WASHINGTON—The CFPB has announced finalized updates to its 2016 prepaid rule, including extending the effective date of the rule by one year.
The Bureau’s 2016 prepaid rule put in place requirements for treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts. The changes announced Thursday adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year to April 2019.
Prepaid accounts are among the fastest growing consumer financial products in the United States, said the CFPB, noting the amount consumers put on “general purpose reloadable” prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. The total dollar value loaded onto these prepaid cards is expected to nearly double to $116 billion by 2020, the Bureau said.
The changes to the prepaid rule will:
- Adjust error resolution requirements: In June 2017, the Bureau proposed amendments to require consumers to register their accounts to receive fraud and error protection benefits, such as the right to dispute charges and have stolen money restored, and to extend the protections retroactively to suspected thefts or disputes occurring before registration was successfully completed. “The changes provide that the error resolution and liability limitation protections apply prospectively, after a consumer’s identity has been verified. These changes will help encourage prompt registration and streamline compliance for financial institutions as well as ensure continued availability and utility of prepaid accounts for consumers,” the CFPB said.
- Provide more flexibility concerning credit cards linked to digital wallets: Some digital wallets are also prepaid accounts because consumers can use them to store and access funds directly. The rule changes ensure that consumers continue to receive full federal credit card protections on their traditional credit card accounts while making it easier for them to link those accounts to digital wallets that can store funds. The changes also reduce potentially unnecessary complications and expense to consumers who link credit cards to digital wallets, the Bureau said.
- Extend the overall effective date of the rule by one year: “The Bureau is sensitive to the concerns raised by commenters about needing more time to implement the rule, especially where they are making changes to packaging for prepaid cards sold in stores. The Bureau is thus extending the overall effective date of the rule by an additional year, to April 1, 2019.”
The Bureau also finalized certain other clarifications and minor adjustments to aspects of the prepaid rule.
CUNA thanked the Bureau for the changes but hopes the CFPB will take more steps.
“As credit unions continue to implement thousands of pages of new rules from the CFPB, we appreciate that it has considered this burden on smaller financial service providers, and is giving them more time to come into compliance with the prepaid card rule,” said CUNA Chief Advocacy Officer Ryan Donovan. “We will continue to urge the CFPB to consider modifying the rule so Regulation Z requirements do not apply to the overdraft features of prepaid accounts.”
More information about the changes and the Bureau’s 2016 prepaid rule is available at www.consumerfinance.gov/prepaid-rule.
The final rule is available at: http://files.consumerfinance.gov/f/documents/cfpb_prepaid_final-rule_2018-amendments.pdf