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FOS Blog

08 Mar



The Prepaid Accounts Rule has been delayed so many times that Compliance Officers have almost forgotten about it.  The initial final rule was first published on October 5, 2016, delayed on April 20, 2017, and then a final rule published on January 25, 2018 with an effective date of April 1, 2019.  We can no longer wait to determine its impact.

A “prepaid account” is one of four definitions:

  • Payroll Card Account
  • Government Benefits Account
  • An account that is marketed or labeled as prepaid AND redeemable at multiple unaffiliated merchants
  • An account issued on a prepaid basis in a specified amount or capable of being loaded with funds after issuance AND whose primary function is to conduct transactions with multiple unaffiliated merchants.

Now regulations for the first two types are history in Regulation E {1005.2(b)(2) and 1005.2(b)(3)(i)(A) & (B)}.  What we are concerned about as new items are 3 and 4 {1005.2(b)(3)(i)(C) & (D).  If that sounds confusing, the CFPB has a Prepaid Account Coverage Chart on their website that can help you determine if your products are covered prepaid accounts.  If your product is a gift certificate {1005.20(a)(1) and (b)}; a store gift card {1—5.20(a)(2) and (b)}; a loyalty, award or promotional gift card {1005.20(a)(4) and (b)}; or a general use prepaid card that is marketed and labeled as a gift card or gift certificate {1005.20(a)(3) and (b)}, an exclusion applies and the account is not a covered prepaid account under the rule.

If you’ve walked through these steps and determined the product(s) you offer are not prepaid accounts, CONGRATULATIONS!  You’ve saved yourself a lot of work.  If you are subject to the rule, my CONDOLENCES because there are extensive compliance obligations to fulfill including short- and long-form disclosures, periodic statements (or alternative means of showing transactions), error resolution, electronic terminal receipts, and prepaid account agreements to deal with.  Your next best friends are the CFPB’s Executive Summary and Small Entity Compliance Guide.  From there, you’ll also want to update your EFT Policy and Procedures to recognize this new coverage.

My hunch is that most likely these rules will not affect community.  And reach out to us if you need assistance.

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