Regulators Issue Guidance on CIP for Prepaid Cards

The federal financial regulators, along with the Financial Crimes Enforcement Network, today issued guidance to depository institutions on how to apply customer identification programs to the prepaid cards they issue. While the guidance does not change or add to existing expectations, it clarifies that banks should apply their CIPs to the cardholders of prepaid cards that constitute “accounts.”

Prepaid cards qualify as accounts if they are reloadable or if they include access to credit or overdraft features, the agencies said. For example, general purpose prepaid cards that are sold without these features activated would not count for CIP purposes until the cardholder activates such a function.

To verify the identity of the account holder as required by the CIP rule, banks would need to identify the cardholder of a prepaid card that meets the above requirements, even if a third party is the named account holder; third parties are to be treated as agents of the bank rather than customers for CIP purposes. However, if a third-party prepaid card — such as a payroll, government benefit or health savings account card — does not offer reloading or credit features, the third-party provider would be considered the customer for CIP purposes. For more information, contact ABA’s Rob Rowe.