Mercator Blog

Is the CFPB’s Final Prepaid Rule Really Final?
Date: March 20, 2018
C. Sue Brown
Director, Prepaid Advisory Service
The prepaid industry generates many financial services innovations. Early adoption of application programing interfaces (APIs) and open systems has provided the means to add or remove features and functionality quickly in order to modify core product infrastructure and offerings to meet clients’ needs. Because the prepaid industry has now expanded well beyond traditional gift cards, the Consumer Financial Protection Bureau (CFPB) has issued new regulations to establish further guidance for the industry.

The prepaid debit industry has grown significantly, mostly in open-loop general purpose reloadable (GPR) cards.

The report, 2018 Consumer Financial Protection Bureau (CFPB) Final Prepaid Rule: Is This Really It?, focuses on the major changes to the Prepaid Rule, which include revised requirements under Electronic Fund Transfer Act (EFTA), implemented by the Federal Reserve through Regulation E, and the Truth in Lending Act (TILA), implemented through Regulation Z. The final Prepaid Rule, twice amended and finally issued on January 25, 2018, is effective April 1, 2019.

The amended Prepaid Rule addresses disclosures, limited liability of prepaid issuers, error resolution, and periodic statements. It expands the scope of the prepaid regulations to include person-to-person (P2P) payment services that use a separate funding account. It also sets forth new requirements regarding the submission of cardholder agreements and fee schedules to the CFPB and distribution of account agreements to cardholders. Overdraft features offered in conjunction with prepaid accounts are also discussed.