WASHINGTON (3/31/16)--The Consumer Financial Protection Bureau (CFPB) will delay finalization of its proposal on prepaid products, according to a number of reports. The proposal was originally listed on the bureau’s rulemaking agenda as coming out by the end of this month.
The CFPB’s proposal would extend to prepaid accounts, including general purpose reloadable cards and digital wallets, and many consumer protections under Regulation E, which implements the Electronic Fund Transfer Act. It also includes protections under Regulation Z, which implements the Truth in Lending Act, for prepaid accounts that offer credit options.
According to a report in Politico (March 28), the final rule will not be out until May or June.
The Credit Union National Association (CUNA) has met with the CFPB to discuss the proposed rule. In addition, CUNA’s comment letter on the proposal highlights a few concerns, most notably that it defines prepaid card overdrafts as extensions of credit under Regulation Z.
"While we generally support the Bureau’s effort to establish consumer protections in the area of prepaid accounts--where such protections are largely lacking--for the reasons cited [in CUNA’s letter], we do not support the proposal as issued and caution the bureau from a blanket extension of Regulation E to cover all prepaid accounts," reads CUNA's letter, sent in March 2015.
CUNA called for the bureau to “proceed very carefully” when including overdraft items in the proposal, as many consumers find overdraft protection to be a valuable tool.
CUNA noted that the application of certain Regulation E requirements may not be appropriate for the different risks and attributes of prepaid accounts.