Page 51 - Pay Magazine

Are You Covered?
volume 10 • spring 2017
WhAt’s Covered
Prepaid accounts are:
• Payroll/government bene t accounts
• Accounts marketed and labeled as “prepaid”
and redeemable at multiple unaf liated
merchants for goods or services or useable at ATMs
• Issued on a prepaid basis in a speci ed amount or capable of being loaded after issuance
• Issued to conduct open-loop, ATM or P2P transactions
WhAt’s Not
Speci c carveouts for:
• Quali ed disaster relief
• HSA, FSA, health reimbursement arrangements, dependent care assistance program, transit/ parking reimbursement
• Gift certi cate, store gift card, LAP card, general-use prepaid card marketed and labeled as a gift card
• Needs-tested bene ts
• Brokerage and savings account
• Checking accounts, share draft accounts, negotiable-order-of-withdrawal accounts
WhAt triggers reg. Z?
• Credit features offered in connection with pre- paid accounts
• Where a “single device” can be used to access a separate credit feature in the course of authorizing, settling or otherwise completing transactions conducted with the card to obtain goods or services, to obtain cash or to conduct P2P transfers
• And the separate credit feature is offered by the issuer, its af liate or its business partner
WhAt doesN’t trigger reg. Z?
• Credit feature offered by an unrelated third party that is not the issuer, its af liate or its business partner
• Credit feature is offered
by the issuer, its af liate
or its business partner,
but cannot be accessed within the course of autho- rizing, settling or otherwise completing transactions to obtain goods or services, obtain cash or conduct P2P transfers
proposed rule’s basic short-form/ long-form structure for disclosing fees and other material terms of a prepaid account before a consumer acquires it. Finally, the nal rule largely keeps intact the proposed rule’s requirements for credit fea- tures o ered as part of a prepaid account, imposing numerous re- quirements on providers seeking
to o er such products—particularly overdraft—to consumers.
Nevertheless, despite di ering
little from the proposed rule in its overall structure and basic require- ments, a number of smaller but important changes were made in the nal rule that providers need to understand. Most of these changes
can be characterized as positive ones that will make compliance with certain aspects of the nal rule much easier. Other changes, by contrast, seem to raise more questions than they answer and present serious compliance chal- lenges to the industry.
This article discusses some of the key changes the CFPB made to
the nal rule with respect to its coverage, disclosure requirements, Regulation E obligations and
credit provisions, including the positive changes that should ease some of the compliance burden for providers as well as other changes that present distinct challenges
for the industry.
De ning Prepaid Accounts
Much of the commentary around the proposed rule’s de nition of “prepaid account” centered on how broad it was, encompassing not only consumer asset account substitutes like GPR cards, but other products as well, including nonreloadable cards, reload packs and disaster-relief cards. On the positive side, the CFPB appears
to have listened to many of the in- dustry’s concerns on a number of these items. The nal rule contains carveouts for quali ed disaster- relief cards, dependent care and transit reimbursement programs. Further, the nal rule incorporates a “primary function” concept into its de nition of prepaid account,
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