California authorizes prepaid accounts to accept publicly administered funds provided no overdraft fees

State Issues State Legislation California Consumer Finance Overdraft Prepaid Cards TILA

On October 5, the California governor signed SB 497, which, among other things, amends the definition of a “qualifying account” use for the purposes of depositing certain publicly administered funds. The amendment eliminates prepaid card accounts from the definition of “qualifying account,” and instead authorizes “a prepaid account or a demand deposit or savings account offered by or through an entity other than an insured depository financial institution, as specified, that is not attached to an automatic credit or overdraft feature, unless the credit or overdraft feature has no fee, charge, or cost, or it complies with the requirements for consumer credit under the federal Truth in Lending Act.” Specifically, persons or entities that are not insured depository financial institutions but who offer, maintain, or manage non-“qualifying accounts” are prohibited from soliciting, accepting, or facilitating the direct deposit of the publicly administered funds into the accounts.