CFPB Proposes 6-Month Delay on Prepaid Card Rule

By Gregory Roberts

The Consumer Financial Protection Bureau plans to delay the effective date of its prepaid card rule for six months, to April 1, 2018, in response to industry objections to the original one-year time frame for compliance.

Brad Fauss, executive director of the Network Branded Prepaid Card Association (NBPCA), released a statement saying the trade group “applauds the CFPB for listening to industry concerns.”

Fauss also said he was “encouraged” by the CFPB’s March 9 announcement. The bureau said delaying the effective date will allow it “to more closely evaluate concerns raised by industry participants regarding certain substantive aspects of the prepaid accounts final rule that they assert are posing particular complexities for implementation or may have negative consequences for consumers.”

The CFPB said it will accept public comments on the proposed delay for three weeks after the notice is published in the Federal Register.

The CFPB published the final rule in October 2016, with an effective date of Oct. 1, 2017. The rule deals with fee disclosures, fraud protection and dispute resolution for prepaid cards, the debit-card-like products that are sold widely in convenience stores and other retail outlets, loaded by the purchaser with money in advance and typically can be reloaded online. It applies credit-card-type regulations to prepaid cards that routinely extend overdraft coverage and also takes in mobile wallets that store value, like PayPal’s Venmo or Google Wallet.

Rule Riles Industry

The prepaid card industry has objected to a number of elements in the rule, and it singled out the one-year compliance deadline as one of them.

In a letter to the CFPB sent while the bureau was considering the rule, in March 2015, the NBPCA wrote, “Based on the substantial operational and systems changes that will be required to implement the anticipated final rule, our members believe that between 18 and 24 months is a much more appropriate time frame to implement the required changes from a broad-sweeping new regulation.”

Republicans in the majority in both the House and the Senate have introduced resolutions this year to set aside the prepaid rule under the 1996 Congressional Review Act ( CRA), which allows for repeal of a federal regulation via a majority vote in each house and the president’s signature. The CRA, exercised only once before this year, has been applied repeatedly since the Jan. 20 inauguration of Republican President Donald Trump to quash rules issued during the administration of his predecessor, Democrat Barack Obama.

Ruth Susswein, deputy director of national priorities for the Consumer Action Network, said her organization doesn’t support the CFPB’s proposed delay. But, she said in an email, “If the extra time will help cooler heads in Congress to prevail, then consumers can probably wait six more months for legal protections on their prepaid cards.”

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