The Federal Trade Commission’s Bureau of Consumer Protection offered some advice to the Consumer Financial Protection Bureau on rules for general purpose reloadable cards. The FTC wrote a comment letter that weighed in on liability limits, disclosures, error resolution, and recurrent payments. One bureau advising another did not make all observers happy. In a blog post, Mercedes Kelly Tunstall and Stefanie Jackman of the Consumer Financial Services Group at Ballard Spahr LLC warn about unintended consequences.
While touting the benefits of applying error resolution procedures to GPR cards, the staff’s letter overlooks various problems that can result. For example, the staff fails to acknowledge the special risks to financial institutions that can arise if they are required to provisionally re-credit funds to a GPR card while investigating an error. Reg E requires provisional crediting of an account while the customer goes through the error resolution process.
Unintended consequences will undoubtedly arise, but the industry needs to think through all of the possible pitfalls of any proposed rules and make sure that the regulators know them. While it is unlikely that everyone will be satisfied at the end of the rules making process, early involvement may prevent the larger pitfalls.
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