CFPB to Regulate Prepaid Debit Cards

Consumer Finance   |   March 25, 2015
Share Page

The CFPB plans to amend Regulation E (implementing the Electronic Funds Transfer Act) and Regulation Z (implementing TILA) to cover prepaid financial products including prepaid debit cards issued by a financial institution that may be used at unaffiliated merchants. These products are called prepaid "cards," but can also refer to an app or key fob that allows access to prepaid funds. Currently prepaid products are not subject to cost disclosure, period statements, or loss/theft limitations; though some financial institutions do provide these services.

The Federal Reserve, as the predecessor to CFPB, declined to regulate prepaid products in 2006 because the market for prepaid products was small. Since then, however, consumers have embraced prepaid products—with some using prepaid debit cards to replace bank accounts. Now, CFPB plans to extend regulations that already govern credit cards to prepaid debit cards.

The proposed amendments will require the issuers of prepaid debit cards to:

  • provide cost disclosures prior to the time the cards are loaded with funds;
  • provide either periodic statements or website access to account balances and transactions;
  • timely investigate and resolve complaints about incorrect charges; and
  • limit consumer losses when their cards are lost or stolen.

To encourage comparison shopping, issuers will also be required to post their card agreements on their websites.

Many prepaid debit cards now have credit card features, such as the ability to generate an overdraft. If a prepaid debit card has credit card features, the proposed regulations will require the issuers to consider a consumer’s ability to repay an overdraft prior to issuing a card, provide monthly billing statements, give a 21-day grace period for payment, charge "reasonable and proportionate" late fees; and limit fees and interest charges to 25 percent of the credit limit.

Under the proposed regulations, CFPB would require an issuer to wait 30 days from the registration of a prepaid debit product to offer credit features on the card. The issuer could not apply reloaded funds to pay the credit portion of the account without customer consent, and the issuer couldn’t take funds from the prepaid account more than once monthly or less than 21 days after mailing the periodic statement. If not extended, the comment period for these proposed regulations, ends on March 23, 2015.

©2020 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Subscribe to Publications


The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.