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From Banking and Finance Law Daily, March 10, 2017

CFPB proposes delay in prepaid rule effective date

By Katalina M. Bianco. J.D.

The Consumer Financial Protection Bureau is proposing a six-month delay in the effective date of the final prepaid accounts rule. The current effective date is Oct. 1, 2017. The CFPB proposal would extend the date to April 1, 2018. Comments on the proposed rule will be due 21 days after publication in the Federal Register.

The CFPB adopted the final prepaid accounts rule in October 2016 (see Banking and Finance Law Daily, Oct. 5, 2016). The new rule amends Reg. E (12 CFR Part 1005) and Reg. Z (12 CFR Part 1026) and the regulations’ official interpretations to give prepaid account consumers protections similar to those for checking account and credit card consumers. The bureau set an effective date of one year because the agency said the final rule provides "strong consumer protections." However, the CFPB issued the proposed rule to extend the date after learning that some industry participants are concerned about implementing certain provisions of the rule. The bureau stated that delaying the effective date for six months "will be sufficient" for industry members to comply with the rule.

Substantive changes? "At this time," the proposal does not make changes to any other part of the final prepaid accounts rule, according to the bureau. The CFPB said it will take into consideration public comments on difficulties implementing the rule. Should the bureau determine that substantive changes are "necessary and appropriate," it will issue a separate proposal and comment request.

Legislative reaction. Representative Scott Tipton (R-Colo) voiced his approval of the proposed extension, stating, "I am pleased to see that the CFPB has considered the concerns raised by consumers, industry, and members of Congress about its prepaid account rule and took action to delay the rule for six months." He remarked that the 12-month effective date "was unrealistic given the new disclosure and packaging requirements and operational changes necessary to comply with the rule." Delaying implementation of the rule balances the protection of consumers with the growth of prepaid card products, Tipton noted.

Senator David Perdue (R-Ga) stated that the CFPB should "scrap" the prepaid accounts rule. "From its initial stages, this rule was shortsighted and so sweeping that it would have stifled innovation in a growing marketplace millions of consumers rely on," he said. The legislator opposed the implementation of the prepaid accounts rule by introducing a resolution (S.J.Res. 19) in February that would nullify the rule.

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