Congress Takes Aim at the CFPB’s Pending Prepaid Card Rule

By Jim Daly
@DTPaymentNews

The new Republican-controlled Congress and Republican President Donald Trump want fewer government regulations, and the Consumer Financial Protection Bureau’s pending rule for prepaid accounts could become one of the first regulations to be killed under the heretofore little-used Congressional Review Act.

Last week, both the House and Senate started the CRA process by passing joint resolutions to “disapprove” the CFPB’s pending rule, most of whose provisions are scheduled to take effect in Oct 1. The House version, Joint Resolution 62, whose lead sponsor is U.S. Rep. Tom Graves, R-Ga., was referred to the House Financial Services Committee. The identical Senate Joint Resolution 19 sponsored by U.S. Sen. David Perdue, R-Ga., was referred to the Senate Banking Committee.

Congress has always had the power to kill or change rules approved by the executive branch, but Congressional Review Act spells out a streamlined process for doing so. Passed in 1996 and signed by then-president Bill Clinton, the law enables Congress to nullify a new rule or regulation within 60 so-called legislative days after receiving notice of its publication. Days when Congress is in session can be subject to change, so the deadline for killing the prepaid rule once the CRA process starts is expected to fall in March or April, a source tells Digital Transactions News. A fast-track component of the disapproval process enables the Senate to bar filibusters by supporters of the rule in question.

Despite the lip service politicians have given for decades to reducing regulations and the size of the federal bureaucracy, Congress has used the CRA only once to kill a regulation, according to a December analysis from The Heritage Foundation, a conservative think tank. But the law is getting attention from the new 115th Congress’s leaders as they seek to undo many regulations passed during former president Barack Obama’s administration.

Exactly how the CRA tactics will play out in relation to the prepaid rule unclear, but what is clear is that the CFPB, a creation of the Dodd-Frank Act of 2010, is politically vulnerable now that Republicans have full control of Washington. Republicans say the CFPB has imposed excessive regulations on the financial-services industry and that its director, currently Richard Cordray, is not accountable to Congress the way other regulatory agencies are.

The prepaid rule is hundreds of pages long and has drawn fire from the payments industry. The Washington-based Electronic Transactions Association in December sent a letter to House and Senate leaders stating that the rule “is overly burdensome, expansive and prescriptive, negatively impacting consumers. The massive rule, if implemented, may eliminate important options for financial products for millions of Americans.”

But consumer groups support the rule, which among other things would tighten disclosures for prepaid cards and related accounts, and limit overdrafts.

Payments industry consultant Eric Grover, principal of Minden, Nev.-based Intrepid Ventures, isn’t sure if employing the CRA to kill the prepaid rule will work. His preferred alternative is to eliminate the CFPB entirely. “That said, I think the chances of picking up a  modicum of Democrat support [for] repealing or gutting specific CFPB rules are greater,” Grover says by email.