphy it fined Wells Fargo and Co. $100 million for setting up
bogus consumer accounts. Despite its successes, the
T he Consumer Financial Protection Bureau bureau has been highly controversial, particularly among
ruled. Thus, the days of prepaid debit cards Republicans in Congress. Rep. Jeb Hensarling, R-Texas,
generally skirting federal consumer protection Chairman of the House Financial Services Committee,
requirements will end in October 2017. That's likened the CFPB's director to a "dictator" at a recent panel
when changes to federal truth-in-lending and electronic hearing.
funds transfer (EFT) regulations addressing prepaid cards
will take effect. Ironically, the new regulatory regime was The CFPB's unconventional organizational structure has
revealed just days before a federal appeals court ruled that been under fire from the start. Historically, when Congress
the CFPB's leadership is unconstitutional. has created independent agencies it has entrusted
leadership with boards of directors. (The Securities
The CFPB was created by the 2010 Dodd-Frank Act as a Exchange Commission, Federal Trade Commission and
consumer financial watchdog agency designed to have Federal Deposit Insurance Corp. are examples.)
minimal political interference. It has regulatory juris-
diction over credit cards, mortgages and other financial Not so with the CFPB. It has a single director, who is
products directed at consumers. In all, the CFPB's enforce- appointed by the president and reports to the Secretary
ment authority spans more than a dozen federal laws and of the Treasury. The CFPB's operating expenses are not
regulations involving consumer protections. This includes subject to congressional appropriations; instead, they come
regulations previously enforced by the Federal Reserve,
such as Regulation Z (which addresses truth-in-lending Contributed articles inside by:
practices) and Regulation E (which addresses EFT).
Brandes Elitch.........................................................................................24
John Tucker..............................................................................................38
Lori Schrameck and Celine Rodriguez...........................................42
Evi Triantafyllides...................................................................................45

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