Vol. 79 Tuesday, 

No. 246 December 23, 2014 

Part II 

Bureau of Consumer Financial Protection 

12 CFR Parts 1005 and 1026 

Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) 

and the Truth in Lending Act (Regulation Z); Proposed Rule 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77102 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Parts 1005 and 1026 

[Docket No. CFPB–2014–0031] 

RIN 3170–AA22 

Prepaid Accounts Under the Electronic 

Fund Transfer Act (Regulation E) and 

the Truth in Lending Act (Regulation Z) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Proposed rule; request for 

public comment. 

SUMMARY: The Bureau of Consumer 

Financial Protection (Bureau) is 

proposing to amend Regulation E, 

which implements the Electronic Fund 

Transfer Act (EFTA); Regulation Z, 

which implements the Truth in Lending 

Act (TILA); and the official 

interpretations to the regulations. The 

proposal would create comprehensive 

consumer protections for prepaid 

financial products. The proposal would 

expressly bring such products within 

the ambit of Regulation E as prepaid 

accounts and create new provisions 

specific to such accounts. The proposal 

would generally cover those prepaid 

accounts that are cards, codes, or other 

devices capable of being loaded with 

funds and usable at unaffiliated 

merchants or for person-to-person 

transfers, and are not gift cards (or 

certain other related types of cards). The 

proposal would modify Regulation E to 

establish disclosure requirements 

specific to prepaid accounts that would 

require financial institutions to provide 

certain disclosures to consumers prior 

to and after the acquisition of a prepaid 

account. The proposal would also 

include an option for an alternative to 

Regulation E’s periodic statement 

requirement that would permit prepaid 

product providers to make available to 

consumers certain methods for access to 

account information in lieu of sending 

periodic statements. Additionally, the 

proposal would apply Regulation E’s 

limited liability and error resolution 

provisions to prepaid accounts, with 

certain modifications, including 

applying these provisions after account 

registration. Moreover, the proposal 

would require prepaid account issuers 

to provide the Bureau with terms and 

conditions for prepaid accounts, which 

it would post on a Web site maintained 

by the Bureau. Relatedly, issuers would 

also be required to post the terms and 

conditions on their own Web sites or 

make them available upon request. 

Finally, the proposal would also contain 

amendments to Regulations Z and E to 

regulate prepaid accounts with overdraft 

services or credit features. Among other 

things, prepaid cards that access 

overdraft services or credit features for 

a fee would generally be credit cards 

subject to Regulation Z and its credit 

card rules. Moreover, the proposal 

would require that consumers consent 

to overdraft services or credit features 

and give them at least 21 days to repay 

the debt incurred in connection with 

using such services or features. Further, 

Regulation E would be amended to 

include disclosures about overdraft 

services or credit features that could be 

linked to prepaid accounts. The 

compulsory use provision under 

Regulation E would also be amended so 

that prepaid account issuers would be 

prohibited from requiring consumers to 

set up preauthorized electronic fund 

transfers to repay credit extended 

through an overdraft service or credit 

feature. 

DATES: Comments must be received on 

or before March 23, 2015. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2014– 

0031 or RIN 3170–AA22, by any of the 

following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Email: FederalRegisterComments@

cfpb.gov. Include Docket No. CFPB– 

2014–0031 and/or RIN 3170–AA22 in 

the subject line of the email. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Consumer 

Financial Protection Bureau, 1700 G 

Street NW., Washington, DC 20552. 

• Hand Delivery/Courier: Monica 

Jackson, Office of the Executive 

Secretary, Consumer Financial 

Protection Bureau, 1275 First Street NE., 

Washington, DC 20002. 

Instructions: All submissions should 

include the agency name and docket 

number or Regulatory Information 

Number (RIN) for this rulemaking. 

Because paper mail in the Washington, 

DC area and at the Bureau is subject to 

delay, commenters are encouraged to 

submit comments electronically. In 

general, all comments received will be 

posted without change to http://

www.regulations.gov. In addition, 

comments will be available for public 

inspection and copying at 1275 First 

Street NE., Washington, DC 20002, on 

official business days between the hours 

of 10 a.m. and 5 p.m. Eastern Time. You 

can make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or social security numbers, 

should not be included. Comments 

generally will not be edited to remove 

any identifying or contact information. 

