Rules & Reaction: Prepaid Industry Gets More Regulated

With a strong focus on “Know Before You Owe” disclosures, the CFPB’s new rules are aimed to improve consumers’ access to account information. Ultimately, these changes would end up benefiting cardholders in a number of ways and potentially create more leg work for issuers.

It’s now been a few months since the Consumer Financial Protection Bureau (CFPB) announced a rule requiring prepaid card issuers to follow a more formalized process and disclose important protections to consumers upfront (known as “Know Before You Owe”). The reason for the changes, according to the CFPB, is that prepaid cards often function like credit or debit cards but aren’t regulated as such. 

Most requirements of the rule will go into effect on October 1, 2017, with the rest going into effect one year later.

"This rule closes loopholes and protects prepaid consumers," CFPB Director Richard Cordray said in a statement. "And it backs up those protections with important new disclosures to let consumers know before they owe." 

Some of the major provisions to the new rules are as follows:

  • A fees disclosure needs to be provided to the cardholder before the prepaid card is purchased. 
  • Periodic statements or online account information need to be available to the cardholder. 
  • Issuers must implement error-resolution processes. If an alleged error could not be resolved within a specified period, the disputed amount will be temporarily credited to the consumer during the issuer’s investigation.
  • Consumers’ losses will be limited when registered prepaid cards are lost or stolen. As long as the cardholder notifies the issuer in a timely manner of a lost or stolen card, his or her responsibility for unauthorized charges will not exceed $50.00.

Because the prepaid card industry is growing extremely fast, now is a good time to better protect the millions of consumers and businesses who use prepaid products. For financial institutions currently offering or interested in offering a prepaid program, TMG Director of Prepaid Products Jeff Falk and I are currently working on a white paper highlighting five things you need to keep in mind regarding the new regulations. Stay tuned for more. 
TMG’s Visa- and MasterCard-branded ATIRA prepaid card solutions already satisfy most of the provisions described above, and we are working to ensure all will be satisfied by their effective date. For more information, email