CFPB Announces Proposed Rules for Prepaid Card Products
The Consumer Financial Protection Bureau (“CFPB”) announced early this morning that it is proposing new federal rules for the prepaid market in a Notice of Proposed Rule Making (“NPRM”) to be released later today. The NPRM will affect a variety of prepaid products and will include provisions requiring consumer protections for prepaid account holders under the Electronic Fund Transfer Act (“EFTA”) and Regulation E. Further, the NPRM will require standardized disclosures to be provided to consumers prior to opening a prepaid account and will require any prepaid products incorporating credit features to include additional consumer protections.
The NPRM will require that several protections applicable under the EFTA and Regulation E be explicitly applied to prepaid products. Such protections will include: (i) providing consumers with account information through periodic statements or by making such information easily available online for free; (ii) error resolution rights for consumers who encounter errors with their accounts; and (iii) limited liability for consumers when their prepaid cards are lost or stolen.
According to the CFPB, the NPRM will also include a “Know Before You Owe” section, which will propose standardized disclosures of common costs and fees associated with the prepaid card account. The standardized disclosures will include both a short and long form and will generally require that consumers have access to a full set of a prepaid accounts fees and related terms before opening the account. Additionally, to facilitate comparison shopping, the CFPB proposes requiring prepaid card issuers to submit card agreements to the CFPB in order to be posted on a public website maintained by the CFPB.
Finally, the NPRM includes several additional protections that prepaid card issuers must provide consumers whenever a prepaid card incorporates credit products that allow consumers to spend more money than they have deposited into their prepaid account. These protections include ensuring consumers have the ability to repay the debt prior to issuing credit, providing monthly credit billing statements, providing consumers with reasonable timeframes in which to repay their debts, and limiting the amount of fees and interest charged to the consumer. Moreover, the NPRM would require companies to wait thirty (30) days from account opening before offering credit to a consumer and would establish a wall between prepaid funds and credit repayment so that companies could not immediately take repayment whenever a prepaid account is next loaded with funds.
The NPRM is open for public comment for ninety (90) days after its publication in the Federal Register. A more detailed summary of the NPRM will follow after it has been released.
A copy of the NPRM, including information on how to submit comments, is available here.
The proposed disclosures are available here.