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all types of prepaid accounts, encompassing cards, codes or other devices that may be loaded with funds and usable at merchants or for P2P transfers, and are not gift, loyalty or promotional cards. Based on the contents of the 2012 ANPR, the industry believed the rule would cover GPR cards only.
“The broad definition of ‘prepaid account’ including many different prepaid products other than GPR cards could have serious and likely unintended consequences,” Fauss tells Paybefore. “In addition, the proposed rule imposes new and unnecessary compliance burdens that ultimately could limit consumer access to safe and reliable prepaid products and potentially eliminate entire categories of prepaid cards from the market. For example, most nonreloadable prepaid products covered by the proposed rule, such as insurance proceeds and check replacement products, wouldn’t be able to bear the increased compliance costs and will likely no longer be offered.”
The NBPCA believes the proposed rule should cover only prepaid products that consumers use as primary transaction accounts for which they would reasonably expect to receive similar protec- tions as those provided with debit cards attached to traditional checking accounts. The NBPCA
also strongly supports the require- ment of a single, consumer-friendly, pre-acquisition disclosure that provides more flexibility than what the industry sees as overly pre- scriptive requirements in the proposed rule for short-form disclosures, according to Fauss.
One area the industry is most concerned about is the provision that any prepaid card offering overdraft and credit features would be required to comply with Regula- tion Z, which includes conducting an ability to repay analysis, deliver- ing monthly paper statements and caps on interest rates, among other requirements. In addition, proposed changes to Regulation E would require an issuer to wait for a period of 30 days following acqui- sition before offering an overdraft feature. Even more troubling for the industry is that the CFPB has expanded the definitions of “credit” and “finance charge” under Reg. Z, which—if not clarified by the bureau—could potentially classify all prepaid cards, even those that do not offer any credit or overdraft features, as credit cards, due to “force pay” transactions, according to the NBPCA. A force-pay transac- tion occurs when a consumer has sufficient funds in his account to cover a transaction when it’s authorized but insufficient funds
to cover the same transaction when it’s paid.
In its comment letter, the NBPCA also requested 18 to 24 months to comply with the final rule—in- stead of the nine months the CFPB
proposed—given the substantial operational and systems changes required to implement the antici- pated final rule.
The NBPCA has held numerous meetings with the bureau both before and after the end of the comment period to discuss various areas of concern. “While we may not ultimately agree with all of the policy decisions that make their way into the final rule, the bureau has provided us with ample oppor- tunity to clearly express our concerns about the effects of the proposed rule on various product types and features, so there can be no reasonable misunderstanding about the intended and unintended consequences of the proposed rule,” Fauss says.
FDIC Brokered
Deposits
Just before the close of 2014, the FDIC issued guidance in the form of FAQs for insured depository institutions regarding identifying, accepting and reporting brokered deposits. By regulatory definition,
a “brokered deposit” is any deposit obtained, directly or indirectly, from or through the mediation
or assistance of a deposit broker. In a 2011 study, the FDIC charac- terized core deposits as “histori- cally stable, less costly deposits obtained from local customers that maintain a relationship with the institution, while brokered deposits are considered volatile, interest- rate sensitive deposits from cus- tomers in search of yield.”
volume 8 • fall 2015
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