The Consumer Financial Protection Bureau ("CFPB") adopted a final rule to enhance consumer protections for prepaid accounts subject to Regulation E (which implements the Electronic Fund Transfer Act) and Regulation Z (which implements the Truth in Lending Act).
The final rule:
- extends the limited liability and error resolution requirements under Regulation E to all prepaid accounts;
- establishes pre-acquisition disclosure requirements for prepaid accounts that require both short- and long-form disclosures before consumers can buy the prepaid accounts;
- creates an alternative to the periodic statement requirements of Regulation E, under which financial institutions may give customers electronic access to information about their prepaid accounts, instead of sending periodic statements;
- requires all issuers of prepaid accounts to submit, on an ongoing basis, their prepaid account agreements to the CFPB;
- regulates overdraft credit features that may be offered in conjunction with prepaid accounts; and
- establishes that, subject to certain exceptions, the above-mentioned overdraft credit features will be covered under Regulation Z when: (i) the prepaid account issuer, its affiliate or its business partner offers the credit feature, and (ii) credit can be accessed during the course of a transaction carried out with a prepaid card.
The final rule will become effective on October 1, 2017. However, the CFPB specified that the requirement to submit prepaid account agreements to the CFPB will be delayed until October 1, 2018.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
