Mick Mulvaney’s CFPB has now issued final changes to its Prepaid Rule, and the payments industry receives a huge reprieve from some of the more draconian elements of the original rule as issued in 2016.
The Bureau of Consumer Financial Protection (CFPB) has now amended Regulation E, which implements the Electronic Fund Transfer Act (EFTA), and Regulation Z, which implements the Truth in Lending Act (TILA). This new rulemaking materially revises the then-final rule published in the Federal Register on Nov. 22, 2016, as amended on April 25, 2017, regarding prepaid accounts under Regulations E and Z. In so doing, the CFPB is finalizing modifications to several aspects of that rule, including with respect to error resolution and limitations on liability for prepaid accounts where the financial institution has not successfully completed its consumer identification and verification process; application of the rule’s credit-related provisions to digital wallets that are capable of storing funds; certain other clarifications and minor adjustments; technical corrections; and an extension of the overall effective date to April 1, 2019.
As we previously reported, in early 2017, the CFPB issued guidance on the rule as finalized in 2016. In mid-2017, the CFPB requested comments on proposed changes to the rule based on industry feedback. Based on feedback received by the CFPB through its outreach efforts to industry regarding implementation of the 2016 Final Rule as well as in comments received on the 2017 effective date proposal, the CFPB proposed to amend several provisions of the 2016 Final Rule (June 2017 Proposal). After reviewing comments received on the proposal, the CFPB has now finalized the rule as originally proposed in June 2017, but with some additional modifications that further address industry concerns. Among the fixes, the CFPB is:
Why it matters
The revised final rule fixes some of the most heavily disputed provisions in the Prepaid Rule. It is a welcome sign that a “kinder, gentler” CFPB is taking a more pragmatic approach to industry concerns.