Time Running Out on Bid to Repeal Prepaid-card Rule

By Gregory Roberts

The window of opportunity for congressional Republicans to repeal a new federal rule aimed at protecting consumers who use prepaid cards looks to be closing, if it’s not quite shut already.

The reason is that the effort to repeal the Consumer Financial Protection Bureau’s rule needs to beat a deadline set by the 1996 Congressional Review Act (CRA), the vehicle for overturning regulations recently issued by federal agencies. That deadline is May 11, the Senate Republican leadership calculates, which may just be too soon for the repeal effort to prevail.

“I think the chances for success are quite low, given the timing and given the lack of unity and vigor of industry support,” Quyen Truong told Bloomberg BNA. Now a partner in the Washington office of Stroock & Stroock & Lavan LLP, Truong formerly served as assistant director and deputy general counsel at the CFPB, which issued the prepaid-card rule in October 2016.

The Senate has “a lot of matters to handle,” Truong said — and the prepaid-rule “falls too far down the list of priorities to get through.”

Senate leadership hasn’t announced when the resolution might be brought up for floor consideration.

One Deadline Met

The Senate dealt with its most pressing issue May 4, when it passed a bill to fund the government through Sept. 1 and sent it to Republican President Donald Trump for his signature. That vote beat by one day a deadline for action to avoid a government shutdown.

The days Congress spent on budget wrangling dimmed prospects for the prepaid-rule repeal.

The prepaid 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. The rule applies credit-card-type regulations to prepaid cards that routinely extend and charge for overdraft coverage. It also takes in mobile wallets that store value, like PayPal’s Venmo or Google Wallet.

A CRA resolution Sen. David Perdue (R-Ga.) introduced Feb. 1 to overturn the rule was moved to the Senate floor queue by a discharge petition filed March 30 that bypassed committee action. A total of 32 senators—all Republican—signed on to either Perdue’s resolution or the petition.

Consumer advocates have praised the prepaid card rule for bringing additional protections to an area of financial services that needs them,saying the prepaid card market could grow to assist consumers outside the traditional banking system. Some industry representatives have said the rule could be so onerous that it squashes innovation and means consumers will have fewer choices in the marketplace, but at least one leading card provider supports the rule.

Simple Majority Needed

It will take 51 votes to pass the Perdue resolution in the Senate, where Republicans hold 52 of the 100 seats. Passage in the Senate would send the measure to the House, where Republicans command a sizable majority. A signature by Trump would not only set aside the rule but bar any substantially similar regulation in the future.

The CRA says that repeal of a regulation by a simple majority vote in each house must occur within 60 legislative days of publication; otherwise, the repeal requires 60 votes in the Senate, under Senate rules. With congressional recesses and other days off, the 60-day CRA deadline for the prepaid rule falls on May 11, by leadership accounting.

Before Trump’s inauguration Jan. 20, the CRA had been used to reject a rule only once, in 2001, when Republicans who had taken over Congress and the White House set aside a workplace ergonomics rule issued during Democrat Bill Clinton’s administration. Other CRA votes by Congress before this year proved to be empty gestures, vetoed by a president uninterested in overturning a rule put forth by his own administration.

The transfer of power from one president to the next can open a window for the CRA if that transition reflects a partisan changeover that puts the White House and Congress in control of the same party—as with the switch from Obama to Trump, who has signed more than a dozen CRA resolutions.

To contact the reporter on this story: Gregory Roberts in Washington at gRoberts@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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