On October 5, 2016, the CFPB issued a new rule concerning prepaid accounts. The new rule applies to traditional prepaid cards, as well as mobile wallets, person-to-person payment products and other electronic prepaid accounts. A select number of the protections mandated by the new rule are highlighted below.
First, the new rule extends a number of protections found in the Electronic Funds Transfer Act (“EFTA”) to prepaid accounts. The rule requires financial institutions to make certain account information accessible to customers for free, unless the information is provided through periodic statements. Financial institutions must also cooperate with consumers and investigate and resolve account errors in a timely fashion. The new rule further protects consumers from unauthorized transactions in the event a prepaid card is lost or stolen. So long as the consumer timely provides notice to the financial institution, the consumer’s responsibility for such unauthorized transactions is limited to $50.
Next, the new rule requires financial institutions to make “Know Before You Owe” disclosures to prepaid account customers. The new rule requires both short and long form disclosures. The short form disclosure lists certain fees, including, but not limited to, periodic fees, per purchase fees, ATM withdrawal and balance inquiry fees, cash reload fees, customer service fees, and any inactivity fees. Financial institutions must also provide or offer consumers access to long form disclosures, which contain a complete list of fees and other information about the prepaid account program.
Third, the new rule mandates certain protections for when consumers link overdraft credit features to their prepaid accounts. Among other requirements, the rule directs financial institutions offering such products to consider a consumer’s ability to repay the debt before extending credit related to a prepaid account.
Finally, the new rule requires financial institutions to make the prepaid account agreements available on their websites. Financial institutions will also be required to submit certain prepaid account agreements to the CFPB, which will post the agreements on a Bureau-maintained website.
The new rule will generally go into effect beginning on October 1, 2017, with the requirement to submit prepaid account agreements to the Bureau beginning on October 1, 2018.
The CFPB announcement with a link to the final rule can be accessed here: http://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-strong-federal-protections-prepaid-account-consumers/.