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SellingPrepaid

ETA sets forth The amendments for which the CFPB seeks input pertain
to adjusting error resolution requirements, providing more
recommendations flexibility concerning credit cards linked to digital wallets,
as well as making "minor adjustments and clarifications to
aspects of the prepaid rule that prepaid companies have
on prepaid rule asked questions about or told the Bureau are presenting
obstacles to implementation," the CFPB stated.

he Electronic Transactions Association went to The CFPB also released an updated version of its small
bat for the prepaid sector as part of its ongoing entity compliance guide for the prepaid rule. That update
advocacy efforts. In response to the Consumer reflects the recent effective date delay, and also includes
T Financial Protection Bureau's June 2017 request clarifications on several other issues for which industry has
for comments on proposed amendments to prepaid account raised questions or suggested might be unclear.
rules under the Electronic Fund Transfer Act and the Truth
in Lending Act, Regulations E and Z, respectively, the ETA The revised guide, which includes a summary of the
sent comments in a letter to the CFPB. updates, can be found at www.consumerfinance.gov/policy-
compliance/guidance/implementation-guidance/prepaid-rule/.
The association offered several recommendations to the
bureau. Among them were to: Mixed forecast for

• Extend the effective date of the rule to April 1, 2019
(It is currently April 1, 2018). open-loop prepaid cards

• Permit incidental credit to be provided via negative
balance on a prepaid account even when a covered rowth in the open-loop prepaid card market
separate account feature is connected to the prepaid was spotty last year, marked by weakening
account, because the considerable challenges in traditionally fast-growth segments in terms
resulting from the restriction on negative balances G of total loads. As a result, Mercator Advisory
leaves in place a hurdle for innovation and cause of Group adjusted its overall expectations in the 14th Annual
customer confusion. U.S. Open-Loop Prepaid Cards Market Forecasts, 2017-2020
analysis of market dynamics across all prepaid segments.
In its letter, dated Aug., 14, 2017, the ETA also recommended
the proposed exception apply in full to business According to Mercator's projections, open-loop prepaid
arrangements and affiliate issuers so long as all conditions loads will reach an estimated $353.6 billion in value by
are met. This includes imposition of the 30-day waiting 2020, led by the FSA/HSA (flexible spending account/health
period for covered separate credit features. savings account) tax deferred programs segment and the
Finalized but not finished benefits segment. In contrast, declining prepaid loads in
the money/financial services segment may continue as
The prepaid rule in question was finalized in October more individuals open bank accounts.
2016 and applies specific federal consumer protections to
broad swaths of the prepaid market. It requires financial Declining volumes, new opportunities
institutions to limit consumer losses; investigate and resolve As revealed in the report, load dollar volumes for certain
errors; offer free, easy access to account information; and segments approaching market saturation are expected to
provide protections. see further declines, whereas less saturated segments will
offer opportunities to prepaid card providers who wish to
The CFPB noted that prepaid accounts are among the expand into those segments.
fastest growing consumer financial products in the United
States, usually purchased at retail outlets or online. The "Prepaid providers should be evaluating their businesses
amount consumers put on "general purpose reloadable" and looking for ways to diversify," said Ben Jackson, Director
prepaid cards grew from less than $1 billion in 2003 to of Mercator Advisory Group's Prepaid Advisory Service,
nearly $65 billion in 2012. The total dollar value loaded onto and author of the report. "Opportunities in the prepaid
these prepaid cards is expected to nearly double to $112 market shift with economic and regulatory changes. New
billion by 2018. Prepaid accounts may be loaded with funds technologies such as the Internet of Things, and new use
by a consumer or by a third party, such as an employer. cases such as corporate disbursements may provide growth
Consumers generally can use these accounts to make markets in the years to come."
payments, store funds, withdraw cash at ATMs, receive
direct deposits, or send money to others.

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