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volume 8 • spring 2015
which, as the bureau’s own testing indicates,2 is likely to overwhelm consumers with the sheer amount of information they’re receiving.
• Second is the one-size-fits-all prescriptive approach the bureau has taken toward the short form. Many in the industry believe the bureau’s lack of flexibility with the short-form disclosures will stymie inno- vation, as the prescriptive approach leaves no room
for alternative fee models or structures and fails to contem- plate either unique products already in the marketplace or potential future advances.
• And third is the short-form requirement to calculate and disclose annually the three most commonly charged inci- dence-based fees not other- wise listed on the short form. To comply, issuing banks and program managers would need new processes and procedures to make these calculations and, potentially, to update packaging annually to reflect changes.
The development, maintenance, production and shipping costs of this requirement would be huge, not to mention the nega- tive ecological impacts. And, the question “For what pur- pose?” cannot be avoided
as the incidence-based fee requirement is likely to create a disclosure that, while compli- ant, is likely to be confusing
in the extreme—and possibly
misleading—to consumers attempting to compare pre- paid products.
The industry’s response to the bureau’s proposed disclosure requirements and the challenges they present has focused on common-sense solutions that achieve the bureau’s goals
of informing consumers with- out confusing them, while avoiding undue burdens on industry participants.
Specifically, the industry has proposed giving consumers a single disclosure of manageable length to be provided before a consumer acquires a prepaid card and containing the information necessary for the consumer to make an informed decision.
The industry believes that such a disclosure, containing all material fees, coupled with a more detailed cardholder agreement, would pro- vide consumers with a sufficient, manageable disclosure without overwhelming them with too much information. Alternatively, the industry has proposed extending the exception, enabling retailers to provide the long form online
or over the phone (and communi- cating the availability of the dis- closure in these formats) to all prepaid accounts regardless
of how they’re acquired.
With regard to the prescriptive nature of the short form, the industry has asked the bureau to provide more flexibility to better account for alternative fee models
in the marketplace and potential future innovations.
Finally, the industry has strongly urged the bureau to eliminate the incidence-based fee requirement, which, again, would be costly for issuers to implement and maintain and, likely, confusing for consum- ers. As an alternative to the inci- dence-based fee requirement, the industry has suggested that the bureau simply select up to three additional commonly charged fees for inclusion in the short form. This approach will be easy to understand and implement and, to the bureau’s own goal, will better facilitate comparison shopping among consumers.
Credit Requirements
No single issue has generated
as much discussion or industry concern as the proposed rule’s treatment of prepaid accounts that have overdraft or credit features. Specifically, the proposed rule applies Regulation Z (the Truth in Lending Act) and CARD Act re- quirements applicable to credit cards to any prepaid account that offers overdraft services or a credit feature subject to a “finance charge” as defined under the proposed rule.
The requirements under the pro- posed rule for prepaid accounts with overdraft or credit features create two issues of paramount importance for prepaid providers.
• First, while the bureau’s pro- posed requirements admirably
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