Which agency regulates prepaid cards?
At the American Conference Institute’s Seventh National Forum onPrepaid Compliance last week I have learned the answer.
All of them!
The conference kicked off with a Federal Regulatory panel thatincluded the Federal Trade Commission, The Federal DepositInsurance Corp., three offices from U.S. Treasury Department plusthe Office of the Comptroller of the Currency, the Department ofJustice, and the Financial Crimes Enforcement Network. Each agencyhas its own concerns about prepaid cards.
For example, the FTC has jurisdiction over non-bank financialservice providers including marketers and advertisers, and thiscould extend to program managers. FinCEN and the DOJ are concernedwith prepaid cards being used for money laundering and othercriminal activity, and the FDIC is concerned with third-party riskand the safety and soundness of banks that issue prepaidcards.
At the Department of Treasury, the Office of Foreign AssetsControl wants to make sure that prepaid cards aren’t used forcriminal activity. The Office of Consumer Policy is monitoring thegrowth of the industry and thinking about how policy can be createdthat prevents confusion about prepaid while helping individualsmake better financial decisions. Meanwhile, the FinancialManagement Service is making sure that Federal Benefits only go oncards that meet requirements such as having FDIC insurance. Itwants to help the industry identify and return Federal paymentssuch as tax returns that may be fraudulent. In addition, the Officeof the Comptroller of the Currency wants to make sure that banksand thrifts manage third-party risk related to prepaid, and thatthey operate programs in a way that protects the safety andsoundness of the institutions.
That was just the first panel of the day. There are also stateregulators, including banking departments, commerce departments,and attorneys general.
Of course, to hear prepaid detractors’ tell it, prepaid is an’unregulated industry’ for all intents and purposes. Tell that tothe sleep-deprived compliance officers.
While all of these regulators go about their business, the listsabove ignore the elephant in the room, which is the ConsumerFinancial Protection Bureau. The CFPB is looking at new regulationson prepaid cards, including requiring Regulation E provisions ongeneral purpose reloadable cards.
So, 2013 will be a busy year in the world of prepaid regulation.What remains to be seen is what shape the industry will be in afterall is said and done.
