Viewpoint: Prepaid Regulations Should Go on a New Year’s Diet
By Ben Jackson, Mercator Advisory Group
The CFPB needs to return to its original plans on prepaid regulations and put its proposed rules on a New Year’s diet. For much of 2014 the CFPB was researching the prepaid industry and said it planned to produce regulations that would focus primarily on prepaid card disclosures. Then, in December 2014, it gave us 870 pages of proposed regulations that covered everything from prepaid card disclosure to overdraft to P2P payments to (possibly) virtual currency. Note that the entire Durbin Amendment regulations were implemented with only 307 pages.
In a Nov. 20 post on its Website, the CFPB said that it expects “to issue the final rule in spring 2016.” It isn’t clear why the CFPB is taking so long to digest the comments, nor do we know what direction it’s taking based on those comments. But, we do know the delay came after the troubles that RushCard and its customers had, and the concern is that the CFPB is going to try to somehow regulate away technical glitches that aren’t unique to prepaid cards.
If the rules come out in spring 2016 as proposed, then we are looking at a major disruption to the prepaid card business. Depending on the implementation time frame given for compliance, program managers may need to recall and destroy mountains of cards and marketing materials. We know the CFPB is not the Environmental Protection Agency (given the reams of paper needed to print out its last regs, it might be the EPA’s sworn enemy). All the same, it would be nice to avoid a repeat of the CARD Act, which led to piles of unusable cardstock being landfilled.
What the CFPB should do is issue a slimmed down version of its prepaid regulations that focuses on disclosure. The industry already has made steps to improve the information customers have for making decisions. Organizations like the Center for Financial Services Innovation and Pew have done good work in developing valuable, workable models.
By issuing rules focusing solely on disclosure, the CFPB could issue guidance and bring help to consumers earlier in 2016, and prevent disruptions to their prepaid access caused by regulatory deadlines. The improved disclosure would let consumers avoid many of the other problems the CFPB seeks to solve through savvy shopping.
Ben Jackson is director of Mercator Advisory Group’s Prepaid Advisory Service. He has more than 10 years of experience in banking and payments research, and is an expert at applying prepaid to help organizations solve tactical and strategic problems. This article originally appeared on Payments Journal. Ben can be reached at email@example.com.
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