Yesterday, the Consumer Financial Protection Bureau (“CFPB”) announced new consumer protection rules and disclosures for the prepaid market. This has been a growing area of lending over the last several years, and it has been a stated area of focus for the CFPB. The prepaid products covered by the rules are wide-ranging and extensive:
- Traditional plastic prepaid cards;
- Mobile and other electronic prepaid accounts that can store funds;
- Payroll cards;
- Certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance, child support, and pension payments;
- Student financial aid disbursement cards;
- Tax refund cards; and
- Peer-to-peer payment products.
The proposed rule extends to three major areas: prepaid account protections, disclosure of fees, and credit protections.
First, many consumers use prepaid accounts as an alternative to checking accounts, and the proposed rule creates requirements for accessing account information, error resolution rights, and fraud and lost-card protection.
Second, the proposed rule includes short and long-form required disclosures, as well as a provision requiring publicly available card agreements.
Finally, the rule would expand the protections that credit card holders have under TILA, including big changes related to products that allow consumers to pay to spend more than they have deposited into the account.
Many institutions, large and small, have ventured into this arena, and the CFPB reports that the amount consumers loaded onto “general purpose” reloadable cards grew from under $1 billion in 2003 to $65 billion in 2013. Review the proposed rule, consider commenting, and please direct any questions to Spilman or other knowledgeable counsel.