The Consumer Financial Protection Bureau finalized changes Thursday to its prepaid rule by extending the effective date to April 2019, adjusting requirements for resolving errors on unregistered accounts and carving out an exception for credit card accounts linked with digital wallets.
Although the prepaid rule was finalized in 2016, acting CFPB Director Mick Mulvaney delayed it in December, after his predecessor, Richard Cordray, also delayed it. They both cited the need for adjustments after getting feedback from prepaid card issuers. The bureau had first sought input on the prepaid rule in 2012.
The rule requires companies to disclose fees on prepaid cards and cooperate with consumers who discover unauthorized charges or errors. Issuers raised several concerns about the rule, including that it would leave them on the hook for fraud losses on unregistered cards. Some issuers had wanted the CFPB to exclude digital wallets from the rule.
A major change is in the rule's error-resolution requirements and limited liability protections, which now will apply after a consumer's identity has been verified. A consumer's right to dispute charges and have stolen money restored because of a suspected theft or dispute now will be extended only after a consumer has registered their prepaid account.
"These changes will help encourage prompt registration and streamline compliance for financial institutions," the CFPB said in a press release.
In another change, the CFPB is creating a limited exception for digital wallets that are linked with a traditional credit card. To qualify for the exception, a consumer must submit a written request to authorize access to a credit card account. However, a provider cannot require that a consumer link an account as a condition for enrolling.
In short, if a consumer links a credit card to a digital wallet, the credit protections in the prepaid rule will not apply because the consumer's credit card already receives protections under prior statute.
The bureau received 32 comment letters on the rule. It chose to extend the effective date by six months because it is "sensitive to the concerns raised by commenters about needing more time to implement the rule," the CFPB said.
Payments industry groups applauded the changes.
“By making adjustments to the prepaid accounts rule, including providing additional time for compliance, the CFPB has taken a step to protect consumer access to prepaid products," Brian Tate, president and CEO of the Network Branded Prepaid Card Association, an industry trade group, said in a press release.
Jason Oxman, CEO of the Electronic Transactions Association, said the CFPB addressed "substantive portions of the prepaid rule that would have severely constrained the ability of prepaid providers to offer innovative financial products to the millions of Americans who need them most.”