Time's Up For Implementing The Final Pending Requirements For Prepaid Accounts

Category: Compliance
Type: Blog

The clock has run out for implementing the final pending requirements for prepaid accounts. The effective date was April 1, 2019.  If you are one of the lucky ones that do not issue cards/offer accounts that meet the definition of prepaid accounts, congratulations. If you are still struggling as to whether or not your product falls under the definition the Consumer Financial Protection Bureau (CFPB) offers a very helpful guide that walks you through specific questions to determine if your product meets the definition of prepaid account.  You can find a link to the guide here:  https://www.consumerfinance.gov/documents/1057/Prepaid_coveragechart_v1_10052016.pdf 
 

We have included the definition below as a reference. It contains four (4) major elements, which of course contain additional details within two (2) of the elements. 

“A “prepaid account” is a product that is one or more of the following: 

1. A payroll card account. 
2. A government benefit account. 
3. An account that: 
a. Is marketed or labeled as “prepaid;” 
b. Is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at automated teller machines (ATMs); and 
c. Does not satisfy a specific exclusion set forth in the Prepaid Rule. 
4. An account that: 
a. Is issued on a prepaid basis in a specified amount or is capable of being loaded with funds after issuance; 
b. Has a primary function of conducting transactions with multiple, unaffiliated merchants for goods or services, conducting transactions at ATMs, or conducting person-to-person (P2P) transfers; 
c. Is not a checking account, a share draft account, or a negotiable order of withdrawal (NOW) account; and 
d. Does not satisfy a specific exclusion set forth in the Prepaid Rule.”


The final rule contains several requirements, including:

1.      Pre-acquisition disclosures
2.      Error resolution requirements
3.      Limitations on liability for prepaid account holders
4.      Periodic statement requirements
5.      Change in terms notice requirements
6.      Overdraft feature requirements that bring Reg. Z into play

In addition, there is a requirement within the final rule to submit prepaid account agreements to the CFPB.  The intent is to make these available to the public through the CFPBs website. Be sure there are procedures in place to name a responsible party to provide these agreements and future updates, including notice for products that are no longer offered. 

This is a requirement with a lot of moving parts if you have a product that qualifies under the definition.  Be sure to check out our FiHub Premium Regulatory Update implementation guidance for the details.  If you are not already a FiHub Premium member learn more about joining here or email slargin@nxtsoft.com for more details.

April 02, 2019
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