Revised interagency examination procedures for prepaid accounts are outlined in attachments to a letter issued Friday, in advance of new regulations affecting the accounts that are set to take effect April 1.
The Financial Institution Letter (FIL-9-2019), issued by the Federal Deposit Insurance Corp. (FDIC), addresses the Consumer Financial Protection Bureau’s (CFPB) amendments to Regulation E and Regulation Z, adopted in 2016, affecting prepaid accounts and which take effect April 1 (after having been delayed by one year).
The FDIC said it issued the letter with the thought that the “examination procedures may be helpful to financial institutions seeking to better understand how FDIC examiners will evaluate an institution’s compliance with these regulations.”
In January 2018, the CFPB extended by one year (to April 2019) its rule affecting prepaid cards and accounts. It said, at the time, the extension reflected comments that those affected “need more time” to put the rule to work – especially card issuers who need to package cards sold in stores.
The rule, as adopted in 2016, is intended to provide comprehensive consumer protections for prepaid accounts under Regulation E, which implements the Electronic Fund Transfer Act (EFTA), and Regulation Z, which implements the Truth in Lending Act (TILA). Its effective date was postponed twice: from 2017 to 2018, and then to this year (April 1). Over that time, the bureau made adjustments to the rule.
The FDIC letter notes that the rule, when adopted in 2016, expanded coverage of Reg E to apply to prepaid accounts, established disclosure standards for prepaid accounts, and classified prepaid accounts that offer covered credit features as “hybrid prepaid-credit cards” subject to Reg Z.
However, the letter states, subsequent amendments to the final rule were made (in 2018) addressing error resolution and limited liability on prepaid accounts where the bank has not completed its customer identification and verification; application of the rule’s credit-related provisions to digital wallets that are capable of storing funds; and other clarifications and minor updates.
The updated interagency examination procedures, the FDIC said in its letter, reflect the 2016 final rule and all subsequent updates.