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Government watch
Where Common Sense + Consumer Protection
VIewpoInt
By Eli A. Rosenberg, Baird Holm LLP
By Grayson J. Derrick, Baird Holm LLP
Converge
Solutions to the biggest concerns raised by the CFPB’s proposed prepaid rule.
In the months following the CFPB’s release of its notice of proposed
1 rulemaking on prepaid accounts,
prepaid card industry participants spent countless hours analyzing the sizable challenges created by the proposed rule. While the proposed rule poses significant concerns across all prepaid product types, three particular concerns stand out:
1. Prescriptive disclosures that leave little room for innovation;
2. Requirements for prepaid accounts offering overdraft or credit features that will drive valuable products and providers out of the market- place; and
3. An effective date that gives the industry far less time to comply than is needed.
This article discusses each con- cern, the distinct challenges it presents for the industry and
the common-sense changes the industry is seeking in the bureau’s final rule.
Disclosure Requirements
Much of the industry’s discussion and comment on the proposed rule has focused on its detailed,
In Viewpoints, prepaid and emerging pay- ments professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore. This article is intended for general information purposes only and should not be construed as legal advice. Readers are urged not to act upon the information without first consulting an attorney.
substantial and prescriptive dis- closure requirements. Specifically, the proposed rule would require, with limited exceptions, prepaid card issuers to provide consumers both short- and long-form fee disclosures before acquiring pre- paid accounts. The proposal’s disclosure requirements reflect
the bureau’s goals of ensuring consumers have access to the fee information most important to
their financial decision-making process before they open a prepaid account and facilitating comparison shopping among prepaid products. The requirements also reflect
the bureau’s concern that, left unchecked, industry participants may attempt to circumvent its requirements by designing products and fee structures that place their products in a more favorable light in consumers’ eyes.
The disclosure requirements present a number of difficult challenges for the prepaid industry.
• First is the cost of providing two separate consumer disclosures with redundant information,