Payments Players Urge Further Delay of the CFPB’s Huge Prepaid Rule Until 2019

While the Consumer Financial Protection Bureau is working toward an April 1, 2018, effective date for its massive rule for prepaid accounts, prepaid card industry advocates are urging the agency to further delay the rule by another year.

In a comment filed this week with the CFPB, which regulates all manner of financial rules, Wirecard North America Inc. urged the regulator to extend the implementation date until April 1, 2019, because of additional changes in the proposed rule. Wirecard North America is a unit of Germany-based Wirecard AG. The original deadline was Oct. 1, 2017, but was extended until April 1, 2018, by the CFPB.

Following an analysis of the rule, Brad Fauss, Wirecard North America general counsel and vice president of compliance and government affairs, writes that delaying the rule another year is necessary for the company to meet the new technical and logistical requirements. Among the issues is that the rule will require changes to its cardholder agreements, interactive voice response systems, Web sites, frequently-asked-questions content, and marketing materials.

“As a result, we will need to resubmit all our cardholder agreements and other cardholder disclosures to our issuing banks for approval at the same time that all of their other program managers are doing the same,” Fauss said. “Further, this process cannot even begin until the proposal is finalized and we have the time necessary to review and understand the final requirements.”

Others, too, want more time. In comments submitted earlier this month, the Network Branded Prepaid Card Association, a Washington-based trade group, advocated for an extension.

“However, the NBPCA is concerned that the various changes included in the proposal will require more time for compliance than is provided for by the current April 1, 2018, effective date,” wrote Brian Tate, president and chief executive. “Moreover, the NBPCA notes that even an additional 6-month extension of the effective date to October 1, 2018, would be difficult for providers to comply with because it would mean trying to replace product and implement the rule during the holiday season.”

The NBPCA said that even if the rule is finalized this fall, there won’t be enough time for prepaid card providers to comply with all of the stipulations by April 1, 2018. “This highlights a particular problem providers have in complying with the requirements of the rule when the substance of the Rule continues to change and is still unsettled,” Tate said. The CFPB tweaked some provisions of the rule in June.

The Electronic Transactions Association, a Washington-based trade group for acquirers, also pushed for the 2019 date.

The NBPCA commented on other aspects of the rule. For example, it wants prepaid account issuers to be allowed to issue credit cards linked to prepaid accounts, and to exempt cards not marketed to the general public from the rule.

Wirecard, too, wants these cards exempted, and points specifically to prepaid cards used for disbursements, such as a goodwill gesture for a faulty product or service. These disbursement cards are beneficial to consumers, but because of the limited manner in which they are used, the CFPB rule should not apply to them, Fauss said. They should be regulated like loyalty, award, and promotional cards, which are already exempt from the rule, he argued.