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Education
The CFPB takes on prepaid
By Brett Husak The scope of the rules
National Bank Services
Recently, the agency issued its Final Rule, which will go into
I n the banking industry, when you read headlines effect Oct. 1, 2017. It governs prepaid accounts that include:
about the Consumer Financial Protection Bureau,
you may feel an immediate sense of dread. The CFPB • General-purpose reloadable cards (such as cards with
can seem like Cousin Eddie from the movie National Visa, Mastercard, or American Express logos)
Lampoon's Vacation and its sequels: someone you don't
really want to see, but he keeps showing up unannounced • Mobile wallets and other electronic prepaid accounts
and you have no way to avoid him. (such as PayPal and Square Cash)
Well, the days have gotten shorter, the air has gotten cooler • Peer-to-peer payment products
and, just in time for the holidays, along came Cousin
Eddie (I mean the CFPB) with an appearance. The prepaid • Student financial aid disbursement cards
card industry has remained mostly unregulated due to
ambiguities in credit and debit card laws. That was up until • Tax refund cards
four years ago, when the CFPB disclosed its intention to
implement regulations on prepaid accounts. • Payroll cards
More on CFPB and prepaid • Government benefit cards
The following resources were used in researching In summary, this applies to any stored-value payment
this article: mechanism that is not connected to a bank account as long
as it is redeemable with unaffiliated merchants, can be
• www.mondaq.com/unitedstates/x/535478/ used at ATMs, or can be used to conduct person-to-person
Consumer+Credit/CFPB+Releases+Final+Rul transfers. The Final Rule specifically excludes:
e+on+Prepaid+Cards
• Gift cards
• www.natlawreview.com/article/consumer-
financial-protection-bureau-finalizes-much- • Gift certificates and store cards redeemable at a spe-
anticipated-prepaid-account-rule cific merchant
• www.motherjones.com/kevin-drum/2016/10/ • Cards given as loyalty or promotional rewards
cfpb-wild-west-over-prepaid-cards
• Payment cards associated with IRS-regulated tax
• www.lexology.com/library/detail. savings accounts (health savings accounts and flex-
aspx?g=fef02d09-3b50-4cca-abef-bf28800f- ible spending accounts)
1fac
• Payment cards used to distribute means-tested ben-
• www.lowcards.com/prepaid-cards-face-new- efits under state or local law
regulations-this-fall-45161
• Federal government store cards for making purchas-
• www.americanbanker.com/bankthink/ es at military installations
cfpb-should-regulate-not-eliminate-prepaid-
cards-1081605-1.html Why these regulations matter
• www.bna.com/cfpbs-prepaid-card- So let's explore what exactly these regulations are and how
n73014444017/ they will affect both you and the consumers. The CFPB reg-
ulations will entail new protections for prepaid accounts
• www.wsj.com/articles/prepaid-cards- under the Electronic Fund Transfer Act, as well as required
growing-popularity-catches-regulators- consumer disclosures and credit protections that arise out
eye-1474104603 of the Truth in Lending Act and the Credit Card Account-
ability Responsibility and Disclosure Act.
On the positive side, consumers will be made more secure
by these changes once they are given greater access to their
account information and more detailed fee disclosures in
their card agreements. There will also be a limit to a con-
sumer's monetary loss in the event that their cards are lost
or stolen.
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