The New Jersey Legislature is considering a law to restrict prepaid-account fees. Assembly Bill 4965 ( the NJ Bill) seeks to impose fee constraints, disclosure mandates, and limits on consumer liability for unauthorized transfers, among other things. While many aspects of the proposed law mirror the Consumer Financial Protection Bureau’s Final Prepaid Rule (the Bureau’s Prepaid Rule), the NJ Bill’s fee restrictions and disclosure mandates exceed federal requirements set to go into effect on April 1, 2018. Proposed changes to the Bureau’s Prepaid Rule will likely delay this effective date, however.
Significantly, the NJ Bill regulates the types and amounts of prepaid account fees. It permits only 13 categories of fees, and limits the amount or frequency of several categories. For example, a fee for a replacement device may not exceed $5, and a periodic fee may not be charged more frequently than monthly. The NJ Bill further states that financial institutions “shall not charge” annual fees, overdraft fees, activation fees, point-of-sale fees (including fees for declined transactions), or any other fee not specifically enumerated by the law. The Bureau’s Prepaid Rule, in contrast, does not contain fee prohibitions, but rather emphasizes upfront disclosures about fees that may be charged.
The NJ Bill’s disclosure requirements also differ from the Bureau’s Prepaid Rule. Under the NJ Bill, a financial institution that holds a consumer’s prepaid account must provide a consumer with “a table of any fees,” including the amount and description of each fee, that the financial institution may charge for using the prepaid account or making electronic fund transfers. Significantly, this table of “any” fees must accompany “any application, offer, or solicitation for a prepaid account.” The Bureau’s Prepaid Rule, in contrast, permits pre-acquisition disclosure of some—but not all—fees in its short-form disclosure, so long as the financial institution also provides information allowing a consumer to access its long form disclosure by telephone or website.
If enacted, the NJ Bill may force prepaid-account issuers to decide whether to offer prepaid products in New Jersey given the fee restrictions and the potential burden of offering special terms to New Jersey consumers. Indeed, the proposed law authorizes a civil penalty of up to $1,000 per day for each day that a violation persists.
The NJ Bill was introduced on June 8, 2017, by New Jersey Assemblyman Troy Singleton (D) and is pending consideration by the New Jersey Assembly Financial Institutions and Insurance Committee. It is Assemblyman Singleton’s second attempt to limit prepaid account fees. In 2012, he co-sponsored a similar bill aimed at limiting prepaid account fees, but that bill died in committee.
