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Financial Services Law Insights and Observations

CFPB appeals ruling vacating mandatory disclosures and 30-day credit linking restriction in Prepaid Accounts Rule

Courts Appellate D.C. Circuit Prepaid Rule EFTA TILA CFPB Dodd-Frank Disclosures


On March 1, the CFPB filed a notice to appeal a December 2020 ruling, in which the U.S. District Court for the District of D.C. vacated two provisions of the Bureau’s Prepaid Account Rule: (i) the short-form disclosure requirement “to the extent it provides mandatory disclosure clauses”; and (ii) the 30-day credit linking restriction. As previously covered by InfoBytes, the court concluded that the Bureau acted outside of its statutory authority by promulgating a short-form disclosure requirement (to the extent it provided for mandatory disclosure clauses). The court noted that it could not “presume—as the Bureau does—that Congress delegated power to the Bureau to issue mandatory disclosure clauses just because Congress did not specifically prohibit them from doing so.” The court further determined that the Bureau also read too much into its general rulemaking authority when it promulgated a mandatory 30-day credit linking restriction under 12 CFR section 1026.61(c)(1)(iii) that limited consumers’ ability to link certain credit cards to their prepaid accounts. The court first determined that neither TILA nor Dodd-Frank vest the Bureau with the authority to promulgate substantive regulations on when consumers can access and use credit linked to prepaid accounts. Second, the court deemed the regulatory provision to be a “substantive regulation banning a consumer’s access to and use of credit” under the disguise of a disclosure, and thus invalid.