WASHINGTON—NAFCU is urging the CFPB to extend the proposed six-month delay of its prepaid account rule to 18 months or to rescind the rule to reevaluate its economic impact on small financial institutions.
In a letter to the Bureau, NAFCU Regulatory Affairs Counsel Andrew Morris said an 18-month delay of the rule would avoid an overlap with the implementation date of the mortgage servicing rule, as this overlap would "strain compliance bandwidth."
Earlier this week CUNA made a similar request to the agency.
"Although an 18-month delay would temporarily relieve regulatory burden, NAFCU believes that the CFPB should rescind the rule and reevaluate its economic impact," Morris wrote. "The complexity of the rule's new disclosure requirements is disproportionate to the types of prepaid products credit unions offer."
Morris noted that the rule's required pre-acquisition disclosures will require credit unions to thoroughly review prepaid account agreements and coordinate extensively with program managers for white-label products – a change that will disrupt consumers' account functionality if the rule is not further delayed or reconsidered.
"As the CFPB is likely aware, many unbanked consumers depend on prepaid accounts to avoid the higher costs associated with traditional products or financial services. A sudden and abrupt transition to a highly regulated prepaid account environment could adversely affect these financially vulnerable consumers," Morris continued. "NAFCU believes that the CFPB should rescind the rule entirely to avoid the risk of disrupted service or loss of access to affordable prepaid products. In the alternative, NAFCU asks that the CFPB exempt credit unions from the final rule."
The CFPB proposed a delay of the effective date of the rule until April 1, 2018. The rule is currently set to take effect Oct. 1.
The prepaid rule creates new consumer protections for prepaid accounts under Regulations E and Z. The rule was finalized in October 2016, leaving credit unions only a year to prepare.