CFPB releases final rule for Regulation E and Z impacting prepaid industry
According to League sources, on Oct. 5, the Consumer Financial Protection Bureau released a final rule for prepaid accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z). The 1,700-page rule establishes broad consumer protections that impact all aspects of the prepaid industry.
The rule, which generally becomes effective on Oct. 1, 2017, will require prepaid providers to:
- include detailed “know before you owe” disclosures in packaging.
- provide easy and free access to account information.
- limit consumers’ losses when funds are stolen or cards lost.
- follow rules designed for credit cards when offering credit in connection with a prepaid account.
The final rule defines prepaid accounts to encompass a diverse group of products, including traditional general-purpose reloadable cards; non-reloadable prepaid cards; payroll cards; student financial aid disbursement cards; tax refund cards; government benefit cards; mobile wallets; person-to-person payment products; and other electronic prepaid accounts that can store funds. The rule excludes from coverage gift cards and gift certificates; accounts used for savings or reimbursements related to certain health, dependent care, and transit or parking expenses; and certain limited government program accounts.
A prepaid product must include “Know Before You Owe” disclosures with standard, easy-to-understand information about the product. The rule requires financial institutions to provide both a “short form” and a “long form” disclosure before a consumer acquires a prepaid account, such as by purchasing, opening, or choosing to be paid via a prepaid account. The rule imposes content, form, and formatting requirements for the short and long form disclosures. Read the full report here.