PREPAID RULE LIVES TO FIGHT ANOTHER DAY

For those banks that fervently prayed the almost 1,700-page Prepaid Account rule would be banished by the Party of Lincoln – sorry but it survived the recent round of regulatory rollbacks.  Courtesy of the law firm, Ballard Spahr, and its Consumer Finance Monitor (CFM) webpage and Politico, we have learned that the joint resolutions introduced in the Senate and House in February to kill the upcoming Prepaid Account regulation, died on the vine of apathy.  The six-month postponement until April 1, 2018 is your last chance to get ready to fully comply with the regulation, if you offer such accounts, with a minor exception.

The CRA – not the one that requires banks to do good things in the community – but the Congressional Review Act, is a legislative maneuver whereby Congress can nullify final regulations previously issued by a federal agency – the CFPB in this case – if done so within 60 days of reporting the new law to Congress such as in the Federal Register.  While the current Congress and Administration has used the CRA to repeal over a dozen regulations issued by President Obama at the close of his presidency, the Prepaid Account rule didn’t generate enough Congressional excitement to nuke this regulation.  The window of opportunity has closed on using the CRA to abolish the Prepaid Account or other regulations that were passed during the Obama administration.

Both houses of Congress would have had to agree to deep six the Prepaid Account rule by May 11 but Mother’s Day must have diverted their attention.  The rule is now scheduled to become effective on April 1, 2018.

Jack has been very vocal in pointing out that regulatory agencies can’t reduce the regulatory burden by themselves as regulatory requirements are mandated by a law that has been passed by Congress.  Our regulators can’t eliminate a final regulation unless Congress changes or eliminates the law and getting Congress to vote against consumer protection is a difficult task at best and might not be appreciated by consumers at the ballot box.

In the final rule, whose primary role was to delay the effective date to April 1, 2018, the CFPB pointed out it will likely propose changes to the current Prepaid Account rule’s provision regarding the linking of credit cards to digital wallets that are capable of storing funds along with error resolution and limitations on liability for unregistered Prepaid Accounts.

The CFPB is also still reviewing all of the concerns noted in the responses received from the industry and public and might have future changes to the regulation.  As Paul Harvey would have said:  “Stay Tuned for More.”

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