CFPB’s Final Prepaid Card Rule: Maximizing Opportunities and Minimizing Risks
On October 5, 2016, the Consumer Financial Protection Bureau (CFPB) released the final rule regulating prepaid card accounts. The new rule will extend the protection of Regulation E, which implements the Electronic Fund Transfer Act, to prepaid cards and similar products. It will also expand the scope of Regulation Z, which implements the Truth in Lending Act, to cover overdraft credit features on prepaid accounts. Most provisions of the final rule will take effect on October 1, 2017, though the requirement to submit prepaid account agreements to the CFPB will take effect in October 2018.
The Knowledge Group has assembled a panel of key thought leaders to discuss the CFPB's final prepaid card rule and its practical implications to prepaid card retailers and issuers. They will also offer best practices to ensure compliance with the final rule.
In this LIVE Webcast, the speakers will discuss:
- Scope of the CFPB's Final Prepaid Card Rule
- Definition of “Prepaid Account"
- Disclosure Requirements
- Submission and Posting of Prepaid Account Agreements
- Requirements for Prepaid Accounts with Overdraft and Credit Features
- Prohibition on Compulsory Use
- Dispute Resolution and Consumer Liability
- Practical Implications
- Best Compliance Practices
- Effective Date extension to 4/1/18-Nate
- Jim to speak later about this in more detail
- Scope of Prepaid Account Rule: Regulation E-Nate
- “Non-needs tested government benefits:” unemployment insurance and child support funds are distributed on prepaid cards in some states
- Virtual currency product coverage: TBD. “Ongoing” review by CFPB. Indicated intention to use supervision and enforcement to make rules in this area.
- Regulation E: New Disclosures-Nate
- Regulation E: Short-Form Disclosure-Nate
- The [Additional fee type] fields are for the two fee types that generated the highest total revenue from consumers of the prepaid account program over the prior 24-month period. This is a change from the proposal.
- BEST PRACTICE: Collect information NOW about the revenue generated by each fee type.
- Revenue-based fees exclude: finance charges and any fees that generate less than 5% of the total revenue from consumers for the prepaid account program.
- To be ready on the effective date (4/1/18), the 24 month period for which data is collected and used to disclose fees must begin well in advance of the effective date
- For new and existing programs that do not have 24 months worth of fee revenue data, may base fee disclosures on revenue that is reasonably anticipated over the first 24 months of a new program, or for existing program, first 24 months after 4/1/18.
- Regualtion E: Long-Form Disclosure-Nate
- Note: alternate model forms for disclosing multiple service plans, prepaid and government benefit cards-Nate
- Regulation E: Error Resolution-Kim
- Regulation E: Account History-Kim
- Regulation E: Submission to CFPB-Kim
- Regulation E: Publicly Posting Agreements-Kim
- Scope of Prepaid Account Rule: Regulation Z-Jim
- Safeharbor: practice of declining transactions that will cause overdraft, the overdraft is $10 or less and no fees charged. (1606)
- Regulation Z-Jim
- Thirty-day waiting period: The CFPB rule requires companies to wait 30 days after a consumer registers the prepaid account before offering the credit feature to the consumer. This gives consumers time to gain experience with the basic prepaid account before deciding if they want to apply for the credit feature.
- Wall between prepaid funds and credit repayment: Prepaid companies cannot automatically seize a credit repayment the next time a prepaid account is loaded with funds. Further, prepaid companies cannot automatically take funds from the prepaid account to repay the credit when the bill is due unless the consumer consents. And even so, companies cannot automatically take funds more than once per month.
- Recent Developments-Jim
- CRA: Senator Purdue (R-GA) led a charge to overturn the rule using the Congressional Review Act which enables the legislature to overturn administrative rules with a majority vote within a certain time period after the rule is issued. The deadline for the prepaid card rule was May 9. The CRA eats up floor time, allowing ten hours of debate for both Dems and Reps. Other administration priorities prevented this effort from receiving floor time and a vote.-Jim
- Digital wallets: ABA expressed concern about the lack of legal distinction between checking accounts and prepaid accounts, particularly in the digital wallet space. CFPB committed to further consider the linking of credit cards to digital wallets that are capable of storing funds.-Jim
- Unregistered cards: no KYC/CIP. High opportunity for fraud where unregistered cardholder may falsely assert an error.-Jim
Who Should Attend:
- Consumer Finance Attorneys
- Banking & Finance Lawyers
- Prepaid Card Issuers and Retailers
- Finance Managers
- Related/Interested Individuals
Jim McGarry is a partner in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices. His national practice focuses on defending financial institutions of all shapes and sizes, primarily in state and nationwide class actions and multi-district class actions around the country and in matters with significant client regulatory and/or reputational risk. In the last five years, Mr. McGarry has defended clients against nearly 100 class actions and his unprecedented streak of defeating contested class actions extends well beyond 10 years.
