United States

Prepaid rule guidance and delay of effective date


Small Entity Compliance Guide

The Consumer Financial Protection Bureau (CFPB or Bureau) released a final rule governing prepaid accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z). The CFPB has issued a small entity compliance guide for its final rule on prepaid accounts.  Prepaid Rule Small Entity Compliance Guide  

The guide highlights information helpful to a small entity implementing the Prepaid Rule and addresses topics, including:

  • Types of prepaid accounts
  • Entities subject to the Prepaid Rule
  • Pre-acquisition disclosures, disclosures on access devices and initial disclosures
  • Change-in-term notices
  • Periodic statements, the periodic statement alternative and prepaid account statement requirements
  • Error resolution and limitations on liability
  • Receipts at electronic terminals
  • Preauthorized electronic fund transfers (EFTs) and compulsory use
  • Issuance of an access device
  • Overdraft credit features
  • Provision of same terms for prepaid accounts with and without a separate credit feature
  • Remittance transfers
  • Record retention

The guide also provides an easy-to-use summary of the Prepaid Rule that tentatively becomes effective Oct. 1, 2017.

Preparing the short form disclosure

The final rule requires financial institutions to generally provide both a short form disclosure, and a long form disclosure before a consumer acquires a prepaid account. Prepaid Rule Disclosures The final rule includes several model short form disclosures that offer a safe harbor to the financial institutions that use them, provided that the model forms are used accurately and appropriately. The CFPB also issued a guide titled, Preparing the short form disclosure for prepaid accounts,  which provides basic how-to instructions to prepare the short form disclosures for prepaid accounts other than government benefit account or payroll card accounts. For the convenience of the prepaid industry and to help reduce development costs, the Bureau has provided native design files for print and source code for web-based disclosures for all the model and sample forms included in the final rule.  Native design file for Prepaid Rule Disclosures

 Delay of effective date

On March 10, the CFPB proposed extending the effective date of its final rule for covered Prepaid Accounts. The proposal would move the effective date from Oct. 1, 2017, to April 1, 2018. According to the Bureau, the proposed extension was due to some industry participants expressing difficulty in complying with certain provisions of the rule by the original effective date. The Bureau invited comments from the public on how implementation challenges may affect consumers and that those comments may lead to substantive changes to the rule if deemed necessary and appropriate. Comments on the proposal are due 21 days after it is published in the Federal Register.