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News

The pending rules are controversial, as
the CFPB has been. In 2016, for example, a
federal appeals court ruled the leadership
structure of the CFPB is unconstitutional.

The 2010 Dodd-Frank Act gives the CFPB broad
powers to regulate consumer financial services,
particularly those offered by nonbank financial
services companies, like prepaid and short-term loan
companies. A sweeping set of rules crafted by the
CFPB specifying regulatory coverage of prepaid cards
is set to take effect in October. Those rules, among
other things require upfront fee disclosures, specific
error resolution procedures, standardized agreements,
detailed monthly statements and overdraft protections.
Controversies prevail

The pending rules are controversial, as the CFPB
has been. In 2016, for example, a federal appeals
court ruled the leadership structure of the CFPB
is unconstitutional. The bureau was created as an
independent federal agency with a director who is
appointed by the President yet reports to the Secretary
of Treasury. The appeals court said the President must
have veto authority over the agency's rules.

Republicans in both the House and Senate have
introduced resolutions to scuttle the rules. The
Congressional Review Act is a 1990s-era law that allows
Congress to override federal agency rulemaking with
majority votes in both the House and Senate, along
with presidential approval.

Peter Cubita, of the law firm Ballard Spahr LLP, said
that to date, the CRA has been used only once to
nullify federal rulemaking. A controversial ergonomics
rule adopted by the Occupational Safety and Health
Administration during the final months of the Clinton
Administration was torpedoed following the election
of George W. Bush and a Republican Congress in 2000.

In December 2016, the Electronic Transactions
Association, echoing the sentiments of many CFPB
detractors, wrote leading Republicans in the Senate
urging repeal of the CFPB's prepaid card rules. "The
CFPB's rule on prepaid cards is overly burdensome,
expansive and prescriptive, negatively impacting
consumers," Scott Talbott, ETA Senior Vice President of
Government Affairs, wrote.

In early February, resolutions to repeal the rulemaking
were introduced in both houses of Congress. Sen. David
Perdue, R-Ga., introduced Senate Joint Resolution 19,
which is co-sponsored by six other Senate Republicans.
The resolution is pending before the Senate Banking
Committee. A similar measure was introduced in the
House by Rep. Tom Graves, R-Ga.
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