CFPB Amends Prepaid Account Rule

The Consumer Financial Protection Bureau (CFPB) has issued final rule amendments to the Prepaid Account Rule. The final rule amendments make three major changes to the Prepaid Account Rule.

3/6/18

Picture of Law book with a wooden judges gavelThe Consumer Financial Protection Bureau (CFPB) has issued final rule amendments to the Prepaid Account Rule.  The final rule amendments make three major changes to the Prepaid Account Rule.

  1. Extends the effective date by one year.
  2. Adjusts and clarifies the error resolution requirements.
  3. Provides more flexibility concerning credit cards linked to digital wallets.

What is the new effective date?

The recent final rule amendments to the Prepaid Account Rule pushes back the effective date of the Prepaid Account Rule to April 1, 2019.

What are the changes to the error resolution requirements?

The revised error resolution requirements and limited liability provisions stipulate that a financial institution is not required to resolve errors or limit a consumer’s liability under Regulation E on prepaid accounts that have not been verified.  For those accounts where the consumer’s identity is later verified, the financial institution is not required to limit the consumer’s liability or resolve errors on disputed transactions that occurred prior to the account being verified.

What are the changes with regards to digital wallets?

The final rule amendments create 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 Account 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.

Where can I see the final rule amendments myself?

You can access the final rule amendments on the CFPB’s website here.

Question of the Week

Do transfers initiated through a mobile device require a receipt with the transaction?

No. Like transfers and bill payments that are initiated by the member through their online banking, transactions on mobile devices are considered analogous in function to a telephone.  These transactions are considered electronic funds transfers and are covered under Reg E, but are not considered to be initiated at an electronic terminal such as an ATM or POS and do not require a receipt at the time of the transaction.

The transactions will need to be clearly identified on the periodic statement.

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