On October 5, the Consumer Financial Protection Bureau (“CFPB”) issued its much-anticipated Final Rule for prepaid accounts under the implementing regulations for the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z). The Final Rule is effective on October 1, 2017 and governs “prepaid accounts” including:*
- general purpose reloadable cards
- mobile wallets and certain other electronic prepaid accounts
- peer-to-peer payment products
- student financial aid disbursement cards
- tax refund cards
- payroll cards
- government benefit cards
The Final Rule’s definition of “prepaid accounts” excludes:*
- gift cards and gift certificate
- loyalty, award or promotional gift cards
- certain health, dependent care, and transit or parking card programs
*As described in Reg E.
Key aspects of the Final Rule include:
Reg E Protections
“Reg E Lite” protections extended to “prepaid accounts.” Thus, financial institutions must provide consumers easy access to account information and must investigate and resolve erroneous charges. Additionally, consumer liability for authorized charges will be limited in certain circumstances.
Reg Z Protections
Prepaid cards linked to credit products are subject to certain protections under Regulation Z and the Credit Card Accountability Responsibility and Disclosure Act. Accordingly, prepaid card issuers must confirm that consumers can repay the debt before offering credit. Consumers must receive periodic account statements, disclosures, and a reasonable time to repay the debt. The Final Rule also sets certain limits on account fees and interest charges.
In most instances, both short- and long-form disclosures must be given before consumers acquire a prepaid account.
As of October 1, 2017, issuers must post prepaid account agreements on their own websites. Beginning October 1, 2018, certain prepaid account issuers must submit their agreements to the CFPB on a rolling basis. The CFPB will post the agreements on its website.
The Final Rule includes model disclosures and forms.
NOTE: A more comprehensive analysis of the Final Rule is forthcoming.