By Cody Roberts
In March 2016, the FRB, FDIC, NCUA, OCC, and FinCEN published guidance to issuing banks on the application of the joint regulations implementing the CIP requirements in Section 326 of the USA PATRIOT Act to their prepaid cards. This guidance can be found here.
The chart below is a quick reference guide for this guidance.
|
Type of Card Issued |
Creates a formal banking relationship and is equivalent to opening an account for purposes of the CIP rule |
The customer of the issuing bank for purposes of the CIP rule |
| General Purpose Prepaid Cards with the Ability to Reload Funds |
Yes |
The cardholder |
|
General Purpose Prepaid Cards without the Ability to Reload Funds |
No |
N/A |
|
General Purpose Prepaid Cards with Access to Credit |
Yes |
The cardholder |
| General Purpose Prepaid Cards with Overdraft Features |
Yes |
The cardholder |
| General Purpose Prepaid Cards Sold without the Reloadable Functionalities Activated or Credit or Overdraft Features Enabled
For example, a purchaser or subsequent transferee of these cards generally may activate any one of those features only if they contact the issuing bank or the third-party program manager. |
No when purchased |
N/A |
|
Yes when a reload, credit, or overdraft feature is activated by cardholder registration. |
The cardholder |
|
| Third-Party Program Manager “On Behalf of” or “In Trust for” Prepaid Cards
These are non-reloadable general purpose prepaid cards without credit or overdraft features, or other prepaid cards that do not have the identified features that establish an account for purposes of the CIP rule, such as closed-loop prepaid cards, of third-party program managers who establish pooled accounts in their names for the purpose of holding funds “on behalf of” or “in trust for” cardholders or processing transactions on behalf of other issuing banks. |
Yes |
The third-party program manager in whose name the pooled account has been established. |
| Payroll Cards if the employer (or the employer’s agent) is the only person that may deposit funds into the payroll card account. |
Yes |
The employer |
| Payroll Cards if the employee is permitted to access credit through the card or reload the payroll card account from sources other than the employer. |
Yes |
The employee |
| Government Benefit Cards/Electronic Benefit Transfer (EBT) cards which permit only government funds to be loaded onto the card and do not provide access to credit. |
No |
N/A |
| Government Benefit Cards/Electronic Benefit Transfer (EBT) cards which allow non-government funds to be loaded onto the card or provides access to credit. |
Yes |
The beneficiary-cardholder |
| Health Benefit Prepaid Cards for Reimbursements on Health Savings Accounts
These are accounts established by an employee to pay or obtain reimbursement for qualifying medical expenses and the employee establishing the account or the employer may contribute to the HSA. |
Yes |
The employee |
| Flexible Spending Arrangements and Health Reimbursement Arrangements Prepaid Cards for Certain Qualified Medical Expenses
These are established by an employer and funded by either voluntary withholdings from an employee’s salary (in the case of FSAs only) or through direct employer contributions (in the case of FSAs and HRAs). |
Yes |
The employer |
