CFPB finalizes prepaid accounts rule

The Consumer Financial Protection Bureau has finalized its prepaid accounts rule, delaying its effective date one year to April 1, 2019.

The changes announced last week adjust requirements for resolving errors on unregistered accounts and provide greater flexibility for credit cards linked to digital wallets.

The bureau’s 2016 prepaid rule set up requirements for the treatment of funds on lost or stolen cards, error resolution and investigation, upfront fee disclosures, access to account information, and overdraft features if offered in conjunction with prepaid accounts.

According to industry analysts, the amount consumers put on “general purpose reloadable” prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. The total dollar value loaded onto these prepaid cards is expected to nearly double to $116 billion by 2020.

In June 2017, the bureau proposed amendments to require consumers to register their accounts to receive fraud and error protection benefits, such as the right to dispute charges and have stolen money restored, and to extend the protections retroactively to suspected thefts or disputes occurring before registration was successfully completed.

The changes made for the final rule provide that the error resolution and liability limitation protections apply prospectively, after a consumer’s identity has been verified. These changes will help encourage prompt registration and streamline compliance for financial institutions as well as ensure continued availability and utility of prepaid accounts for consumers, the bureau said.

The rule changes also ensure that consumers continue to receive full federal credit card protections on their traditional credit card accounts while making it easier for them to link those accounts to digital wallets that can store funds. The changes also reduce potentially unnecessary complications and expense to consumers who link credit cards to digital wallets, the bureau said.