Prepaid cards are helping redefine the current and future consumer finance landscape. In fact, a recent study showed prepaid cards are the fastest growing non-cash payment method in the U.S. By 2018, the Consumer Financial Protection Bureau (CFPB) predicts as much as $121 billion will be loaded onto prepaid cards.
This increasing consumer interest in prepaid means community financial institutions (FIs) may want to include prepaid in their strategic plans for 2017. According to TMG sister company PolicyWorks, FIs currently offering prepaid cards, or planning to offer them in the future, should be aware of five new rules recently released by the CFPB. These rules state that, by October 1, 2017, prepaid card issuers must provide consumers with new access and protections – including:
- Up-front disclosures – These include terms, conditions and fees, both on card packaging and online, as well as easy access to account information. For prepaid issuers, this means consumers must be allowed to review all relevant disclosures before purchasing prepaid cards.
- Protections from unauthorized purchases – Prepaid cardholders will now be able to file a claim anytime they suspect fraud on their prepaid accounts. However, this only applies to those prepaid cards tied to a consumer’s financial account.
- Error resolution rights for questionable and unauthorized purchases – For suspected fraud or unauthorized purchases on payroll cards or other prepaid products tied to an individual account, FIs must cooperate with consumers to investigate or resolve disputes.
- Protections related to any credit features a card may offer – If the prepaid issuer allows payroll cardholders, for instance, to opt into an overdraft program supported by a line of credit, that issuer must follow Reg Z rules governing the overdraft program.
- Distinction between the prepaid account and credit features a card may offer – For those prepaid cards with a credit feature (e.g. overdraft line of credit), prepaid issuers must wait 30 days after registration of that card before offering said credit feature.
TMG is committed to ensuring its ATIRA and Coopera Card prepaid programs meet or exceed these rule requirements and works closely with PolicyWorks to understand the steps necessary for compliance. Click here for an overview of key requirements, how they impact TMG prepaid programs and any action steps for TMG and its clients.
Community FIs interested in providing smart and convenient financial solutions to consumers may be well positioned to participate in the prepaid card resurgence. The key is to partner with experienced prepaid card experts who are up-to-speed on regulatory requirements and forward-thinking about how prepaid cards are shaping future payment methods.
