On Nov. 20, 2014, the Consumer Finance Protection Bureau published a broad set of recommended guidelines for prepaid providers that seek to simplify and standardize the way prepaid products are sold, distributed and supported in the United States.
The prepaid community's initial comments have been mostly high level as industry stakeholders complete their due diligence on the proposed changes and their far-reaching impact on the prepaid ecosystem.
Pasadena based Green Dot Corp., a leading provider of prepaid products and wholly owned subsidiary of Green Dot Bank, applauded the bureau's efforts to improve the prepaid experience.
Green Dot founder, Chairman, and Chief Executive Officer Steve Streit met with the CFPB representatives on Nov. 13 in Wilmington, Del., and issued a favorable statement to the bureau and media.
"Today the prepaid industry takes another step towards maturity and passes another milestone on its path to long term sustainability and critical mass," Streit said. "I, as a person, and Green Dot, as a company, fully support the CFPB's mission. A football game without rules and referees isn't a sport; it's a brawl. Like sports, to be successful, industry also needs rules and referees to ensure fairness, integrity and safety for all participants.
"Green Dot believes its business will not be materially impacted by the CFPB's newly proposed rules. Furthermore, Green Dot fully supports rules that mandate Regulation E consumer protections for lost or stolen funds and disputed transactions, including the providing of provisional credits to consumers and the CFPB's proposed rulemaking dealing with the new framework for overdraft programs attached to prepaid cards."
The Network Branded Prepaid Card Association is a New Jersey-based association for providers of prepaid cards that bear the card brand network logos of American Express Co., Discover Financial Services, MasterCard Worldwide, and Visa Inc. Doug Bower, NBPCA Executive Director and President, predicts a bright future for prepaid products over the next two decades, as wealth is transferred from baby boomers to younger generations who are more comfortable with the convenience and utility of prepaid products.
"Confidence is a key ingredient for success in life, whether it's in education, sports or relationships," Bower said. "Many consumers find that prepaid products make it easier to manage their finances. They also enjoy the autonomy and control of the prepaid experience. NBPCA welcomes guidelines that enhance the uniformity and clarity of prepaid products and improve transparency for consumers."
The CFPB had alerted the NBPCA two years ago that it was developing a new set of guidelines that would likely include some regulatory disclosures. While Bower and colleagues were expecting the CFPB proposal, they were surprised by its broad scope, which affects all forms of prepaid accounts, including "cards, codes, or other devices capable of being loaded with funds and usable at unaffiliated merchants or for person-to-person transfers," according to language in the report.
"We didn't anticipate the provisions in this new rule making and the size of the disclosures," Bower said, adding that it will take time for the association to review and respond to the multifaceted report.
Alex Cooper is CEO of New Jersey-based Rezzcard, a payment solution for building owners and managers that enables them to accept one-time or reoccurring rent payments onsite and through a secure web portal. The service is an alternative to traditional checking accounts for underserved and underbanked consumers.
Cooper acknowledged that the bureau's proposed changes to prepaid regulations as a positive development in the prepaid space.
"The regulations may accelerate consolidation of some of the smaller programs and issuers, but that would have happened anyway as the industry matures," Cooper said. "Prepaid cards have become valuable and meaningful transactional accounts for the underserved and under banked. Cleaner and better disclosures make better consumer products, which will benefit the marketplace and put better products in consumers' hands."
The 870-page guidelines, published under the "proposed rules" tab at www.consumerfinance.gov/regulations/, will remain open for public feedback for 90 days from Nov. 20, 2014. During this period, respondents can voice comments and concerns via www.consumerfinance.gov/notice-and-comment/.
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