CFPB prepaid accounts rules are final

The Consumer Financial Protection Bureau (CFPB) has finalized the proposed regulations on prepaid accounts. Specifically, the (CFPB) is amending Regulation E, which implements the Electronic Fund Transfer Act, and Regulation Z, which implements the Truth in Lending Act, and the official interpretations to those regulations. The CFPB is finalizing modifications to several aspects of that rule, including with respect to error resolution and limitations on liability for prepaid accounts where the financial institution has not successfully completed its consumer identification and verification process; application of the rule’s credit related provisions to digital wallets that are capable of storing funds; certain other clarifications and minor adjustments; technical corrections; and an extension of the overall effective date to April 1, 2019.

The CFPB is:

  • Revising the error resolution and limited liability provisions of the Prepaid Accounts Rule in Regulation E to provide that financial institutions are not required to resolve errors or limit consumers’ liability on unverified prepaid accounts. For accounts where the consumer’s identity is later verified, financial institutions are not required to limit liability and resolve errors with regard to disputed transactions that occurred prior to verification.
  • Creating a limited exception to the credit-related provisions of the Prepaid Accounts Rule in Regulation Z for certain business arrangements between prepaid account issuers and credit card issuers that offer traditional credit card products. This exception is designed to address certain complications in applying the credit provisions of the Prepaid Accounts Rule to credit card accounts linked to digital wallets that can store funds where the credit card accounts are already subject to Regulation Z’s open-end credit card rules in circumstances that appear to pose lower risks to consumers. This final rule also expands the situations in which prepaid account issuers are permitted to run negative balances on prepaid accounts, provided certain conditions are met.
  • Extending the overall effective date of the Prepaid Accounts Rule to April 1, 2019.
  • Making clarifications or minor adjustments to provisions of the Prepaid Accounts Rule in Regulation E related to an exclusion from the definition of prepaid account, unsolicited issuance of access devices, several aspects of the rule’s pre-acquisition disclosure requirements, and submission of prepaid account agreements to the Bureau.
  • Making technical corrections to certain provisions of the Prepaid Accounts Rule in both Regulations E and Z. (CFPB RIN 3170-AA72, January 9, 2018.)

Visit our News Library to read more news stories.