Two of the country’s major credit union advocacy groups are pushing for further delay and changes to the Consumer Financial Protection Bureau’s proposed amendments regarding prepaid accounts.
In letters to the CFPB, the groups also suggested that implementation of the amendments, which are set to go into effect April 1, 2018, could significantly hamper or even force credit unions to discontinue prepaid products.
“As the CFPB is likely aware, many unbanked consumers depend on prepaid accounts to avoid the higher costs associated with traditional products or financial services,” Andrew Morris, regulatory affairs counsel for the National Association of Federally-Insured Credit Unions, wrote in a letter to the CFPB. “As we have stated previously, NAFCU believes that the CFPB should rescind the rule entirely to avoid the risk of disrupted service or loss of access to affordable prepaid products.”
A prepaid account typically includes general purpose reloadable cards, payroll and government benefit cards, as well as certain mobile or electronic prepaid accounts such as PayPal or Google Wallet.
The CFPB in October of last year issued a rule proposing amendments on prepaid accounts to the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z).
Among several measures, the amendments would give prepaid accounts more consumer rights like those for checking accounts such as requiring financial institutions make certain account information available for free upon request.
It would also require financial institutions to investigate and resolve consumer-initiated claims of unauthorized or fraudulent charges in a timely manner, as well as restore missing funds if deemed appropriate and cover unauthorized transactions beyond $50 on lost or stolen prepaid cards.
In addition, the rule requires financial institutions to make “Know Before You Owe” disclosures for prepaid accounts, as well as conducting an ability to pay assessment of the consumer, providing monthly billing statements and adhering to certain limits on fees and interest charges.
Many credit union advocacy groups came out in opposition to the rule, which has continued despite the CFPB’s decision to delay the rule and changing certain amendments that make the regulation less burdensome.
Still, advocacy groups have argued that the rule is another one of the many regulations that will prove costly for credit unions and that misses the mark on prepaid accounts.
“We reiterate our position from previous discussions with, and letters to, the bureau that characterizing a prepaid account as a credit account is clearly inappropriate due to the inherent differences of such products,” Luke Martone, senior director of advocacy and counsel at the Credit Union National Association wrote in a letter to the CFPB.
Furthermore, claims NAFCU’s Morris in his letter, credit unions are among the most transparent and understandable products available in the financial marketplace.
He added that the rule is another cost to credit unions that have already been hindered by a host of other regulatory costs such as those related to the expanded Home Mortgage Disclosure Act
“The rule’s array of pre-acquisition disclosures, which incorporate multiple fee schedules and specific methods for determining reportable fees, will require credit unions to thoroughly review prepaid account agreements and engage in extensive coordination with program managers for white label products,” Morris wrote.
CUNA has proposed a delay until October 2018, while the NAFCU has proposed a delay until April 2019 if a complete rescind of the amendments is off the table.
