Interpretive rule will allow coronavirus relief payments to be issued by pre-paid card

Certain coronavirus relief payments from the government will not be considered “government benefits” and thus may be issued to consumers via prepaid cards, according to an interpretive rule issued Monday by the federal consumer financial protection agency.

Under the interpretive rule – which takes effect as soon as it is published in the Federal Register (which, as of Tuesday afternoon, is not yet in the publication pipeline) – certain pandemic-relief payments are not “government benefits” for purposes of Regulation E, and those payments are not subject to the compulsory use prohibition in the Electronic Funds Transfer Act (EFTA) and Regulation E, the Consumer Financial Protection Bureau (CFPB) said.

“Government agencies may not always be able to use direct deposit to distribute funds because they do not have access to consumers’ account information, such as account and routing numbers, and because some consumers receiving payments do not have a pre-existing account that can accept direct deposits,” the agency said in a release.

In such cases, the bureau said, disbursement of funds via such alternative means as a newly issued prepaid account “may be faster, more secure, more convenient, and less expensive – for both the government agency and the consumer – than making disbursements through other methods such as paper check.”

The bureau said, specifically, that government benefits do not include payments from federal, state, or local governments if those payments: (1) are made to provide assistance to consumers in response to the COVID-19 pandemic or its economic impacts; (2) are not part of an already-established government benefit program; (3) are made on a one-time or otherwise limited basis; and (4) are distributed without a general requirement that consumers apply to the agency to receive funds.

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