COMMENTARY: In the Eyes of the CFPB, We Are All Prepaid Now

A deep dive into the more than 2,000 pages of the Consumer Financial Protection Bureau’s regulations covering the prepaid market shows that the CFPB is trying to extend uniform consumer protections to as many payment types as possible. That includes unauthorized or disputed transactions for all financial-access devices regardless of their ownership, account type (credit, debit, or prepaid), or form (card, digital wallet, funds transfer app, wearable, etc.).

By blurring the lines between prepaid accounts, debit cards, and other similar products, the CFPB has made it clear that we are all prepaid now. If a company stores money in a pooled account, but doesn’t open a bank account for its customers, it is offering a prepaid account.

Many of the products covered by the regulations are things that many payment companies never considered to be prepaid—and, really, neither have their customers. However, the CFPB’s view is different. The reality is that fintech and emerging-payments companies will need to adjust the way they bring customers on board and manage the accounts of the customers they have.

For example, the payments industry will need to figure out how to take a simple mobile-signup process into the world of prepaid card compliance with multiple layers of disclosures. This means many that mobile-wallet providers (think PayPal, Google, Amazon) and other similar products and businesses will need to make sure they have processes for delivering new kinds of disclosures, identifying their customers, and managing dispute resolution under Regulation E. Moreover, peer-to-peer payment solutions such as Venmo and Zelle will have to examine the rules to see what the impact will be on their offerings.

It’s no coincidence that many of the recent payments partnerships have been driven by the rules for prepaid accounts. Because of the prepaid community’s expertise, the fintech industry has established relationships with prepaid providers to bring new innovative products to market. For example, since the final prepaid rules were released, a number of new and existing payment partnerships have garnered attention: PayPal/Bancorp and Apple/Green Dot to name a couple of prominent examples.

Almost nine months ago, I published an op-ed that explicitly acknowledged that prepaid is a unifier within the payments space. The fintech industry has received the message and learned that they do not need to reinvent the wheel when it comes to compliance, since the prepaid industry has been doing this for a long time and has been preparing for the new compliance regime.

In fact, the Network Branded Prepaid Card Association, along with our members, led the push for the CFPB to make changes to the Prepaid Accounts Final Rule. Many of the changes made to the final rule are a direct result of the prepaid community’s direct advocacy. (Effective Jan. 1, 2019, the NBPCA will become the Innovative Payments Association.)

Over the last 12 months, the prepaid community has driven the agenda for the payments industry in Washington, D.C., and beyond the Beltway. As the prepaid community continues to grow and become more diverse, we know lawmakers and regulators may not understand all of the intricacies of our industry, making it all the more important we remain unified and able to speak up. Imagine the power for positive change if every segment of the ever-expanding prepaid community could speak with one voice to address critically important issues such as financial empowerment, consumer protection, and fraud and security.

As innovators, prepaid providers will continue to find success by expanding their businesses and partnering with creative startups, long-existing and newly established companies (for example, Uber, Lyft, Walmart) and mainstays like the federal government (Treasury) that want to include payment solutions as part of a broader value proposition.

The future looks bright as we aim to foster an environment in which the prepaid community and its many partners find new and compelling ways to address the ever-changing banking needs of American consumers and businesses.

—Brian Tate is the president and chief executive of the Network Branded Prepaid Card Association, Washington D.C. Reach him at btate@nbpca.org.