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The CFPB Tweaks Its Prepaid Rule as Showdown Looms Over Its Repeal
April 24, 2017

By Jim Daly

The Consumer Financial Protection Bureau confirmed last week that it will extend the effective date of its planned rule governing prepaid accounts by six months, until Oct. 1, and indicated it would consider a further extension. The embattled bureau also said it would revisit “at least two substantive issues” in the rule in the coming weeks.

Those changes come as votes loom in Congress on whether to repeal the controversial rule in its entirety. Proposals backed by Republicans in the Senate and House of Representatives would employ a heretofore little-used law called the Congressional Review Act that gives Congress power to nullify regulations up to 60 legislative days after their publication. For the prepaid rule, the deadline is somewhere around May 9, according to The Hill, a Washington, D.C., political news outlet.

The 1,689-page prepaid rule, which regulates fee disclosures, error-resolution rights, and consumer access to their accounts, among other things, has spurred opposition because of what some see as its inordinate length and sweeping scope. It extends, for example, to digital wallets as well as prepaid cards. Issues related to digital wallets, however, are up for another review.

In an apparent effort to placate critics, the CFPB indicated in March that it was considering a six-month delay for the planned April 1 effective date, and on April 20 confirmed that based on the feedback it received it would indeed do so. The CFPB received commentary on the proposed delay from consumer groups, financial institutions and other members of the prepaid card industry, trade associations, state regulators, the general public, and a digital-wallet provider.

“We had learned that some industry participants believed they would have difficulty complying with certain aspects of the rule by the original Oct. 1, 2017, effective date while also ensuring continued availability of their prepaid products and with minimal disruption to consumers,” the CFPB said in a news release.

Also as a result of the feedback the CFPB said that it should revisit what it calls two substantive issues through a separate rule-making process. They are:

• The aforementioned digital wallets, more specifically “the linking of credit cards to digital wallets that are capable of storing funds,” the CFPB said.

• Error resolution “and limitations on liability for prepaid accounts that cannot be registered, have not yet been registered, or for which consumers have attempted but have not successfully completed the registration process,” according to the CFPB.

“We are continuing to evaluate other concerns raised by industry and other stakeholders and may address a limited number of other topics in the proposal as well,” the CFPB said. “We also will seek comment on whether any further extension of the effective date is needed in light of the specific changes that we propose.”

A creation of 2010’s Dodd-Frank Act, the CFPB has drawn fire from the GOP since its birth. Now that Republicans control both Congress and the White House, they could radically change one of former President Barack Obama’s signature achievements.

Congress passed the Congressional Review Act in 1996, but until the start of the latest legislative session used it successfully only once to repeal a regulation. As of April 1, however, the new Republican Congress had used the CRA to nullify 13 regulations, and President Donald Trump had signed eight of those actions into law, according to The Hill.

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