Bureau issues final prepaid account rule

Almost two years after its November 13, 2014, proposal, the Consumer Financial Protection Bureau announced early this morning a finalized rule amending Regulations E and Z to provide federal consumer protections for prepaid account users. The new rule 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. The Bureau also finalized new “Know Before You Owe” disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Finally, prepaid companies must now generally offer protections similar to those for credit cards if consumers are allowed to use credit on their accounts to pay for transactions that they lack the money to cover.

The rule covers traditional prepaid cards, including general purpose reloadable cards. It 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. New protections for these cards under the Electronic Fund Transfer Act and Regulation E include requirements for statements or free and multi-channel access to account information, error resolution rights, and protections for lost cards and unauthorized transactions. New upfront disclosures will use standard formats for both short-form and long-form versions, and card agreements will be publicly available on issuers' websites and, in the future, on a CFPB site.

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 limited fee and interest charges. Credit features cannot be made available via a prepaid account until 30 days after a consumer registers the account, and prepaid companies cannot automatically grab a credit repayment when a prepaid account is next reloaded with funds, and can't automatically take funds from a prepaid account balance when a credit payment is due without consumer consent.

The new rule will be effective October 1, 2017.

UPDATE: The rule was published in the Federal Register on November 22, 2016.

• The CFPB's Final Rule [1,689 page PDF]
• LINK to November 22, 2016, publication in the Federal Register
• Sample disclosures under the new rule
• Link to the Bureau's new Prepaid Accounts page, with links to resources, model forms, etc.
• The CFPB Prepaid Accounts implementation page
• Bureau YouTube video with highlights of the rule