CFPB issues regulations protecting prepaid cards

Sources close to the LSCU say the Consumer Financial Protection Bureau (CFPB) is issuing a Prepaid Card Rule regulation, which extends protections that apply to credit and debit cards to prepaid cards. The aim is to allow consumers to monitor their accounts and ensure safety of funds.

The regulation is expected to:

• Limit consumer liability on lost or stolen cards to $50 for an unauthorized transaction
• Create uniform fee disclosures so consumers can compare more easily
• For “hybrid” pre-paid cards that allow consumers to spend more than is on the card initially, issuers must determine “ability to repay”
• Restrict financial institutions from offering credit features on pre-paid cards for the first 30 days after purchase
• Take effect Oct. 1, 2017.

Covered pre-paid cards include: cards sold by American Express, Discover, MasterCard, and Visa, employer payroll cards, and government benefit account cards. Branded single-store gift cards are excluded from the rule.

The LSCU will keep you updated on new information relevant to this rule.