NBPCA Highlights Need for Additional Changes to CFPB Prepaid Rule

August 04, 2017

WASHINGTON – On Friday, the Network Branded Prepaid Card Association (NBPCA) urged the Consumer Financial Protection Bureau (CFPB) to make additional revisions to the prepaid rule to avoid adverse consequences for consumers. In a comment letter responding to proposed changes to the rule, the association acknowledges the positive changes to the rule being considered by the CFPB, including efforts to simplify and streamline disclosure requirements; however, the letter urges that additional changes and an extended implementation period also be implemented to ease unnecessary burdens created by the rule. 

“While the proposed changes to the final prepaid account rule are a step in the right direction, there remain significant compliance challenges and issues that must be addressed to avoid disruption of consumer access to prepaid products,” said Brian Tate, president and CEO of NBPCA. “To ensure prepaid accounts remain available to the many consumers that rely on them, we will continue to work to address the ongoing concerns outlined in our comment letter.” 

Since the prepaid accounts rule was released in October 2016, the NBPCA has directly engaged the bureau on behalf of its members to resolve issues with the proposed rule and now the final rule, which, if not addressed, will create significant implementation and compliance challenges and potentially reduce the availability of certain prepaid products. In particular, the NBPCA noted the following areas of concern:

  • The application of Reg E should continue to be evaluated to reduce fraud. The proposed change to extend Reg E and liability protections only to cards that have been verified is a positive step; however, the CFPB should also consider taking additional steps to reduce fraudulent activity, such as shortening the lookback period.   
  • Cards not marketed to the general public should be exempted from the rule. While the LAP card exemption is positive step, the exemption should be extended to any cards that are not marketed to the general public, such as disbursement cards for providing refunds for utility payments, since they offer similar features and function in the same manner as LAP cards.
  • Prepaid account issuers should be allowed to issue credit cards linked to prepaid accounts. The proposed changes to the rule create an exception for third parties to offer traditional credit cards that are linked to a digital wallet or prepaid account. The exception should be extended to allow prepaid account issuers themselves to also offer these cards.
  • More time is needed to address the latest amendments. Once finalized, the proposed changes to the prepaid rule will create additional logistical and compliance challenges for prepaid providers. Delaying the implementation date by a year to April 1, 2019, would allow issuing banks, program managers, marketers, and technology service providers adequate time to implement changes.
  • Companies that comply early should be granted safe harbor. The CFPB should specifically include a safe harbor for early compliance.

The NBPCA remains committed to ensuring consumers retain access to prepaid cards, which are an important financial tool for a diverse and growing sector of American consumers—including the nearly 67 million unbanked or underbanked Americans who would otherwise lack access to the increasingly card-based economy—as well as businesses and governments to distribute, manage and spend funds. 

The letter can be viewed here.

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About the NBPCA

The Network Branded Prepaid Card Association (NBPCA) is a non-profit, inter-industry trade association that supports the growth and success of network branded prepaid cards and represents the common interests of the many players in this new and rapidly growing payments category. For additional information, visit www.NBPCA.org, or follow us on Twitter @NBPCA.

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