On September 29, four senators and 39 representatives sent a letter to Consumer Financial Protection Bureau (CFPB) Director Richard Cordray expressing concern about the CFPB’s proposed rulemaking for prepaid accounts. (Read our LawFlash discussing the proposed rule.)
The letter specifically identifies four areas of concern:
- The broad coverage of the proposed rule, which encompasses person-to-person transfers and other transactions where consumers might not necessarily expect protections similar to credit cards and other traditional financial products.
- The requirement of multiple disclosures, and the lack of usefulness of the long-form disclosure.
- The implementation deadline—requesting 24 months from the final rule’s publication date instead of the proposed nine-month implementation period.
- The effect of the overdraft provisions and whether consumers would be better served by overdrafts that allow for “micro-credit” but are exempt from the requirements of Regulation Z.
The letter was sent on the same day as a House Financial Services Subcommittee hearing on “The Semi-Annual Report of the Bureau of Consumer Financial Protection.” The comment period for the proposed rule closed on March 23, 2015, and more than 6,000 comments were submitted. Around 250 of those were from industry, trade associations, or consumer oriented nonprofits.
The CFPB is facing a significant amount of pressure to scale back the scope of the proposed rule, but has not indicated its views on industry input. Given the CFPB’s strong interest in prepaid cards and prepaid access (and in payment systems in general), we expect that the final rule will have about the same scope of coverage and that the overdraft provisions will remain. The CFPB expected to issue a final rule on prepaid accounts in early 2016. The final rule is certain to require changes in the prepaid access and prepaid card industry.