WASHINGTON, D.C. – In October, the Consumer Financial Protection Bureau (CFPB) finalized new federal consumer protections for prepaid account users. The new rule requires financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, and give consumers free and easy access to account information. The Bureau also finalized new “Know Before You Owe” disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Finally, prepaid companies must now generally offer protections similar to those for credit cards if consumers are allowed to use credit on their accounts to pay for transactions that they lack the money to cover.
Prepaid accounts are among the fastest growing consumer financial products in the United States, usually purchased at retail outlets or online. The amount consumers put on “general purpose reloadable” prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. The total dollar value loaded onto these prepaid cards is expected to nearly double to $112 billion by 2018. Prepaid accounts may be loaded with funds by a consumer or by a third party, such as an employer. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits, or send money to others.
Some of the protections for consumers include:
- Free and easy access to account information;
- Error resolution rights;
- Protections for lost cards and unauthorized transactions
- Standard, easy-to-understand, upfront information (disclosures)
- Publicly available card agreements.
The new rule will generally apply to prepaid accounts starting Oct. 1, 2017, though the requirement for submitting agreements to the Bureau takes effect in October 2018. The final rule includes other accommodations in certain situations. Read the rule here. Check with your prepaid payroll card vendor to see how these new rules will impact your pay card program.
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