prepaid account – FinTech and Blockchain Law Watch

Potential Major Change for U.S. Prepaid Products: Paypal vs CFPB Court Vacates Two Significant Restrictions in CFPB’s Prepaid Account Rule

Jan 13 2021

By Judith Rinearson, Andrew C. Glass, Gregory N. Blase, and Hollee M. Boudreau

On 30 December 2020, the United States District Court for the District of Columbia entered an order invalidating two provisions of the “Prepaid Account Rule” (the Rule) promulgated by the Consumer Financial Protection Bureau (CFPB). Specifically, the order invalidated the Rule’s mandatory short form disclosure requirement and the requirement for a thirty-day delay before linking prepaid products to credit, on the basis that the CFPB had exceeded its statutory authority.¹

The Shoe Finally Drops: CFPB Makes Final Changes to the Prepaid Account Rule and Delays the Effective Date until 2019

Feb 01 2018

By Eric A. Love and Judith Rinearson

On January 25, 2018, the U.S. CFPB announced that it has finalized changes to its sweeping Final Rule governing most general use prepaid accounts, digital wallets and P2P payment programs. These changes have been long anticipated, and include a delay of the Final Rule’s effective date (until April 1, 2019), as well as the following notable features:

Error Resolution and Limited Liability

A major bone of contention for the industry was the fact that provisional re-crediting of claims of unauthorized transactions would be required even if the cardholder had not registered or been verified. Such a requirement would certainly have increased fraud. Under the new amendments, Regulation E’s error resolution and limited liability requirements will not apply until after the consumer identification and verification process has been completed. This new limitation does not apply to payroll cards and government benefit accounts, since these cardholders are usually already known to the issuers.

Comprehensive Analysis of the CFPB’s Final Prepaid Account Rule

Nov 10 2016

By Eric A. Love, Linda C. Odom and Judie Rinearson

As noted in our previous blog post, the Consumer Financial Protection Bureau (“CFPB”) finalized on October 5 its long-awaited Final Rule for prepaid accounts under the implementing regulations for the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z). Effective October 1, 2017, the Final Rule clocks in at nearly 1,700 pages and represents the most significant change to the legal and regulatory landscape of the prepaid account industry since the Financial Crimes Enforcement Network’s issuance in 2011 of a final rule regarding prepaid access. Although the CFPB’s Final Rule retains many key aspects of the agency’s Notice of Proposed Rulemaking (“NPRM”) on prepaid accounts, the Final Rule differs from the NPRM in a number of important respects and will create a new set of compliance hurdles for the prepaid account industry.

In our alert entitled “CFPB Finalizes Expansive Prepaid Account Rule Creating New Compliance Hurdles,” we provide a comprehensive analysis of the Final Rule and highlight several notable differences between the Final Rule and the NPRM. You can read the full alert here.

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