The Consumer Financial Protection Bureau today issued final rules on prepaid financial products, including prepaid cards and digital wallets that store and transfer funds. The final rule includes many elements formalizing consumer protections already offered by banks that provide these products, such as those related to unauthorized transactions. The bureau made some improvements reflecting the feedback from the American Bankers Association and others, but the proposal could create steep compliance barriers and limit services to “underbanked” individuals.
“Many people choose prepaid products as a useful alternative to a traditional checking account,” said ABA SVP Nessa Feddis. “ABA will review the rules closely to ensure they protect bankers’ ability to offer convenient, affordable prepaid products for consumers who may not want a traditional checking account or are just looking for a simple solution for managing their money.”
The final rule allows prepaid issuers to provide account information online in lieu of periodic statements. After a customer registers a card, issuers would also be required to resolve account errors promptly and protect customers against unauthorized or fraudulent transactions — protections that customers already enjoy due to card network rules. The final rule also includes a standard set of two disclosures — one short and one longer — detailing key account information and fees, plus online posting of account terms.
The final rule includes several small tweaks intended by the bureau to reduce unnecessary compliance burdens associated with the disclosure requirements, such as requiring disclosure of two fees rather than three and extending the time period after which disclosures must be updated. The bureau said it made other changes related to disclosures for payroll card accounts and aligned its periodic statement alternative with the practices of many financial institutions.
The CFPB also changed the requirement for public posting of prepaid agreements to cover only agreements offered to the general public. While the final rule takes effect on Oct. 1, 2017, issuers will not be required to submit their agreements until Oct. 1, 2018. ABA experts will review the full rule — nearly 1,700 pages — in depth and issue a staff analysis in the coming weeks.