NYPAY: Regulation Prepaid
A week ago, DWT Consumer Financial Services team member Tom Scanlon spoke in the June NYPAY panel entitled, “Regulating Prepaid: Balance Between Protecting Consumers & Promoting Payments”.
NYPAY is really a New You are able to-based forum for innovators and leaders within the payments and mobile commerce industry. The current panel was a part of a number of NYPAY occasions located by DWT along with other New You are able to lawyers. DWT is constantly on the monitor developments on prepaid issues, such as the Consumer Financial Protection Bureau’s suggested prepaid account rule and also the interplay among prepaid credit cards, technology, and emerging payment systems.
Tom was became a member of around the panel by Alex Gasner, Co-founder, One Financial Holdings Craig Kessler, Gm Reloadable Product, Praxell and Kaira Fauss, Chief executive officer, Network Branded Prepaid Credit Card Association. Cristienne Genaro, Partner at Paygility Advisors, moderated the panel.
The panelists discussed the CFPB’s suggested prepaid account rule and key implications for that prepaid payments industry when the rule may be implemented as suggested. The panelists highlighted three areas where the suggested rule (if adopted supplying substantively similar terms and needs) can be problematic:
- What’s a “Prepaid Account?” The panelists noted the suggested meaning of “prepaid account” doesn’t adequately demarcate the main difference from a “prepaid account” and other kinds of accounts (say, a bank account, with funds accessible by way of debit cards) presently included in Regulation E.
- Extension of Regulation Z’s Disclosure Needs. The panelists expressed worry about the suggested rule’s extension of certain Regulation Z provisions to prepaid items that offer overdraft features, including unintended overdrafts referred to as forced-pay transactions. The panelists observed that, in forced-pay transactions, a prepaid account issuer may be unable to prevent overdrafts. Consequently, an extensive swath of prepaid account issuers might be susceptible to Regulation Z whether or not the products offered don’t specifically contain an overdraft feature. A minumum of one panelist was positive the CFPB may further refine these provisions within the final rule.
- Excessive Disclosures. The panelists identified the suggested rule’s disclosure needs as particularly burdensome. Attendees and panelists debated the expense and advantages of disclosures for consumers, including thoughtful discussion of behavior financial aspects and if the short form / lengthy form disclosures within the rule will really help consumers.
The panelists agreed that the final prepaid account rule may benefit the by supplying more certainty regarding the the introduction of new items, but cautioned that compliance with certain facets of the rule will probably stifle innovation. The CFPB is anticipated to produce your final prepaid account rule later this summer time.