On October 5, 2016, the Consumer Financial Protection Bureau (the Bureau or CFPB) issued its final rule to extend certain federal consumer protections to the prepaid market.1 As previously reported, the rule extends Regulation E (Electronic Fund Transfers) coverage to prepaid accounts, while adopting specific account provisions. It also generally expands coverage of Regulation Z (Truth in Lending) to overdraft credit features sometimes offered in conjunction with prepaid accounts.2
The CFPB is proposing to delay the October 1, 2017 effective date of the rule by six months, to April 1, 2018.3 Through various discussions regarding implementation efforts, the Bureau learned that some industry participants are concerned that they will have difficulty complying with the rule while also ensuring continued availability of their prepaid products and with minimal disruption to consumers by October 1, 2017 deadline.4 The Bureau believes that delaying the effective date will give the CFPB an opportunity to assess whether any additional rule adjustments are appropriate, as well as help industry participants address certain packaging-related logistical issues for prepaid accounts that are sold at retail locations.5 The Bureau also recommended to make conforming amendments to certain regulatory text and commentary adopted in the rule to reflect the proposed effective date delay.
Specifically, the CFPB solicits comment on whether it should delay the effective date of the rule, and if so, whether six months is an appropriate length of time. The Bureau also solicits comment on the potential consequences of not extending the effective date. In particular, the Bureau asks commenters to provide specific detail and any available data regarding current and planned practices, as well as relevant knowledge and specific facts about any benefits, costs, or other impacts of this proposal on industry, consumers, and other stakeholders. Finally, the Bureau solicits comment about the impact of the proposed delay on consumers who use prepaid accounts.
While the CFPB is not proposing to amend any substantive rule requirements at this time, it is soliciting comments about any implementation challenges that may affect consumers, and how additional time will impact industry, consumers, and other stakeholders. If the CFPB determines that any substantive changes are necessary and appropriate, the Bureau states that it will issue a separate proposal and provide the public an opportunity to comment on those changes before finalizing.
We note that the Bureau is not proposing to delay the October 1, 2018 effective date required to submit prepaid account agreements to the Bureau in Regulation E (12 C.F.R. § 1005.19(f)(2)). The CFPB expects to have its agreement submission process in place by October 1, 2018, and the Bureau’s outreach has not indicated that industry participants are concerned that they cannot meet the agreement submission effective date. The CFPB nonetheless solicits comment on whether it should delay the effective date of the agreement submission requirement, and if so, for what length of time.
The comment period on the proposal will close 21 days after it is published in the Federal Register.