CFPB’s prepaid card rule survives Congress challenge

CFPB prepaid rule CongressLast October, the CFPB issued its Final Rule for Prepaid Accounts which established comprehensive consumer protections for prepaid accounts under Regulation E. Due to the timing of the rule, Congress had until Thursday to repeal the regulation by passing a disapproval resolution in both chambers with simple majorities under the Congressional Review Act (CRA). That deadline came and went without a repeal of the Bureau’s new rule.

CFPB delays effective date of Prepaid Accounts Rule

CFPB delays Prepaid RuleOn April 20, the CFPB finalized a proposed rule to delay the effective date of the Prepaid Account Rule. The final rule governing prepaid accounts will be delayed six months, from October 1, 2017 to April 1, 2018.

According to the CFPB, the Bureau discovered that “some industry participants believed that they would have difficulty complying with certain provisions of the Prepaid Accounts Final Rule that would have gone into effect on October 1, 2017.” As a result, the Bureau postponed the effective date in order to “facilitate compliance with the Prepaid Account Final Rule, and to allow an opportunity for the Bureau to assess whether any additional adjustments to the Rule are appropriate.”

NetSpend to pay $53 million in settlement with FTC

NetSpend FTCLast week, the FTC announced that NetSpend, one of the nation’s largest providers of prepaid debit cards, had agreed to pay $53 million to settle allegations that it deceived consumers about their ability to access funds loaded onto their cards.

In November 2016, the FTC filed a lawsuit alleging that NetSpend engaged in misleading advertising practices in violation Section 5 of the FTC Act which prohibits unfair or deceptive acts or practices. The FTC’s complaint alleged that NetSpend made misrepresentations in marketing materials and on its website that led consumers to believe that the cards were “ready-to-use,” that they would have “immediate access” to funds loaded onto their cards, and that their money is “always available.” NetSpend also claimed that consumers are “guaranteed approval” for a card.

CFPB proposes delay to Prepaid Card Rule effective date

CFPB prepaid rule delay

On March 9, 2017, the CFPB released a proposal to delay the effective date of its final rule govern prepaid accounts by six months. This proposal will push the effective date back from October 1, 2017 to April 1, 2018.

Through ongoing discussions with companies in the prepaid industry, CFPB staff learned that some industry participants have concerns about achieving compliance with the new requirements while also ensuring continued availability of their prepaid products and with minimal disruption to consumers by the October 1, 2017 deadline.