The CFPB Prepaid Rule
What is the Prepaid Rule?
The Prepaid Rule amends creates comprehensive consumer protections for prepaid accounts under Regulation E, and requires issuers to provide consumers with clear, upfront information about prepaid account fees and creates a number of new legal rights for people with prepaid card accounts, including protections in case of errors, loss, or theft.
The Rule modifies general Regulation E requirements to create tailored provisions governing disclosures, limited liability and error resolution, and periodic statements, and adds new requirements regarding the posting of account agreements. Additionally, the Prepaid Rule regulates overdraft credit features that may be offered in conjunction with prepaid accounts.
What Qualifies as a Prepaid Account?
Under the Rule, a “prepaid account” is a product that is one or more of the following:
1. A payroll card account.
2. A government benefit account.
3. An account that:
(a) Is marketed or labeled as “prepaid;”
(b) Is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at automated teller machines (ATMs); and
(c) Does not satisfy a specific exclusion set forth in the Prepaid Rule.
4. An account that:
(a) Is issued on a prepaid basis in a specified amount or is capable of being loaded with funds after issuance;
(b) Has a primary function of conducting transactions with multiple, unaffiliated merchants for goods or services, conducting transactions at ATMs, or conducting person-to-person (P2P) transfers;
(c) Is not a checking account, a share draft account, or a negotiable order of withdrawal (NOW) account; and
(d) Does not satisfy a specific exclusion set forth in the Prepaid Rule.
Prepaid Rule Exclusions
The following types of accounts that would otherwise fall under the definition of a covered prepaid account, are specifically excluded from coverage under the Rule:
1. Accounts loaded only with funds from certain healthcare and employee benefit programs;
2. Accounts loaded only with qualified disaster relief payments;
3. Gift certificates;
4. Store gift cards;
5. Loyalty, award, or promotional gift cards; and
6. General-use prepaid cards that are both marketed and labeled as gift cards or gift certificates.
Other, less common types of accounts are also excluded.