WASHINGTON – New disclosures and consumer protections for users of general-purpose reloadable prepaid debit cards would offer many benefits to consumers, but the potential application of some Reg E requirements may not be appropriate for the different risks and attributes of these cards, CUNA said in a comment letter filed this week.
The comment letter was in response to an advanced notice of proposed rulemaking (ANPR) issued earlier this year by the CFPB.
The CFPB announced in May it would begin the process of regulating prepaid cards under Reg E, which implements the EFT Act. Before launching the rule-writing effort, the agency is seeking information on the costs, benefits, and risks of prepaid card use.
In its comment letter CUNA suggested that the CFPB first take steps to reduce the abusive practices of some non-depository institutions that provide prepaid cards before any Reg E rulemaking is initiated. In fact, the CFPB has announced plans to use its authority under Dodd-Frank to begin supervision of some larger non-depository institutions.
CUNA noted that the agency has authority to prescribe rules and take actions against entities that are engaged in "unfair, deceptive or abusive acts or practices,” which could include non-depository prepaid card issuers.
If the CFPB does decide to apply Reg E rules to prepaid cards, the agency should provide appropriate flexibility and limit additional compliance requirements, CUNA said.
Overall, CUNA encouraged the CFPB to coordinate with credit unions on any regulatory issues regarding prepaid cards to minimize compliance burdens. The CFPB should also work with NCUA and other regulators as it develops prepaid card regulations. Any future prepaid card rulemaking should be preceded by a Small Business Regulatory Enforcement Fairness Act (SBREFA) panel, CUNA said.
CUNA’s comment letter is available here.