FOR FURTHER INFORMATION CONTACT: 

Kristine Andreassen, Morgan Harper, 

and Jane Raso, Counsels; Krista Ayoub, 

Joseph Baressi, and Eric Goldberg, 

Senior Counsels, Office of Regulations, 

at (202) 435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule 

The Bureau of Consumer Financial 

Protection (Bureau) is issuing this notice 

to propose comprehensive consumer 

protections for prepaid financial 

products (or prepaid products). Such 

products are among the fastest growing 

types of payment instruments in the 

United States. However, with certain 

limited exceptions, prepaid products 

have not been subject to the existing 

Federal consumer regulatory regimes 

that provide consumer disclosures, error 

resolution and protection from 

unauthorized transfers. See generally 12 

CFR part 1005. 

The Bureau is proposing to establish 

a new definition of ‘‘prepaid account’’ 

within Regulation E and adopt 

comprehensive consumer protection 

rules for such accounts. The proposal 

would extend Regulation E protections 

to prepaid products that are cards, 

codes, or other devices capable of being 

loaded with funds, not otherwise 

accounts under Regulation E and 

redeemable upon presentation at 

multiple, unaffiliated merchants for 

goods or services, or usable at either 

automated teller machines or for personto-person (P2P) transfers; and are not 

gift cards (or certain other types of 

limited purpose cards), by bringing 

these products under the proposed 

definition of ‘‘prepaid account.’’ 

The Bureau is also proposing to 

modify Regulation E, as it would pertain 

to prepaid accounts, in several key 

respects. First, the Bureau proposes to 

require financial institutions to make 

certain disclosures available to 

consumers before a consumer agrees to 

acquire a prepaid account. These 

disclosures would take two forms, 

whether provided in oral, written, or 

electronic form. The first would be a 

short form highlighting key fees that the 

Bureau believes are most important for 

consumers to know about prior to 

acquisition. The second would be a long 

form that would set forth all of the 

prepaid account’s fees and the 

conditions under which those fees 

could be imposed. When certain 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77103 

1Fed. Reserve Sys., The 2013 Federal Reserve 

Payments Study, Recent and Long-Term Payment 

Trends in the United States: 2003–2012, Detailed 

Report and Updated Data Release (2014), available 

at https://.frbservices.org/files/communications/

Continued 

conditions are met, the proposed rule 

would provide an exception for 

financial institutions that offer prepaid 

cards for sale over the phone or in retail 

stores that would allow such 

institutions to provide consumers with 

access to the long form disclosure by 

telephone or internet, but otherwise not 

make the long form available until a 

consumer has acquired the prepaid 

account. To facilitate compliance, the 

Bureau is additionally proposing model 

forms and sample forms. The use of the 

model forms would establish a safe 

harbor for compliance with the short 

form disclosure requirement. The 

Bureau is also proposing revisions to 

existing Regulation E model forms and 

model clauses to provide model 

language. 

In addition, with certain 

modifications, the Bureau is proposing 

to extend to all prepaid accounts the 

existing Regulation E requirements 

regarding the provision of transaction 

information to accountholders that 

currently apply to payroll card 

accounts, Federal government benefit 

accounts, and non-needs tested State 

and local government benefit accounts. 

These provisions would allow financial 

institutions to either provide periodic 

statements or, alternatively, make 

available to the consumer: (1) The 

account balance, through a readilyavailable telephone line; (2) an 

electronic history of account 

transactions that covers at least 18 

months; and (3) a written history of 

account transactions that covers at least 

18 months upon request. For all prepaid 

accounts, the Bureau proposes to 

require financial institutions to disclose 

monthly and annual summary totals of 

all fees imposed on a prepaid account, 

as well as the total amount of all 

deposits to and debits from a prepaid 

account when providing a periodic 

statement or electronic or written 

account history. 

Further, the Bureau is proposing to 

modify Regulation E to adopt error 

resolution and limited liability 

provisions specific to prepaid accounts. 

Currently, Regulation E limits 

consumers’ liability for unauthorized 

transfers, provided that the consumer 

gives timely notice to the financial 

institution, and requires financial 

institutions to resolve certain errors in 

covered accounts. The Bureau proposes 

to extend this regime to prepaid 

accounts, with modification to the 

timing requirements for reporting 

unauthorized transfers and errors when 

a financial institution follows the 

periodic statement alternative described 

above. The Bureau is also proposing not 

to apply the limited liability and error 

resolution requirements of Regulation E 

to unregistered prepaid accounts. 

Moreover, the proposed rule would 

include provisions that would require 

prepaid account issuers to post prepaid 

account agreements on the issuers’ Web 

sites (or make them available upon 

request in limited circumstances) and to 

submit those agreements to the Bureau 

for posting on a Web site maintained by 

the Bureau. 

