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Will the CFPB’s Proposed Six-Month Effective Date Extension Be Enough?

delayed_stamp_question3Prepaid stakeholders scrambling to meet the Oct. 1, 2017, effective date for the CFPB’s final rule on prepaid accounts got a break earlier this month, when the CFPB proposed delaying the effective date by six months. Perhaps more important than the delay itself was the bureau’s signal that it might be open to tweaking some aspects of the rule.

In a Notice of Proposed Rulemaking (NPRM) released on March 9, the CFPB proposed pushing back the effective date of the final rule to April 1, 2018. Citing industry participants’ concerns about difficulties complying with certain provisions of the rule, the bureau characterized the potential six-month delay as a way to “facilitate compliance … and to allow an opportunity for the bureau to assess whether any additional adjustments to the rule are appropriate.” The CFPB is seeking industry input on the proposed delay and whether six months is the appropriate amount of time for such an extension.

A delay would be a welcome reprieve for prepaid issuers, program managers and other stakeholders, many of whom have expressed concern over the original implementation period, which would have been less than a year from the rule’s issuance on Oct. 5, 2016. Specifically, many parties noted potential difficulties in pulling and replacing prepaid access products and packaging materials that are covered under the final rule’s disclosure requirements but were produced before the final rule’s release, according to the NPRM. Stakeholders also raised related concerns about the production capacity of packaging manufacturers and other supply chain limitations leading up to the Oct. 1, 2017, effective date, due to increased demand by the industry on a limited number of manufacturers.

Open for Change?

Along with giving stakeholders more time to prepare, a delay also would enable the CFPB to “more closely evaluate” concerns raised by industry participants about “substantive aspects of the final rule that they assert are posing particular complexities for implementation or may have negative consequences for consumers” that the CFPB says were not anticipated or fully explained by commenters during the original comment period after the NPRM on prepaid accounts, issued in November 2014. Furthermore, the bureau could “propose revisions to those provisions of the Prepaid Accounts Final Rule if it determines that amendments are necessary and appropriate.”

Industry Reacts

Paybefore asked some of the leading providers of prepaid products for their reactions to the CFPB’s proposed six-month delay of implementation of its final rule on prepaid accounts. Here’s what they had to say:

sorbe_trent“The proposed delay in the effective date of the prepaid rule was encouraging and will help ensure revised disclosures are developed without unnecessary haste. The industry should also use the added time to simultaneously take advantage of the CFPB’s apparent willingness to reconsider certain aspects of the rule and engage the agency on a variety of unresolved issues. While we are skeptical of a ‘rollback,’ we’re hopeful that this decision is the first evidence of a plateau in new regulatory requirements.”

Trent Sorbe, president of Central Payments and a member of the CFPB’s Community Bank Advisory Council

hagy_john“We support the CFPB proposal to extend the implementation date of the prepaid account rule for 180 days. The scope and complexity of the rule certainly justify additional time to comply. More specifically, the disclosure and packaging requirements—as well as the development of new operational processes and procedures—will require additional time to ensure compliance. We also support the CFPB’s comment in the proposal that it will use the additional time to review other substantive concerns raised by industry.”

John Hagy, chief policy officer, MetaBank

“The proposal does nothing to address the fundamental problems raised by the industry and consumers. As currently written, the CFPB rule will limit unbanked and underbanked consumers’ access to products and features they find valuable. Until changes are made that address these concerns, Netspend will continue to support full repeal.”

—Spokesperson, Netspend

The NBPCA was among those that actively voiced industry concerns to the CFPB over what its members view as problematic aspects of the rule and its implementation. The industry group welcomed the bureau’s proposal to delay the effective and re-examine elements of the rule.

fauss_brad“The NBPCA appreciates the CFPB for listening to our members’ concerns and giving providers an additional six months to comply with the nearly 1,700-page rule,” said Brad Fauss, president and CEO, NBPCA. “Since the final rule was released last fall, NBPCA and its members have been in close contact with the bureau, frequently meeting to highlight the challenges of a rushed implementation date and the potential impacts to the industry and, most importantly, consumers.”

Fauss said the industry group was “especially appreciative” of the efforts of U.S. Rep. Scott Tipton (R-Colo.) and Sen. Mike Rounds (R-S.D.), along with “dozens of other members of Congress who have weighed in with their support for common-sense, balanced prepaid regulations which both encourage continued innovation and protect consumers.”

Looking ahead, Fauss said the NPBCA looks forward to “continuing our work with the bureau to address our other substantive issues with the final rule during the upcoming notice-and-comment period.” (For more industry reaction, see sidebar.)

Several legislators, with support from the Electronic Transactions Association (ETA), have introduced three joint resolutions in Congress that would repeal the final prepaid accounts rule using the Congressional Review Act (CRA). The ETA described the rule, which covers mobile wallets and person-to-person payment products, as “overly prescriptive and sweeping” regulation.

A spokesperson from the ETA said: “While we appreciate the proposed delay, we still have concerns with the underlying rule. We support the use of the CRA to address underlying problems with the final rule’s effect on product cost and availability.”

Comments on the NPRM to delay the rule are due on or before April 5, 2017, and may be sent to the CFPB by any of the following methods:

Email: FederalRegisterComments@cfpb.gov. Include Docket No. CFPB-2017-0008 or RIN 3170-AA69 in the subject line of the email.

Electronic: http://www.regulations.gov. Follow the instructions for submitting comments.

Mail: Monica Jackson, Office of the Executive Secretary, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, D.C., 20552.

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