On 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.”
The Bureau also announced that it intends to release a notice of proposed rulemaking to address “at least two issues that have been identified as areas where the Prepaid Accounts Final Rule may be posing particular complexities for implementation.” Those two issues are (1) the linking of credit cards to digital wallets that are capable of storing funds; and (2) error resolution and limitations on liability for unregistered prepaid accounts where the financial institution has not completed its consumer identification and verification process with respect to the account. The Bureau stated that it will also seek comment on whether “any further extension of the effective date is needed in light of the specific changes proposed.”
The Prepaid Account Rule covers a broad range of products – from general purpose reloadable cards offered through retail locations to digital-only accounts. The rule introduces significant new disclosure requirements, extends consumer liability protections to prepaid accounts and adds burdensome requirements for accounts with overdraft or credit features.
The Prepaid Account Rule has been the subject of numerous attacks from industry representatives and lawmakers. Many industry participants have expressed disappointment with the Bureau’s decision to apply Regulation Z requirements to overdraft features of prepaid accounts. The rule also faces possible challenge under the Congressional Review Act, which is a procedure by which Congress can essentially nullify a covered rule adopted by a federal agency. On February 1, 2017, Senator David Perdue initiated the process by filing a joint resolution. On February 3, Representatives Tom Graves and Roger Williams introduced House Resolution 62. The Senate Joint Resolution was recently brought out of Committee and to the floor for consideration by way of a discharge petition filed by Senate Banking Chairman Mike Crapo.
If the joint resolution of disapproval ultimately is enacted, the CRA would prohibit the CFPB from reissuing the Prepaid Accounts Rule “in substantially the same form” or issuing a “new rule that is substantially the same” as the disapproved rule “unless the reissued or new rule is specifically authorized by a law enacted after the date of the joint resolution disapproving the original rule.”
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