The Final Rule for Prepaid Accounts has been one of those hanging around awhile and may have fallen off your radar. Unfortunately, if you were counting on another extension, it didn’t happen. The final rule effective date of April 1, 2019 has now passed and there certainly was not another extension. This regulatory amendment started back in 2012, with the notice for proposed rule-making. In 2014, we saw the first draft of the proposal. It wasn’t until 2016 that the first final rule was issued. Yes, you heard correctly, first final rule. The effective date of Oct. 2017 was then delayed until April 2018. With comments still rolling in regarding burden and the need for clarification, the Consumer Financial Protection Bureau (CFPB) provided an additional extension to April 1, 2019 and modified several sections.
The original final rule was put into place to recognize prepaid accounts and provide consumer protections for those account holders. As we all know, this is a booming industry and previous guidance has been vague at best. With the new prepaid account requirements consumers are provided protections to limit losses for stolen or lost cards, expedited error resolution provisions, and free access to user-friendly account information. In addition to the Reg. E provisions, it also pulled in Reg. Z provisions with protections for access that allowed for credit on the accounts when funds were not available. A new “Know Before You Owe” disclosures was finalized by the CFPB for prepaid accounts.
The 2018 amendments provide for additional error resolution requirements and flexibility for digital wallets connected to a traditional credit card account. While the requirements cover what we consider traditional prepaid cards, general purpose and reloadable cards, it also brings in guidance for mobile wallets, P2P (person to person) payments, and other electronic accounts that can store funds. Also included in the mix are payroll cards, student financial aid cards, tax refund cards and federal, state and local government benefit cards.
Be sure you know whether or not you actually offer a pre-paid account under the definition. The CFPB has offered a Guide to walk you through the process. If you find that you are offering prepaid accounts, the final rule contains the following features that must be required as part of the prepaid account program:
· Pre-Acquisition Disclosures
· Error Resolution and Limitations on Liability
· Periodic Statements and the Periodic Statement Alternative
· Change in Terms Notices
· Prepaid Account Agreement Submissions
· Overdraft Feature Requirements
There are some additional requirements that are already expected to be in place, such as receipts at electronic terminals, issuance of access device limitations and signed pre-authorizations. If you missed the boat for this deadline be sure to stop and attend to this asap. Your first stop should be the definition to see if your product(s) qualify. Prepaid accounts will definitely be on the request list during your next regulatory exam so be sure it doesn’t fall off the radar again.