By Mary Crotty, Freelance Writer for Banks and Third-Party Service Providers
Making good on a promise it made in December, the Consumer Financial Protection Bureau (CFPB) yesterday announced that it is officially delaying the effective date of its Prepaid Accounts Rule along with other changes to its original final rule on the matter.
Effective Date for Prepaid Accounts Rule Moves to April 1, 2019
Financial institutions that issue prepaid accounts and cards will now have until April 1, 2019 to comply with the CFPB’s rule. This additional year, which provides time for issuers to update their prepaid card packaging to meet new disclosure requirements, appears to be the CFPB’s compromise between issuers’ need for additional preparation time and the Bureau’s continued stance that this increasingly popular consumer financial product should benefit from consumer protection regulations.
The other two major changes announced on January 25 also reflect this sentiment.
Error Resolution and Liability Changes
Under the Final Rule’s amendment, “financial institutions are not required to resolve errors or limit consumers’ liability on unverified accounts.” The CFPB indicates that this change is intended to encourage consumers to register their prepaid accounts in order to enjoy their full utility, while ultimately lessening the compliance burden of this rule on financial institutions.
In addition, financial institutions will not be required to retroactively resolve errors or limit liability on transactions made prior to the account verification.
Provision for Credit Cards Linked to Digital Wallets
The CFPB estimates that $116 billion will be loaded onto prepaid accounts by the year 2020. This rapidly escalating number is fueled in part by credit card holders linking their credit card accounts to digital wallets, which fall under the prepaid accounts definition. The final major change from the CFPB “ensures consumers continue to receive full federal credit card protections on their traditional credit card accounts while making it easier for them to link those accounts to digital wallets that can store funds.”
Make Sure to Update Employees on Revised Effective Date
The project team within your institution that is working on preparations for the Prepaid Accounts Rule implementation should communicate the revised effective date to all relevant departments to ensure that everyone is aware of the delay and understands the other changes associated with this rule amendment.