Prepaid Card Rule Latest Regulation of Fast-Changing and Novel Payment Devices

The Consumer Financial Protection Bureau (CFPB) issued on October 5, 2016, a new rule regulating the over $100 billion already placed on general purpose, reloadable prepaid cards, and also mobile wallets, person-to-person (P2P) transfers, payroll cards, student financial aid disbursement cards, tax refund cards, certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance and child support, and other electronic prepaid accounts that can store funds. The rule’s effective date is October 1, 2017.

Prepaid Card Rule Requirements

The CFPB prepaid card rule amends Regulation E (electronic funds transfers) to extend its coverage to prepaid accounts and to adopt provisions specific to those accounts, and expands Regulation Z (Truth in Lending) coverage to overdraft credit features offered with prepaid accounts. The new rule applies to a wide range of prepaid cards and sets out pre-acquisition disclosures, methods for consumers to obtain statements of the card’s activity, limits on consumer liability for unauthorized use, and error resolution rights. Truth in Lending protections will also be applicable to overdraft credit features on prepaid cards.

Blitz Listing of New Ways to Make Payments To and By Consumers

The new CFPB prepaid card rule is just one example of new regulations trying to keep up with the exploding number of new ways payments are made to and by consumers. Rules already in effect have been issued by the CFPB, FTC, U.S Treasury, Departments of Labor, Agriculture and Education, and the National Automated Clearing House Association (NACHA).

Here is a blitz survey of novel payment methods with references to NCLC’s Consumer Banking and Payments Law, updated at www.nclc.org/library, that detail the new forms of regulation of each of these mostly novel payment methods:

• Payroll cards, § 7.3
• Green Dot, NetSpend, VISA, American Express and other prepaid cards, § 7.2
• Unemployment insurance prepaid cards, § 7.4.3
• College prepaid cards, § 7.5
• Mobile wallets, § 5.14
• Debit cards, ch 5
• Preauthorized and other electronic fund transfers, ch. 5
• Remotely created checks, § 3.13
• Remotely created payment orders, § 3.13.5
• Electronic payment of checks (ARC, POP, and BOC), § 5.11
• Substitute checks, § 3.12
• Electronic representment of checks, § 5.12
• Virtual currencies, § 5.14a
• Mobile payments, §§ 5.13, 7.8
• Inmate release prepaid cards, § 7.6
• Gift cards, § 7.7
• International remittances, § 6.5
• Person to person (P2P) transfers, § 6.6
• Electronic benefit transfer cards for Supplemental Nutrition Assistance (formerly food stamp) payments and other payments of federal and state need-based benefits, ch 8
• Deposit of federal benefits onto a Direct Express or other cards, § 9.6, 9.7
• Direct deposit of federal benefits into banking accounts, §§ 9.4, 9.8, 9.9