CFPB Proposes Rule on Prepaid Products to Extend Certain Credit Requirements and Mandate Disclosures
The Consumer Financial Protection Bureau released last week a proposed rule that would impose an array of new requirements on prepaid accounts. The proposed new definition of “prepaid account” would include general purpose reloadable cards, electronic or mobile accounts that can store funds such as PayPal accounts, payroll cards, and certain government benefit cards, but not include closed-loop gift cards. Many of the new requirements are rooted in existing requirements for credit accounts under the Bureau’s Regulations E and Z. Additionally, the Bureau is proposing to require prepaid account issuers that offer overdraft services to consider the consumer’s ability to repay the debt before offering overdraft protection or other credit services. Generally Applicable Requirements The proposed rule would require all prepaid account issuers to comply with a multitude of new requirements, including:
- Short form and long form disclosures. The Bureau proposes to require prepaid account issuers to provide both short form disclosures, which would highlight key fees that the Bureau believes to be the most important to consumers, and long form disclosures, which would list the entirety of fees and conditions related to a prepaid account. Both forms of disclosure would generally be required prior to the customer acquiring the account, with certain exceptions for sales over the phone or in retail stores. The Bureau also provided model forms for the disclosures that would provide a safe harbor for compliance with the disclosure requirements.
- Provision of account and transaction information. The Bureau proposes to extend existing Regulation E requirements regarding the provision of transaction information to all prepaid accounts. The rule would require financial institutions to either provide periodic statements, or make available account balance and certain transaction history.
- Error resolution and limited liability. The Bureau also proposes to extend requirements, with certain modifications for timing, that limit consumers’ liability for unauthorized transactions and require financial institutions to work with consumers to resolve account errors.