The Bureau is also proposing to revise 

various other provisions in subparts A 

and B of Regulation E. With respect to 

subpart A, the proposed amendments 

include a revision that would provide 

that, similar to payroll card accounts, a 

consumer cannot be required to 

establish an account for receipt of 

government benefit. Additionally, the 

Bureau proposes to revise official 

interpretations to Regulation E to 

incorporate a preemption determination 

the Bureau made regarding certain State 

laws related to unclaimed gift cards. 

With respect to subpart B, which 

applies to remittance transfers, the 

Bureau proposes a conforming change to 

the official interpretations. 

Overdraft Services and Credit Features 

The Bureau is also proposing to 

modify Regulations Z and E to address 

the treatment of overdraft services and 

other credit features offered in 

connection with prepaid accounts. 

Regulation Z. The Bureau is 

proposing changes to Regulation Z so 

that prepaid account issuers that offer 

overdraft services or other credit 

features in connection with such 

accounts and charge a fee for the service 

(such as interest, transaction fees, 

annual fees, or other participation fees) 

generally would be subject to Regulation 

Z’s credit card rules and disclosure 

requirements for open-end (not homesecured) consumer credit plans. In 

addition, the Bureau proposes to revise 

Regulation Z so that its credit card rules 

would apply to separate lines of credit 

linked to prepaid accounts. The 

proposal would also require an issuer to 

obtain a consumer’s consent before 

adding overdraft services and credit 

features to a prepaid account and would 

prohibit the issuer from adding such 

features until at least 30 calendar days 

after a consumer registers the prepaid 

account. Moreover, the proposal would 

amend Regulation Z as it pertains to 

credit on prepaid accounts to provide 

that a consumer would receive a 

periodic statement not more often than 

once per month and then have at least 

21 days to repay the debt the consumer 

incurred in connection with using the 

overdraft service or credit feature. The 

proposal would also prevent an issuer 

from requiring, as terms of the credit 

feature, that it could immediately take 

incoming payments to a prepaid 

account, such as cash loads or direct 

deposits, to repay and replenish the 

credit line. 

Regulation E. The Bureau is proposing 

to revise Regulation E to include 

disclosures about overdraft services or 

credit features that could be linked to 

prepaid accounts in the short and long 

form disclosures. The Bureau is also 

proposing to provide that the 

compulsory use provision would apply 

to overdraft services or other credit 

features linked to prepaid accounts. As 

proposed, prepaid account issuers 

would be prohibited from requiring 

consumers to set up preauthorized 

electronic fund transfers to repay credit 

extended through an overdraft service or 

credit feature. Lastly, the Bureau 

proposes to amend Regulation E to 

restrict issuers from applying to a 

consumer’s prepaid account different 

terms and conditions such as charging 

different fees for accessing funds in a 

prepaid account, depending on whether 

the consumer elects to link the prepaid 

account to an overdraft service or credit 

feature. 

Effective Date 

The Bureau proposes that with certain 

exceptions, the effective date for the 

requirements set forth in a final rule 

would be nine months after the final 

rule is published in the Federal 

Register. The exception proposed herein 

is that for a period of 12 months after 

the final rule is published in the Federal 

Register, financial institutions would be 

permitted to continue selling prepaid 

accounts that do not comply with the 

final rule’s pre-acquisition disclosure 

requirements, if the account and its 

packaging material were printed prior to 

the proposed effective date. 

II. Background 

A. Prepaid Financial Products 

As noted above, prepaid products—in 

various forms—are among the fastest 

growing types of payment instruments 

in the United States. A 2013 study by 

the Board of Governors of the Federal 

Reserve System (the Board) reported 

that compared with noncash payments 

such as credit, debit, automated clearing 

house (ACH), and check, prepaid card 

payments increased at the fastest rate 

from 2009 to 2012.1 Among other 


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77104 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

pdf/general/2013_fed_res_paymt_study_detailed_

rpt.pdf. 

2 Id. at 37. 

3Payment networks include Visa, MasterCard, 

American Express, and Discover; ATM networks 

include NYCE, PULSE, STAR and Cirrus. 

4As described in more detail below, payroll card 

accounts and cards used to distribute certain 

government benefit payments are currently 

regulated by Regulation E. 

5Mercator Advisory Grp., Eleventh Annual U.S. 

Prepaid Cards Market Forecasts, 2014–2017 at 13 

(Nov. 2014). 

