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05.15.17

CFPB Prepaid Rule Survives Congressional Repeal Deadline

The CFPB’s final rule on prepaid accounts has survived a bid to repeal it via the Congressional Review Act (CRA), with lawmakers failing to bring the matter up for vote by the May 11 deadline. But despite the CRA efforts having fizzled, reforming the rule is still on the table.

Under the CRA, Congress can vote to repeal any law within 60 legislative days of its publication by simple majority votes in the House and Senate and the signature of the president. With a strong base of opposition to the CFPB among the Republican Congressional majority—and President Trump’s often-expressed displeasure with financial regulation—many opponents of the final rule viewed a CRA repeal as a viable possibility. The wheels officially were set in motion in February, when Republican members of the House and Senate filed joint resolutions of “Congressional disapproval” of the prepaid rule—the first step in the CRA process. However, with lawmakers in the midst of debate over other matters, such as health care reform, the push for repeal via CRA lost steam, and the matter failed to reach the floor for vote in either house by the May 11 deadline.

With the CRA off the table, the best bet for prepaid industry stakeholders seeking relief from what critics call the law’s overly sweeping regulatory scope and onerous compliance costs, could come from the CFPB itself.

In April the bureau announced it would push back the effective date of the rule by six months, to April 1, 2018, and would revisit “at least two substantive issues” in the 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. Further, the agency raised the possibility of making additional changes to the rule—and perhaps a longer implementation delay.

“I think that the best alternative for changing aspects of the rule at this juncture is through the process the CFPB has begun to amend the rule,” says Alan Kaplinsky, partner, Ballard Spahr LLP. “While the CFPB is unlikely to make wholesale changes to the rule, it will consider making changes other than the two specific items it identified,” Kaplinsky tells Paybefore. “I would certainly encourage industry participants to take full advantage of that opportunity.”

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