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Pre-Acquisition Disclosures Under the Prepaid Rule

Senior Compliance Consultant Jon Tavares describes the pre-acquisition disclosures that financial institutions must provide with any prepaid account.

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Jon Tavares – Senior Compliance Consultant

My last article described the definition of a prepaid account. In this article, I will describe the pre-acquisition disclosures that you must provide with any prepaid account. Before a consumer acquires a prepaid account, the financial institution must provide a Short Form Disclosure, a Long Form Disclosure and additional information that must be outside of the Short Form Disclosure. When the purpose of a prepaid account is to disburse funds to a consumer, and no alternative means for the consumer to receive those funds exists, the financial institution may provide the Short and Long Form Disclosures along with the prepaid account.

Short Form Disclosure 

The Short Form Disclosure must include, as applicable:

  • Any periodic, per purchase, ATM withdrawal, cash reload, ATM balance (both in-network and out-of-network fees), customer service (both automated and live agent calls) or inactivity fees
  • A statement disclosing the number of additional fee types the financial institution may charge consumers with respect to the prepaid account
  • The two additional fee types that generate the highest revenue
  • A statement regarding overdraft/credit features that may be offered, or a statement that no overdraft/credit feature may be offered
  • A statement regarding registration and FDIC/NCUA insurance or lack thereof
  • A statement directing the consumer to CFPB’s website (cfpb.gov/prepaid) for general information about prepaid accounts
  • A statement directing the consumer to the location of the Long Form Disclosure

If a financial institution provides the prepaid account at a retail location, the statement directing the consumer to the location of the Long Form Disclosure must include a telephone number and a website for the consumer to receive the Long Form Disclosure.

If the prepaid account is a payroll account, the Short Form Disclosure must also state that the consumer does not have to accept the payroll card account and it must direct the consumer to ask about other ways to receive wages or salary from the employer instead of receiving them via the payroll card account. 

Information to be Provided Outside the Short Form Disclosure

A financial institution must also disclose the following information at the same time it provides the Short Form Disclosure: 

  • The name of the financial institution
  • The name of the prepaid account program
  • The purchase price for the prepaid account, if any
  • The fee for activating the prepaid account, if any

If the institution is providing the account in a non-retail location, it must disclose this information in close proximity to the Short Form Disclosure. In a retail location, the information (except for the purchase price) must be disclosed on the exterior of the access device’s packaging material. The financial institution must disclose the purchase price either on the exterior of, or in close proximity to, the packaging material of the prepaid account access device.

Long Form Disclosure

The Long Form Disclosure must include, as applicable:

  • A heading stating the name of the prepaid account, and a statement that the disclosure includes a list of all fees for that prepaid account or program
  • The amount of each fee that may be imposed in connection with the account, and the conditions under which the fee may be imposed, waived, or reduced
  • A statement regarding registration and FDIC/NCUA insurance or lack thereof
  • A statement regarding overdraft/credit features that may be offered or a statement that no overdraft/credit feature may be offered
  • A statement directing the consumer to a telephone number, mailing address and website for the consumer to learn about the terms and conditions of the prepaid account, to obtain prepaid account balance information, to request a copy of transaction history, or to notify the institution of an unauthorized EFT
  • A statement directing the consumer to the CFPB’s website (cfpb.gov/prepaid) for general information about prepaid accounts and the CFPB telephone number (1-855-411-2372) and website (cfpb.gov/complaint) to submit a complaint about a prepaid account
  • The disclosures required by Reg Z if, at any point, a covered separate credit feature accessible by a hybrid prepaid-credit card may be offered in connection with the prepaid account (I will discuss these disclosures in more detail in an upcoming article).

When disclosing the fees, an institution must include any known applicable third-party fees. If a third-party fee may apply but the amount of that fee is unknown, the institution must include a statement indicating that the third-party fee may apply without specifying the fee amount.

The institution need not provide the Long Form Disclosure before a consumer acquires a prepaid card from a retail location if:

  • The packaging material contains the access device
  • The Short Form Disclosure is provided on, or is visible through, an outward-facing, external surface of an access device’s packaging material
  • The Short Form Disclosure includes a statement regarding information on all fees and services that allows the consumer to access the information required on the Long Form Disclosure by telephone and website
  • The financial institution provides the Long Form Disclosure after the consumer acquires the prepaid account

If the institution does not provide the Long Form Disclosure inside the packaging material and is not already providing account-related communications within 30 days of obtaining the consumer’s contact information, the financial institution may provide the Long Form Disclosure electronically, without regard for prior demonstrable consent under e-sign.

The Prepaid Rule has specific language that financial institutions must use for each of the above disclosures and specific guidelines regarding the order, grouping, size and prominence of each disclosure, so be sure to review the requirements thoroughly before preparing and reviewing your disclosures.

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Jon Tavares – Senior Compliance Consultant