The CFPB Proposes Strong Federal Protections for Prepaid Card Accounts

By Jim Daly

The Consumer Financial Protection Bureau on Thursday unveiled proposed regulations for prepaid accounts that for the first time would bring to prepaid cards many of the federal protections that currently apply only to credit and debit cards.

The CFPB’s plan would limit consumers’ losses when funds are stolen or cards lost; require account providers to investigate and resolve errors; provide free and easy access to account information; and adhere to existing protections governing credit cards if they offer a credit product linked to a prepaid account.

The rules would apply not only to many plastic prepaid cards, but also to mobile and other electronic prepaid accounts that can store funds. Prepaid products to be covered by the rules include general-purpose reloadable cards, payroll cards, certain government benefits cards, student-aid disbursement cards, tax-refund cards, and peer-to-peer payment products.

“Consumers are increasingly relying on prepaid products to make purchases and access funds, but they are not guaranteed the same protections or disclosures as traditional bank accounts,” CFPB Director Richard Cordray said in a news release. “Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smart phone, or sending a payment.”

Under the proposal, financial institutions would be required to either provide periodic statements to prepaid card holders or make account information available to them online, at no cost. Under the plan’s lost-and-stolen section, a consumer’s loss would be limited to $50 provided he or she promptly notified the issuer.

The CFPB last May issued an advance notice of proposed rules about prepaid cards and has scheduled a hearing on the topic today in Wilmington, Del. The bureau is expected to publish the proposal in the Federal Register, after which it will take comments for 90 days.