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04.20.17

CFPB to Delay Final Prepaid Rule by 6 Months, ‘Revisit’ Aspects with New Proposal

It’s official. The CFPB is pushing back the effective date of its final rule on prepaid accounts until April 1, 2018—six months after the originally scheduled implementation date of Oct. 1, 2017. What’s more, the agency has decided to “revisit at least two substantive issues” in the final rule: requirements for digital wallets that are capable of storing funds; and error resolution and liability limitations for prepaid accounts that cannot or have not yet been registered.

The bureau announced the decision on April 20, about six weeks after initially floating the proposal to delay the effective date by six months and soliciting comments from industry stakeholders on the plan. At the time, the CFPB said the potential delay was in response to industry participants’ concerns about difficulties complying with certain provisions of the rule. The agency also characterized the proposed delay as “an opportunity for the bureau to assess whether any additional adjustments to the rule are appropriate.”

Many prepaid industry stakeholders applauded the proposed delay, although some—including the NBPCA—lobbied for even more time. Citing the technical and logistical challenges presented by the rule, including the need to pull and replace noncompliant card packaging and materials before the rule takes effect, the NBPCA suggested a 12-month delay in its comment letter. Earlier this month, U.S. Rep. Scott Tipton (R-Colo.) introduced a bill that would delay the effective date until Oct. 1, 2018.

The CFPB decided to stick with a six-month delay, releasing its decision 15 days after its comment period on the proposal ended. “We continue to believe that a six-month delay… allows sufficient time for industry to implement the rule,” the agency said in its announcement. “It also provides for an appropriate balance between the interests of the consumers who will receive the benefits of the rule and the needs of industry for an adequate implementation period.”

Big Changes Brewing?

The CFPB’s decision to re-evaluate portions of the rule presumably comes as welcome news. Many in the industry had expressed concerns about the rule’s extension of Regulation E limitations on liability provisions to unregistered cards. Doing so would “likely lead to a significant increase in fraud losses,” the NBPCA said in its comment letter to the CFPB.

The rule’s application to mobile wallets also was a bone of contention. Under the final rule, mobile wallets that enable users to store funds—such as Google Wallet and Venmo—would be required to comply with the rule. Many argued that bringing those products under the scope of the prepaid rule would unnecessarily stifle the emerging market for mobile wallets. (Wallets that simply act as a “pass-through” are exempt.)

The CFPB said it would “revisit” both of those topics—and potentially other aspects of the rule—in a separate rulemaking notice, due to be released “in the coming weeks.” That notice will be followed by another comment period.

“We are continuing to evaluate other concerns raised by industry and other stakeholders and may address a limited number of other topics in the proposal as well,” the bureau said. “We also will seek comment on whether any further extension of the effective date is needed in light of the specific changes that we propose.”

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