CFPB Tweaks Proposed Prepaid Payroll Card Rules

As a few individual states in the U.S. examine payroll and debit card rules, the Consumer Financial Protection Bureau also has this product on its mind.

News reports Thursday (July 13) said the CFPB issued a proposal to amend regulations that affect payroll debit card usage. The amendments would affect Regulation E, which includes the Electronic Fund Transfer Act, and Regulation Z, which includes the Truth in Lending Act, according to Bloomberg BNA reports.

In its Federal Register, the CFPB said it is proposing to revise error resolution and limited liability provisions under Regulation E in an effort to no longer require financial institutions to resolve errors or limit customers’ liability unless the consumer’s identity is later verified, in which case FIs would be required to limit the customer’s liability and resolve errors over disputed transactions, even if they occurred before the identity was verified.

Further, the CFPB said, it is proposing to create an exception to a rule under Regulation Z that pertains to the business relationship between prepaid account issuers and credit card issuers that offer traditional card products. The exception would aim to address “certain complications,” it said, regarding overlaps of how credit card accounts are subject to both Regulation Z’s open-end credit card rules and the Prepaid Accounts Rule that applies to cards linked to digital wallets.

Finally, the CFPB said it is also looking to “make clarifications or minor adjustments” to the Prepaid Accounts Rule that defines a prepaid account.

Last October, the CFPB released a final rule on consumer protections for prepaid accounts under Regulation E and Regulation Z. But in the months following, the bureau received concerns from industry players that they would have difficulty in implementing these changes originally intended to come into effect Oct. 1, 2017. The CFPB then changed the effective date to April 1, 2018.

The proposed changes to the rules are also a result of feedback from industry stakeholders, it said.