The Consumer Financial Protection Bureau finally dropped the hammer. Despite the many changes, the rules concerning prepaid cards came and went with little protest.
The bureau’s sweeping changes to the prepaid card rule recently took effect, upending issues, including consumers’ access to their accounts, error resolution, and fee disclosures.
The Biggest Issue Concerning Prepaid Card Rules
The biggest adjustment noted in the 1,600-page rule is about ensuring consumer disclosures are compliant for things, like card packaging. Most have been well prepared, so most avoided having to deal with non-compliant card language.
Most in the $700 billion prepaid card industry in the United States are taking a laid back approach to the changes, but hysteria could take shape has the rules dig in.
Now, one major shift falls on the backs of digital-wallet providers, like PayPal and Apple Inc., Jackson points out. Under the new rule, wallets must comply with the changes if they store funds for prepaid products.
For a long time, financial technology companies attempted to fool people into thinking they were technology companies not banks and financial businesses. But, the truth is that the new rules look at them as financial institutions, and therefore, required to comply with the bureau’s rules.
For example, users who keep funds in a Venmo or Apple Pay account will be subject to the rules. This is because the CFPB rules clearly state that if a user considers a product as prepaid, then that’s what it is and how it will be treated.
Settling into the Rules
Since the rule and its changes are so voluminous, it may take some time before people in the industry realize how much it will help or hurt them. As people page through and process the information, they will find out what they are really up against.
Background on the Changes of the CFPB Rule
In 2012, the CFPB began planning for a consumer-protection regulation in the prepaid business. In the fall of 2014, it issued a proposed rule. After taking comments, the bureau issued its final rule in 2016. It was amended twice and the effective date was extended a couple of times.
The prepaid rule extends consumer protections for prepaid accounts under Regulation E, which implements the Electronic Funds Transfer Act, and under Regulation Z, which does the same for the Truth in Lending Act.
Changes to prepaid card rules are extensive and heady. As people adjust to them, expect the mood to go from blasé to overwhelmed to hyper. Any type of major overhaul causes this type of reaction. For now, it is best to stay tuned and watch.
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