Ballard Spahr to hold a webinar on the proposal at 12 p.m. ET on December 12th. A link to register is available here.
Yesterday I attended the Consumer Financial Protection Bureau’s (CFPB) field hearing in Wilmington, Delaware, at which the CFPB unveiled and accepted public comment on its long-awaited proposed rule for prepaid accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z) (the Rule). A copy of the 870-page proposal and request for public comment can be found here. For a detailed discussion of the Rule, please see our legal alert.
CFPB Director Richard Cordray delivered prepared remarks explaining the agency’s desire to afford strong consumer protection for, and to fill “gaps” experienced by, consumers in the prepaid market, and highlighting some of the general protections, obligations and restrictions of the Rule. Addressing one of the more controversial aspects of the proposal, the extension of certain credit card protections to prepaid customers whose accounts include credit features, the Director recognized that such protections could make “certain credit features impractical for prepaid cards,” but observed such protections to be “very important in this context.”
At the conclusion of Director Cordray’s remarks, a panel of commentators made individual statements. The panelists included CFPB General Counsel Meredith Fuchs; Douglas Bower, Executive Director and President of the Network Branded Prepaid Card Association; Cecilia Frew, the head of U.S. Prepaid Products for Visa, Inc.; Rashmi Rangan, Executive Director at Delaware Community Reinvestment Action Council, Inc.; Lauren Saunders, an Associate Director at the National Consumer Law Center (NCLC); Steven Streit, Chairman of Green Dot Corporation; and Susan Weinstock, Director of Consumer Banking for The Pew Charitable Trusts. Following such statements, the panelists each fielded directed but general questions from CFPB representatives in attendance, including Ms. Fuchs, Steven Antonakes, Deputy Director and Associate Director for Supervision, Enforcement, and Fair Lending, and William Wade-Gery, Assistant Director for Card and Payments Markets.
Ms. Fuchs described briefly the efforts and consumer testing undertaken by the CFPB since having received some 220 comments on the original ANPR for prepaid card regulation that came out in 2012, and emphasized that the proposed rule is just that— a proposal regarding which the CFPB is actively seeking comment and feedback.
The panelists generally agreed that the proposal represents an important, and even welcome, first step in the right direction. For example, Mr. Streit of Green Dot fully supported the rulemaking, seeing it as “another milestone” in the “maturation” of the industry. He believed it to be a very positive development for consumers and the industry that providers will have a uniform set of rules to follow. Several commentators hoped the rules would serve to ease some of the problems currently associated with such products or encountered by its users, especially the more vulnerable segments of the unbanked and underbanked populations, such as an inability to easily comparison shop among products, or the difficulty experienced by users in accessing information about the terms of their own accounts, or in doing so without incurring inordinate levels of hidden fees.
Other commentators expressed a general uneasiness, or more specific concerns, about the continuing ability for prepaid accounts to link to a credit feature under the proposal or about other aspects of the proposal. For example, Ms. Weinstock suggested that the CFPB should delineate more specifically how such credit offers can be marketed to ensure consumers are not pressured or misled into accepting such credit features, and suggested that the model disclosure forms do not include certain information points that would be useful to consumers to know. Ms. Saunders indicated her organization will urge that no link to credit features be permitted for prepaid accounts under the final rule (stating that a separate credit product could be offered by the prepaid provider instead of as a linked product), and, more generally, that the NCLC would be seeking to tighten rules or to extend their reach where in its view the rules do not go far enough as proposed.
Public comment from the audience was invited and several consumers and non-profit group representatives expressed their views, which tended to reflect similar themes and concerns as those raised by the members of the panel.
