We're almost there gang! This is my penultimate post in this Prepaid Rule series. In fact, this is it for Regulation E. If you haven't seen the previous articles in this series, you can see my article discussing the definition of a prepaid account here and my article discussing pre-acquisition disclosures here. This article will cover a few other miscellaneous requirements of the Prepaid Rule. The final article in the series will discuss the requirements related to hybrid prepaid-credit cards.
Regulation E generally prohibits a financial institution from conditioning an extension of credit on the consumer's agreement to repay by preauthorized EFTs. One exception to this rule is when credit is extended under an overdraft credit plan, which does not include a covered separate credit feature accessible by a hybrid prepaid-credit card. A financial institution may require automatic repayment of an overdraft credit plan that is not part of a covered separate credit feature accessible by a hybrid prepaid-credit card, even if the overdraft is charged to an open-end account that may be accessed by the consumer in ways other than overdrafts. Credit extended through a negative balance on the asset feature of a prepaid account is an overdraft credit plan.
Modified Error Resolution and Liability
Other than payroll card accounts or government benefit accounts, a financial institution is not required to comply with the liability limits and error resolution requirements for any prepaid account for which it has not successfully completed its consumer identification and verification process.
- The date the consumer electronically accesses the consumer's account (provided the electronic account transaction history made available to the consumer reflects the unauthorized transfer), or
- The date the financial institution sends a written history of the consumer's account transactions requested by the consumer in which the unauthorized transfer is first reflected
Access to Prepaid Account Information
A financial institution does not need to provide a periodic statement for a prepaid account if the institution makes available to the consumer one of the following:
- The consumer's account balance, through a readily available telephone line
- An electronic history of the consumer's account transactions, such as through a website, that covers at least 12 months preceding the date the consumer electronically accesses the account
- A written history of the consumer's account transactions, provided promptly in response to an oral or written request, that covers at least 24 months preceding the date the financial institution receives the consumer's request
If a financial institution has not completed its consumer identification and verification process, it does not need to provide a written history of the consumer's account transactions.
The history of account transactions must include the information required on a periodic statement, the amount of any fees assessed against the account and a summary total of the amount of all fees assessed by the financial institution against the consumer's prepaid account for the prior calendar month and for the calendar year to date.
Modified Disclosure Requirements
If a financial institution does not provide a periodic statement, the institution must modify its initial account disclosure by disclosing:
- A telephone number the consumer may call to obtain the account balance
- The means by which the consumer can obtain an electronic account transaction history, such as the website address
- A summary of the consumer's right to receive a written account transaction history upon request, including a telephone number to call to request a history, in place of the summary of the right to receive a periodic statement
The Prepaid Rule requires a modified error resolution notice. This notice must be substantially similar to the sample notice in Appendix A-7 of Regulation E. Alternatively, for prepaid account programs that do not have a consumer identification and verification process, the financial institution must describe its error resolution process and limitations on consumers' liability for unauthorized transfers.
If a third-party fee is disclosed in the pre-acquisition Long Form Disclosures and initial disclosures, the financial institution does not have to provide a change-in-terms notice solely to reflect a change to that fee amount imposed by the third party. If a financial institution provides the Regulation Z disclosures for an overdraft credit feature on its Long Form Disclosures, the financial institution is not required to provide a change-in-terms notice solely to reflect a change in the fees or other terms disclosed.
On the prepaid account access device, a financial institution must include its name, website and a telephone number a consumer can use to contact the financial institution about the prepaid account. If a financial institution does not provide a physical access device in connection with a prepaid account, the disclosure must appear on the website, mobile application or other entry point a consumer must visit to access the prepaid account electronically.
Submission and Posting of Prepaid Account Agreements
An issuer must submit its prepaid account agreements to the CFPB beginning on May 1, 2019. Thereafter, an issuer must submit its account agreements within 30 days after it begins to offer or amends a prepaid account. There are two exceptions to this requirement:
- If an issuer has 3,000 or fewer open prepaid accounts, the issuer need not submit its prepaid account agreement to CFPB.
- An issuer need not submit its account agreement if it is offered as part of a product test offered to only a limited group of consumers for a limited time, issued to fewer than 3,000 open prepaid accounts and not offered other than in connection with a test.
An issuer determines if it qualifies for these exceptions on the last day of each quarter.
An issuer must also post and maintain on its website any prepaid account agreement it submits to the CFPB. If an issuer does not maintain a website, it need not post the agreement online. An issuer's website includes any website maintained by a third party to allow consumers to access account specific information.
If an issuer does not post an account agreement online, it must provide a copy of that agreement to a consumer upon request. This requirement applies to all open prepaid accounts, even when an issuer qualifies for an exception from the requirement to post prepaid account agreements. If an issuer makes an agreement available by request, it must allow the consumer to request a copy by telephone.