The Consumer Financial Protection Bureau needs to return to its original plans on prepaid regulations and put its proposed rules on a post-Thanksgiving diet. For much of 2014 the CFPB was researching the prepaid industry and said that 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 person-to-person payments to (possibly) virtual currency. Note that the entire Durbin Amendment regulations were implemented with only 307 pages.
In a November 20 post on its website, the CFPB said that it expects “to issue the final rule in spring 2016.” It is not clear why the CFPB is taking so long to digest the comments, nor do we know what direction they are taking based on those comments. But, we do know that 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 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 that focus solely on disclosure, the CFPB could issue guidance before the end of the year that would 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 CFPB seeks to solve through savvy shopping.
