Prepaid Cards: Future Compliance With Regulation E?
The Consumer Financial Protection Bureau (CFPB) has released an Advance Notice of Proposed Rulemaking on the applicability of Regulation E to general purpose reloadable prepaid cards (GPR cards). Although this is not a final rule or even a proposed rule, it is the first step toward requiring GPR cards to comply with various Regulation E consumer protection requirements.
Many credit unions co-brand with other providers to offer GPR cards to members. The number of GPR cards being issued and the total dollar value of outstanding cards are both growing quickly. The total value on GPR cards was $57 billion in 2011, and is expected to climb to $167 billion by 2014. A growing number of consumers view GPR cards as an alternative to checking accounts and debit cards.
The CFPB is concerned that since GPR cards are currently not governed by the same consumer protections as other types of accounts, consumers might not be aware of all the costs and restrictions applicable to the cards. While debit cards linked to a checking account are subject to Regulation E, GPR cards are not. In the months ahead, expect a GPR card final rule requiring a “terms and fees” disclosure that includes provisions for unauthorized transactions.
The CFPB has a good website for frequently asked questions about prepaid cards.