Comments are due today on CFPB’s proposal to delay the implementation date of its final rule on prepaid accounts by six months. The NBPCA is asking the consumer watchdog to double the length of that extension to 12 months, creating an effective date of Oct. 1, 2018. In a letter to the CFPB, the prepaid industry association expressed appreciation for the proposed six-month extension—which would implement the rule on April 1, 2018—but noted that the “technical and logistical challenges” presented by the rule will require more time for implementation.
Chief among those challenges is the likelihood that many prepaid providers have determined they will need to pull and replace noncompliant card packaging and materials before the rule takes effect. The rule includes an exemption allowing providers to continue selling noncompliant packaging and materials prepared in the normal course before the original Oct. 1, 2017, effective date. However, many providers have expressed concern with continuing to sell cards with noncompliant packaging “in light of recent enforcement actions taken by other federal regulators,” the letter noted.
According to the NBPCA, providers that change certain characteristics of their prepaid products to comply with the rule could open themselves to lawsuits and UDAP violations if packaging materials don’t accurately describe the features and protections of the cards therein. “In light of this fact, providers need significantly more time than what was originally provided under the rule to exhaust and replenish card inventory,” the NBPCA said.
The letter cited other logistical and technical issues necessitating a longer delay, including the need for “extensive” platform development by various providers in the prepaid value chain and an expected logjam in the production of packaging materials created by the spike in demand for new compliant materials from a limited number of packaging suppliers.
Concerns Remain on CFPB Rule
The NBPCA’s letter also highlighted certain aspects of the rule it said the CFPB should “closely evaluate” during the extended implementation period. In its proposal to push back implementation, the CFPB said a delay would give the agency more time to evaluate substantive concerns about the rule’s impact on consumers which were not anticipated or fully explained by commenters in responses to the original proposal. “As a result, the NBPCA believes that it is critically important to raise substantive issues to inform the CFPB’s consideration of potential amendments to the rule that could be included in a subsequent proposal to address the concerns of our members, which will ultimately benefit consumers,” the letter said.
Those issues include the rule’s extension of Regulation E limitation on liability provisions to unregistered cards. Extending those provisions to unverified, anonymous products “will likely lead to a significant increase in fraud losses,” the NBPCA said. The letter also asked the CFPB to further consider the application of the rule to low-value, nonreloadable prepaid products, such as refund cards.
“We strongly believe that these products should be excluded from the rule or they risk elimination from the marketplace due to compliance costs exceeding the revenues generated from the product,” the letter said. The letter also asked the CFPB to re-evaluate the rule’s requirement that providers supply a written copy of a long-form disclosure agreement in cases when it already has been provided electronically, among other concerns.
Finally, the NBPCA’s letter requests a safe harbor for providers who will be compliant with certain components of the rule before the extended implementation date. The association said a safe harbor may be necessary to ensure those providers are not deemed to be out of compliance with the older provisions of Reg. E “simply by virtue of their compliance with the requirements of the rule in advance of the extended effective date,” the letter said. For example, the rule modifies the time frame under which providers must respond to a notice of error from a customer, meaning that providers who are compliant with the new rule by the original effective date could be deemed to be noncompliant if the old rules are still in place at that time.
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