Agency to publish final rule on pre-paids (with effective date pushed by one year)

Five revisions to its rule on pre-paid accounts — including extending the overall effective date to April 1, 2019, and providing that financial institutions will not be required to resolve errors or limit consumers’ liability on unverified accounts — are outlined by the Consumer Financial Protection Bureau (CFPB) in filings Monday with the Federal Register.

The final rule and official interpretation are expected to be published this week.

In the final rule submitted to the Register, the agency stated that the central provisions of the final rule:

  • Revise the error resolution and limited liability provisions of the Prepaid Accounts Rule in Regulation E to provide that financial institutions are not required to resolve errors or limit consumers’ liability on unverified prepaid accounts. For accounts where the consumer’s identity is later verified, financial institutions are not required to limit liability and resolve errors with regard to disputed transactions that occurred prior to verification.
  • Create a limited exception to the credit-related provisions of the Prepaid Accounts Rule in Regulation Z for certain business arrangements between prepaid account issuers and credit card issuers that offer traditional credit card products. This exception is designed to address certain complications in applying the credit provisions of the Prepaid Accounts Rule to credit card accounts linked to digital wallets that can store funds where the credit card accounts are already subject to Regulation Z’s open-end credit card rules in circumstances that appear to pose lower risks to consumers. This final rule also expands the situations in which prepaid account issuers are permitted to run negative balances on prepaid accounts, provided certain conditions are met.
  • Extend the overall effective date of the Prepaid Accounts Rule to April 1, 2019.
  • Make clarifications or minor adjustments to provisions of the Prepaid Accounts Rule in Regulation E related to an exclusion from the definition of prepaid account, unsolicited issuance of access devices, several aspects of the rule’s pre-acquisition disclosure requirements, and submission of prepaid account agreements to the Bureau.
  • Make technical corrections to certain provisions of the Prepaid Accounts Rule in both Regulations E and Z.

Final: Rules Concerning Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)

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