CFPB proposes extending Regulation E requirements to reloadable prepaid cards

As the CFPB considers extending Regulation E rules to general purpose reloadable prepaid cards, the watchdog agency has filed an advance notice of proposed rule-making requesting public comment on the proposal.

Prepaid cards have recently enjoyed a considerable increase in popularity, particularly among under-banked and un-banked consumers. The Mercator Advisory Group projects that the value of amounts loaded onto GPR cards will reach $167 billion in 2014, a marked increase from $12 billion in 2007.

The CFPB is requesting information pertaining to the function of the GPR cards, as well as the possible costs, risks and benefits to consumers. The ANPR requests comment in four categories – product fees and disclosures, regulatory coverage of products by some if not all of Regulation E, product features and other information.

Regulation E protections generally apply to electronic fund transfers that authorize a financial institution to credit or debit a consumer account. These transactions include those conducted using ATMs, point-of-sale terminals, phone bill-payments, remote banking and automated clearinghouse transactions.

Unlike traditional checking accounts, GPR cards do not carry the same federal protections.

“[T]he lack of a comprehensive federal regulatory regime may contribute to market distortions, misaligned incentives or consumer confusion, as GPR card consumers may mistakenly assume that they possess rights enforceable under federal law,” the ANPR says.

Comments on the proposal are due within 60 days of the official publication of the ANPR in the Federal Register.

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