The Consumer Financial Protection Bureau has finalized new federal consumer protections for prepaid account users.
The bureau’s new rule, which takes effect Oct. 1, 2017, requires financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, and give consumers free and easy access to account information, according to a CFPB news release.
The rule includes new “Know Before You Owe” prepaid disclosures, which provide consumers with standard, easy-to-understand, upfront information about prepaid accounts, and also establishes new credit protections for prepaid account users, the release said.
“Many consumers rely on prepaid cards to make purchases and access funds, but until now they were not guaranteed strong consumer protections under federal law,” CFPB Director Richard Cordray said in the release. “This rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. And it backs up those protections with important new disclosures to let consumers know before they owe.”
Prepaid accounts are among the fastest growing consumer financial products in the U.S., and usually are purchased at retail outlets or online, according to the release. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits or send money to others, the release said.
The final rule covers traditional prepaid cards, including general purpose reloadable cards, and also applies to mobile wallets, person-to-person payment products and other electronic prepaid accounts that can store funds. Other prepaid accounts covered by the new rule include: payroll cards; student financial aid disbursement cards; tax refund cards; and certain federal, state and local government benefit cards such as those used to distribute unemployment insurance and child support, according to the release.
The new rule gives prepaid account consumers important protections under the Electronic Fund Transfer Act. Those provisions include free and easy access to account information, error resolution rights for consumers who find unauthorized or fraudulent charges or account errors, and protections for lost and stolen cards and unauthorized transactions, the release said.
Credit protections similar to those provided for credit card accounts will apply when consumers have access to credit products via their prepaid accounts, including ability to pay requirements, monthly billing statements, at least 21 days from billing to payment due dates, and limits on fees and interest charges.
To read more about the new rule, visit http://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-strong-federal-protections-prepaid-account-consumers/.