Consumer Groups Ask Agency To Extend Reg E To Reloadable Prepaid

Consumer groups are banding together to urge the Consumer Financial Protection Bureau to require prepaid debit card issuers to provide consumers with the same mandatory protections that come with traditional debit cards under Regulation E of the Electronic Funds Transfer Act.

Seven organizations, including Consumers Union and the Center for Responsible Lending, signed a letter they submitted to the bureau Nov. 18 (see letter). In the letter, the groups urge the bureau to enact several mandatory protections for consumers using general-purpose reloadable cards, including a cap on how much value consumers could lose if their card is lost or stolen or if someone uses their card to make unauthorized purchases.

The organizations also seek a guarantee that issuers will recredit unauthorized debits from a prepaid card account no later than 10 business days after the cardholder reports the funds missing. The groups also want clear and conspicuous disclosures of all fees at the time the consumer purchases a card.

Reg E requires periodic statements about account activity, and the consumer groups want that requirement to apply to prepaid cards, too.

The bureau declined comment regarding the letter. Representatives for the consumer groups were not immediately available.

The Network Branded Prepaid Card Association, which represents the card brands, issuers and prepaid providers, agrees with parts of what the consumer groups are proposing.

Before the Dodd-Frank Act moved responsibility for Reg E to the bureau from the Federal Reserve Board, association members held a series of meetings with Fed representatives to discuss extending mandatory protections under Reg E to reloadable cards, according to Terry Maher, a partner at the law firm Baird Holm LLP and general counsel to the association.

“Since the establishment of the [bureau], we have also had a series of meetings with representatives of the [bureau] to discuss consumer protections for holders of reloadable prepaid cards,” Maher tells PaymentsSource.

Some prepaid products already have Reg E protections, Maher notes. Prepaid accounts consumers use to receive government funds have Reg E protection under a U.S. Treasury Fiscal Management Service regulation, he notes.

The association disagrees with the groups about periodic statements. It contends providing consumers with access to a 60-day account history instead of the periodic statements required under Reg E would save printing and mailing costs for the issuers, Maher notes.

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