The Consumer Financial Protection Bureau is proposing further changes to its prepaid card rule to address concerns raised by the financial services industry.
The CFPB’s rule, which was finalized in October 2016, requires financial institutions to limit consumers’ losses when funds are stolen or prepaid cards are lost, investigate and resolve errors, give consumers free and easy access to account information, and provide consumer protections if credit is offered. The latest proposal would adjust error resolution requirements for unregistered accounts and provide greater flexibility for credit cards linked to digital wallets, according to a CFPB news release.
Comments on the latest proposed changes are due within 45 days of publication in the Federal Register. To learn more about the proposed rule changes, click here.
The latest proposal seeks to addresses concerns raised by prepaid companies about unanticipated complexities regarding certain aspects of the rule, according to the CFPB release. The proposed changes would:
• Adjust error resolution requirements: Under the proposal, consumers would need to register their accounts to receive full fraud and error protection benefits such as the right to dispute charges and have stolen money restored. The proposal would require companies to provide these protections to registered accounts even if the theft or dispute occurred before registration was successfully completed.
• Provide greater flexibility concerning credit cards linked to digital wallets: The proposal would ensure consumers continue to receive full CARD Act protections on their traditional credit card accounts while making it easier for them to link those accounts to their digital wallet prepaid accounts.
The bureau also is proposing minor adjustments and clarifications to the rule to address other concerns raised by prepaid card companies.
In April, the CFPB delayed the general effective date of the prepaid rule by six months to April 1, 2018. In its latest proposal, the bureau is seeking comment on whether a further delay would be warranted.
Despite the CFPB’s proposed amendments, some financial industry trade groups believe additional changes are still needed.
The American Bankers Association, in an article published in the ABA Banking Journal, said the CFPB proposal failed to address the organization’s “overarching concern that the rule still requires significant adjustment to ensure banks can confidently offer checking and prepaid accounts without liability risk.”
In a June 16 article in Credit Unions Times, Credit Union National Association Chief Advocacy Officer Ryan Donovan said the CFPB should reconsider whether Truth in Lending Act requirements should apply to overdraft services on prepaid accounts. Those requirements would “have the unintended consequence of reducing consumer choice and making this product more difficult to offer,” Donovan said in the article.
Along with the proposed changes, the CFPB is releasing an updated version of its small entity compliance guide for the prepaid rule. That updated guide reflects the recent effective date delay, and also includes clarifications on several other issues or questions raised by the industry.