CFPB Releases Final Rule on Prepaid Financial Products; Chamber of Digital Commerce Comments on Scope of the Rule
On October 5, the CFPB released its final rule on prepaid financial products, including traditional prepaid cards, mobile wallets, person-to-person payment products, and other electronic accounts with the ability to store funds. The rule is intended to provide consumers with additional federal protections under the Electronic Fund Transfer Act analogous to the protections checking account consumers receive. The following federal protections are included in the new rule: (i) financial institutions will be required to provide certain account information for free via telephone, online, and in writing upon request, unless periodic statements are provided; (ii) financial institutions must work with consumers who find errors on their accounts, including unauthorized or fraudulent charges, timely investigate and resolve these incidents, and restore missing funds when appropriate; and (iii) consumers will be protected against unauthorized transactions, such as withdrawals or purchases, if their prepaid cards are lost or stolen. The rule contains new “Know Before You Owe” prepaid disclosures similar to those used for mortgages and student financial aid offers. In addition to requiring two (one short, the other long) disclosure forms, the new rule requires that prepaid account issuers post agreement offers made available to the general public on their websites, submit all agreements to the CFPB, and make agreements that are not required to be posted on their website available to relevant consumers. The new rule also includes credit protections stemming primarily from the Truth in Lending Act and the Credit Card Accountability Responsibility and Disclosure Act, including providing consumers with monthly credit billing statements, giving consumers reasonable time – at least 21 days – to repay their debt before incurring late fees, ensuring that consumers are able to repay the debt before making a credit offer, and limiting the fee and interest charges to 25% of the total credit limit during the first year an account is open. The rule, which has not yet been published in the Federal Register, has a general compliance date of October 1, 2017, but includes certain accommodations, one of which is an October 2018 effective date for the requirement that agreements be submitted to the CFPB.
The Chamber of Digital Commerce submitted comments to the CFPB in December advocating that virtual currency products and services should fall outside the scope of the prepaid rule. Pursuant to the final rule, the CFPB found that “application of Regulation E and this final rule to such products and services is outside the scope of this rulemaking.”