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Thursday, November 13, 2014

CFPB Proposes Rules, Disclosures on Prepaid Products

With more Americans using prepaid cards and products, the Consumer Financial Protection Bureau is today proposing rules on prepaid products that would formalize many consumer protections already offered by banks that provide these products. “Many people choose prepaid products as a useful alternative to a traditional checking account,” ABA SVP Nessa Feddis commented. “These rules formalize the protections that banks’ prepaid customers already enjoy.”

The proposal would require prepaid issuers to provide periodic statements or make account information available online for free. After a customer registers a card, issuers would also be required to resolve account errors promptly and protect customers against unauthorized or fraudulent transactions -- protections that customers already enjoy due to card network rules.

The proposal also includes a standard set of two disclosures -- one short and one longer -- detailing key account information and fees, plus online posting of account terms. The proposal also includes rules for prepaid products that allow overdrafts and other credit products.

“The disclosure requirements appear consistent with many of the banking industry’s recommendations, and the consumer protections regarding unauthorized transactions and billing disputes seem to reflect current best practices,” Feddis added. “ABA will review the proposed rules closely to ensure they protect bankers’ ability to offer the convenient, affordable prepaid products customers want.” Comments will be due 90 days after publication in the Federal Register.

View the model disclosures.