CFPB Makes Changes to Prepaid Accounts Rule

Yesterday, the CFPB finalized some updates to its 2016 prepaid rule.  The original rule put in place some consumer protections for prepaid accounts such as the treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosure, access to account information, and disclosing applicable overdraft features.  

Yesterday’s changes adjust requirements for resolving errors on unregistered accounts, provide greater flexibility for credit cards linked to digital wallets, and extend the effective date of the rule by one year (April 2019).  This change is one of the most recent changes we are seeing in a trend that is occurring under the direction of the new interim director of the CFPB, Mick Mulvaney who replaced long-time director Richard Cordray in November of 2017.

In their release, the CFPB said that the changes to the prepaid rule will:

  1. “Adjust error resolution requirements: In June 2017, the Bureau proposed amendments to require consumers to register their accounts to receive fraud and error protection benefits, such as the right to dispute charges and have stolen money restored, and to extend the protections retroactively to suspected thefts or disputes occurring before registration was successfully completed. Today’s changes provide that the error resolution and liability limitation protections apply prospectively, after a consumer’s identity has been verified. These changes will help encourage prompt registration and streamline compliance for financial institutions as well as ensure continued availability and utility of prepaid accounts for consumers.
  2. Provide more flexibility concerning credit cards linked to digital wallets: Digital wallets provide consumers with an electronic way to use their debit and credit cards. Some digital wallets are also prepaid accounts because consumers can use them to store and access funds directly. The rule changes ensure that consumers continue to receive full federal credit card protections on their traditional credit card accounts while making it easier for them to link those accounts to digital wallets that can store funds. The changes also reduce potentially unnecessary complications and expense to consumers who link credit cards to digital wallets.
  3. Extend the overall effective date of the rule by one year: The Bureau is sensitive to the concerns raised by commenters about needing more time to implement the rule, especially where they are making changes to packaging for prepaid cards sold in stores. The Bureau is thus extending the overall effective date of the rule by an additional year, to April 1, 2019.”

The full new final rule can be found here.  

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