The Consumer Financial Protection Bureau (CFPB or Bureau) has proposed to delay the effective date of the Prepaid Accounts Rule under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) (Prepaid Rule) by six months, to April 1, 2018. The CFPB issued the final Prepaid Rule in October 2016, with an original effective date of October 1, 2017.
The Bureau's proposal seeks comment on whether it should extend the effective date of the Prepaid Rule, and if so, whether six months is an appropriate length of time for such an extension. In addition the Bureau seeks information on any benefits, costs, or other impacts of the its proposal on industry, consumers, and other stakeholders. As currently drafted, the Prepaid Rule will require prepaid providers to include detailed "know before you owe" disclosures in packaging, provide easy and free access to account information, limit consumers' losses when funds are stolen or cards lost, and follow rules designed for credit cards when offering credit in connection with a prepaid account.
According to the Bureau's proposal, some industry participants have raised concerns about unanticipated interactions between the rule and some business models and practices that were not fully address in the participants' comment letters on the Notice of Proposed Rulemaking (NPRM). The CFPB explains that this "may lead to additional complexities for implementation and negative implications for consumers."
The Bureau believes that delaying the effective date will allow an opportunity to assess whether any additional rule adjustments are appropriate, and help industry participants address certain packaging-related logistical issues for prepaid accounts that are sold at retail locations. The Bureau notes that both consumers and covered persons would benefit if a delay in the effective date were to minimize industry disruption. At the same time, the Bureau notes that industry participants that chose to comply with original effective date may still do so.
The comment period on the proposal will close on April 5, 2017.
The CFPB's comment period regarding the question of the delayed effective date for the Prepaid Rule occurs as Congress is examining the rule under its authority granted by the Congressional Review Act. As of the date of this article, the necessary resolutions for wholesale repeal of the rule have been introduced in both the House and the Senate. Congress has until mid-May to act on the resolutions to repeal the rule under the statutory timelines established in the Congressional Review Act.
Bottom line, the future of the implementation of prepaid card rule is very much in flux. Stay tuned.