A new report titled The CFPB Final Prepaid Rule Is Here: What Now? Start with Disclosures and Marketing provides a first look at the elements of the final prepaid rule published by the Consumer Financial Protection Bureau in October 2016. The nearly 1700-page rule covers a number of topics, including the definition of prepaid, disclosures, error resolution, and the relationship of prepaid and credit.
The report focuses on the near-term concerns for prepaid providers, who need to bring programs into compliance by October 1, 2017. Because of the breadth and depth of the prepaid regulations, the report highlights the topics of disclosures, error resolutions, overdraft, and marketing concerns.
This report encourages providers to double check everything because, even though prepaid programs have done plenty of work in anticipation of the rule, fine tuning of the final rule by the CFPB means that the final versions of the disclosure forms are different than what was proposed earlier.
"Prepaid card providers have a lot of work to do in one year, but the industry will be able to take action and continue providing an important financial tool," Ben Jackson, director of Prepaid Advisory Service, and author of the report, comments.
Highlights of the report include:
- The Consumer Financial Protection Bureau (CFPB) has released a proposed prepaid rule after two years and has asked the payments industry to respond in 90 days.
- The 1689-page rule is nearly three times as long as the rules that implemented Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act and is loaded with unintended consequences.
- The rule would lead to less access and more confusion for prepaid customers, thus harming the consumers it is designed to protect.
- The rule also would pull new types of payments companies under the prepaid umbrella and lead to further confusion and frustration among consumers.
- Prepaid providers should comment on the rules to address how individual provisions will harm their cardholders and propose alternative rules.
1. Executive Summary
3. A Brief History of the Rules
What Products and Companies Are Covered by the Final Rule?
What Products and Companies Are Excluded by the Final Rule?
Disclosures Are Simplified, but They Carry Risks for Providers
4. Third-Party Fees and ATMs Could Be a Touchy Subject
Additional Notices on Payroll and Government Benefits Cards
The Long-Form Disclosure
5. Overdrafts and Credit: The CFPB Fixed at Least One Problem
Do You Have to Pull Cards off the Shelf?
Error Resolution and Periodic Statements
Conclusion: Double Check Everything
Appendix: CFPB Resources to Help with Compliance
List of Figures
Figure 1: Segments from the author's Taxonomy of Prepaid Cards Covered by the CFPB Rule
Figure 2: Segments from the author's Taxonomy of Prepaid Cards Exempted from the CFPB Rule
Figure 3: CFPB Model Short-Form Disclosures for General Prepaid Accounts
Figure 4: CFPB Model Short-Form Disclosures for General Prepaid Accounts with Multiple Service Plans
Figure 5: CFPB Model Short-Form Disclosures for Payroll Prepaid Accounts
Figure 6: CFPB Model Short-Form Disclosures for Government Benefit Prepaid Accounts
Figure 7: CFPB Model for Long Form Disclosures