PREPAID ACCOUNTS JUST GOT KICKED UP TO THE CONSUMER PROTECTION SUITE

On October 3, 2016 the CFPB issued its final rule for general purpose prepaid accounts which will generally go into effect on October 1, 2017.   This culminated a 4+ year wait since the CFPB announced its initial intention to regulate prepaid accounts and 2 years from its proposal.  The CFPB’s initial 870 page ANPR has morphed into a 1,689-page final rule so it’s easy to determine that numerous products and requirements were added on that 4-year path.  There will be numerous consumer protection requirements including various new disclosures and limited consumer liability.

The final rule includes a host of prepaid accounts, some of which likely are offered by banks of all sizes.  This rule will primarily impact prepaid accounts that are offered by banks which can be used at merchants or retailers to purchase products and/or services or at ATMs for cash advances.  It will also cover the newest product offerings such as digital wallets and person-to-person transfers that do not involve a checking account.

Banks will now be required to provide both a “short” and “long” form disclosure prior to acquisition of the account by a consumer and these disclosures will primarily note fees and account information.  Banks will be required to provide summary totals of any fees assessed on a monthly and annual basis.

Regulation E’s consumer liability and error resolution requirements will be applied to prepaid accounts including the aspects of provisional crediting as well as various timing deadlines.  The rule also applies Regulation Z requirements to the overdraft features of prepaid accounts.

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