Public Comment: Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)

Debit card
By Blake Taylor, Policy Analyst
March 23, 2015

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This Consumer Financial Protection Bureau (CFPB or “Bureau”) proposed rule would extend various consumer protections to prepaid account products. Protections for traditional bank account and credit products now exist through Regulation E, which governs electronic funds transfers, and Regulation Z, which governs the use of consumer credit. However, prepaid accounts such as debit cards that can be pre-loaded with funds are currently unregulated. CFPB proposes to amend Regulation E and Regulation Z to apply existing and new protections to these relatively new financial products by imposing various information disclosure, limited liability, error resolution, and consumer credit requirements.

Although this comment provides an overview of the proposed rule’s requirements, its statutory authority for doing so, and an analysis of its consideration of regulatory principles, the main focus is an analysis of CFPB’s information disclosure requirements. CFPB argues that confusing and shrouded pricing information for these products constitutes a market failure and consumer protection issue. However, their proposed remedy of information disclosure requirements may in reality do little to rectify this stated problem. This is at least partly because the increased competition resulting from market growth and maturation has served to diminish the information problem compared to when the Bureau decided to propose rules two years ago.

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