Prepaid is Too Diverse for One Omni Regulation

by Ben Jackson 0

Money withdrawal on the ATM

In an editorial in The Hill Magazine, Brad Fauss, the executive director of the Network Branded Prepaid Card Association, argues correctly that prepaid regulations cannot be one-size-fits-all. The problem is that is what the Consumer Financial Protection Bureau has tried to do with its proposed prepaid rules.

“While NBPCA fully supports the CFPB’s goal of protecting consumers, we caution that the proposed rule could have the opposite effect. In its current form, the rule will likely eliminate entire categories of prepaid cards from the market and could drive consumers to riskier products or eliminate their access to safe financial products altogether. Instead, the CFPB should implement commonsense solutions that protect consumers while also driving innovation and the availability of safe and effective products.”

The CFPB document for the rules runs to more than 900 pages. As NBPCA notes, there are many good aspects to the rules, but their sheer size guaranteed that unintended consequences have crept in. Additionally, the rules may cause some confusion for prepaid buyers through the limits that they set on disclosures.

Mercator Advisory Group did an analysis of the rules that captures some of the highlights which could lead to problems. The CFPB started in the right place, but in its zeal to cover all the possible problems, it ended up potentially creating new ones.

The comment period has ended, and the CFPB is reviewing the comments before finalizing the rule. The industry hopes that some changes will be made to make the rules more effective for protecting consumers. The industry views that as in its best interest, because if customers feel they are protected and they better understand how to use the cards, then they are more likely to do so.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

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