Consumer Financial Protection Bureau Seeks Comments Regarding General Purpose Reloadable Prepaid Cards
On May 23, 2012, the Consumer Financial Protection Bureau (“CFPB”) issued an Advanced Notice of Proposed Rulemaking seeking comments, data, and information from the public regarding general purpose reloadable prepaid cards (“GPR cards”). A copy of the Advanced Notice of Proposed Rulemaking can be read here.
A GPR card is issued for a set amount of dollars in exchange for payment made by a consumer. If the GPR card is “reloadable,” consumers can add funds to the card. In addition, prepaid cards may either be “closed-loop” or “open-loop.” “Closed-loop” cards are prepaid cards that can only be used at a specific merchant or group of merchants, while “open-loop” cards can be used at any location that accepts payment from a retail electronic payment network. In its Advanced Notice of Proposed Rulemaking, the CFPB is only seeking comments on open-loop reloadable GPR cards and not other prepaid cards such as “closed-loop” cards, debit cards linked to a traditional checking account, non-reloadable cards, payroll cards, electronic benefit transfers (“EBT”), or gift cards.
GPR cards have drawn increased attention from CFPB because of the lack of federal regulation regarding these prepaid card products. For example, regulations (Regulation E) implementing the Electronic Fund Transfer Act currently do not apply to GPR cards. Regulation E generally provides that companies are required to reimburse customers for unauthorized transactions on consumers prepaid cards when those cards are reported lost or stolen. GPR cards also currently escape regulation under the Credit Card Accountability Responsibility and Disclosure Act of 2009 which established restrictions regarding dormancy fees, service fees and expiration dates on certain prepaid cards. The CFPB intends to use the information gathered through its comment period in order to craft proposed rules to regulate the GPR card industry.
Fuerst Ittleman will continue to monitor the situation as the CFPB develops a comprehensive regulatory scheme. For more information, please contact us at firstname.lastname@example.org.