October 31, 2016 8:00 am

By Gina Ellis

The Consumer Financial Protection Bureau finalized amendments to Regulation E and Regulation Z on October 5, 2016. The new requirements to provide additional consumer protections and disclosures to prepaid accounts are effective October 1, 2017. Prepaid account access devices or packaging material that are manufactured, printed or otherwise produced in the normal course of business prior to October 1, 2017 will not need to be removed or replaced. Instead financial institutions will be required to provide a change in terms notification and updated initial disclosures.

Primarily, the revision adds the term “prepaid account” to the definition of “account” in Regulation E and will apply to accounts established for personal, household or family purpose. Accounts established for commercial purpose or accounts held under a bona fide trust agreement will not be considered prepaid accounts. The Regulation Z revisions address overdraft credit features that may be offered in conjunction with prepaid cards.

Generally, payroll cards accounts and government benefit accounts are prepaid accounts under the new definition. Additionally, a prepaid account includes a product that is either of the following unless specifically excluded:

  1. An account that is marketed or labeled as prepaid and is redeemable on presentation at multiple, unaffiliated merchants for goods and services or usable at automated teller machines (ATMS); or
  2. An account that meets all of the following requirements:
  • Is issued on a prepaid basis in a specified amount or is capable of being loaded with funds after issuance;
  • Where the primary function is to conduct transactions with multiple, unaffiliated merchants for goods or services, to conduct transactions at ATMS, or person-to-person (P2P) transfers; and
  • Is not a checking account, share draft account, or a negotiable order of withdrawal (NOW) account.

There are extensive exemptions from the “prepaid account” definition that we will discuss in the future and the CFPB has provided a coverage chart as well as other resources that can be found here: http://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/prepaid-rule/

Stay connected with us and we will provide additional information to assist you with these changes www.americanbanksystems.com or call us at (405) 607-7000.