Jim McGarry is a partner in Goodwin’s Financial Industry and Consumer Financial Services Litigation practices. His national practice focuses on …
Kimberly Monty Holzel is an associate in Goodwin’s Financial Industry, Consumer Financial Services and FinTech practices. She advises banks, non-depository financial institutions, and FinTech clients on consumer financial laws and compliance and transactional matters.
Prior to joining the firm, Ms. Holzel worked for the U.S. Consumer Financial Protection Bureau and was an Associate at Schulte Roth & Zabel LLP, where she regularly advised money transmitters and licensed lenders on consumer financial law and regulatory compliance in licensing and transactional matters. During Ms. Holzel’s four years at the CFPB, she headed examination teams at large financial institutions, among other responsibilities. The CFPB teams she led examined for compliance with, among other things, mortgage originations and servicing, fair lending laws, and consumer loan and consumer banking matters.
Kimberly Monty Holzel is an associate in Goodwin’s Financial Industry, Consumer Financial Services and FinTech practices. She advises banks, non-depository …
Nate Viebrock focuses his practice on counseling the firm’s financial services clients on how to navigate government investigations and offer compliant financial products that serve the best interests of consumers. Prior to joining Bradley, Nate worked at the Consumer Financial Protection Bureau (CFPB) as an enforcement attorney and outreach associate. While at the CFPB, Nate handled matters related to debt collection, mortgage servicing and origination, and financial technology. He also met with stakeholders to solicit their feedback regarding residential mortgages, auto finance, the CARD Act, and small dollar lending. His government service affords clients the opportunity to consult an attorney with a unique understanding of the goals of government regulators and an appreciation for the compliance challenges that increased regulation can cause financial service providers.
Nate received his J.D. from the University of Georgia School of Law, where he served as president of the Equal Justice Foundation, an organization dedicated to raising money to support public-interest fellowships for law students. He dedicated his law school summers to clerking at state and federal public defender offices where he developed his litigation skills and learned to advocate for the best interests of his clients.
Nate Viebrock focuses his practice on counseling the firm’s financial services clients on how to navigate government investigations and offer …
Print and review course materials
Method of Presentation:
Experience in financial services law
NASBA Field of Study:
Business Law - Technical
NY Category of CLE Credit:
Areas of Professional Practice
Unlock All The Knowledge and Credit You Need
Leading Provider of Online Continuing Education
It's As Easy as 1, 2, 3
Get Your 1-Year All Access Pass For Only $199
About Goodwin Procter LLP
Goodwin is a leading Am Law 50 and Global 50 law firm, with offices across the United States and in Europe and Asia. Excelling at complex transactional work and high-stakes litigation, the firm combines in-depth legal knowledge with practical business experience to help clients maximize opportunities and manage risk. With more than 1,000 lawyers, Goodwin offers innovative counsel and delivers results through a client-centric and collaborative approach. The firm focuses on matters involving financial institutions, intellectual property, private equity, real estate capital markets, securities litigation/white collar defense, and technology/life sciences. Information may be found at www.goodwinlaw.com. Follow us on Twitter @goodwinlaw.
About Bradley Arant Boult Cummings LLP
Bradley is a national law firm with a global perspective. The firm has more than 525 attorneys serving established regional, national and international companies, emerging businesses, and individuals. Our offices—strategically located in Alabama, Florida, Mississippi, North Carolina, Tennessee, Texas and the District of Columbia—provide an extensive geographic base from which to best accommodate our clients. Recognized across the country, our attorneys serve as national, regional, and statewide counsel for clients across many industries. Clients rely on us for innovative legal services that reflect a deep understanding of their business objectives.