6The Bureau understands that in limited 

circumstances, a consumer can reload a GPR card 

via paper check. 

things, the report found that the number 

of prepaid card payments reached 9.2 

billion transactions in 2012 (up from 5.9 

billion in 2009).2

There is significant variation among 

prepaid products. For example, some 

prepaid products are ‘‘reloadable,’’ 

meaning that a consumer or other 

authorized party can add funds to the 

account after the account is issued, 

while others are not. Additionally, some 

prepaid products, such as certain gift 

cards, are ‘‘closed-loop,’’ meaning that a 

consumer can only use the product at a 

specific merchant or group of 

merchants. Regulation E currently 

regulates closed-loop gift cards and 

similar products. See § 1005.20. Other 

prepaid products are ‘‘open-loop.’’ Like 

gift cards, these products are used to 

store funds. However, unlike closedloop prepaid products, they can be used 

on payment and automated teller 

machine (ATM) networks.3

Consumers may acquire prepaid 

products in a variety of ways. Prepaid 

products may be sold directly to 

consumers in retail locations, over the 

telephone, or online. They may also be 

provided at no charge through an entity 

that uses the prepaid product to 

distribute funds to a recipient, such as 

an employer that distributes wages to an 

employee on a payroll card. Further, as 

discussed in greater detail below, 

prepaid products may not be tied to a 

physical card or device, and instead 

may be accessible and usable online or 

at a physical location through a mobile 

device such as a smartphone. 

Typically, consumers may not spend 

more than the total amount of funds 

loaded onto a prepaid product, although 

some products permit consumers to 

access additional funds for a fee in a 

manner similar to overdraft services or 

credit features offered with checking 

accounts. As discussed below, a 

‘‘general purpose reloadable’’ (GPR) 

card is one type of reloadable, openloop prepaid product. Others include 

prepaid products onto which third 

parties distribute funds, also as 

discussed in greater detail below. These 

include payroll cards and cards for the 

disbursement of student loan proceeds 

or insurance proceeds, and cards used 

to disburse Federal and non-needs 

based State and local government 

benefits.4

GPR Cards 

A GPR card is one of the most 

common and widely-available forms of 

open-loop, reloadable prepaid products. 

A financial institution generally issues a 

GPR card for an amount paid to load the 

card by a consumer less the purchase 

price of the card, if any. A GPR card can 

be reloaded by the consumer, meaning 

that once the card is registered, the 

consumer can add funds to the card. 

Based on the Bureau’s research, it 

understands that currently, the top five 

GPR card programs (as measured by 

load volume) identified by the Aite 

Group have maximum load amounts 

generally ranging from approximately 

$2,500 to $15,000, with some exceptions 

made for large tax refunds. The 

prevalence of GPR cards has grown 

rapidly. According to projections by the 

Mercator Advisory Group, the amount 

loaded onto GPR cards grew from less 

than $1 billion in 2003 to nearly $65 

billion in 2012. This makes GPR cards 

among the fastest-growing forms of 

prepaid products over that decade, 

growing from less than 8 percent of 

prepaid load to over 36 percent during 

that same period. The growth rate has 

continued. According to Mercator’s 

projections, the total dollar value loaded 

onto GPR cards is expected to continue 

to grow to over $98 billion in 2014.5

Virtual GPR cards. As noted above, 

prepaid products may not be tied to a 

physical card or device, and instead 

may be accessible and usable online or 

at a physical location through a mobile 

device such as a smartphone. The 

Bureau understands that the use of GPR 

prepaid products not linked to a 

physical card or device to store and 

transfer funds via the internet, text, or 

mobile phone application is growing. To 

use these ‘‘virtual GPR cards’’ (‘‘virtual’’ 

because these accounts are not linked to 

a physical card or device), consumers 

may receive account information such 

as the account number that they can 

then use to make purchases. 

GPR Card Functionality 

As noted above, consumers generally 

purchase GPR cards at retail locations, 

over the telephone, or online. When 

buying a GPR card at a retail location, 

consumers typically pay an upfront 

purchase fee. Program managers may 

waive this fee for GPR cards that 

consumers purchase online. A newlypurchased GPR card is usually loaded 

by the retailer at the time of purchase 

with funds provided by the consumer. 

However, in order to take advantage of 

all of the GPR card’s features, 

consumers are often required to contact 

the GPR card’s program manager and 

register the card, or at least to activate 

it. Indeed, the Bureau understands that 

it is common that unless a consumer 

registers the consumer’s newlypurchased GPR card, the consumer only 

has a ‘‘temporary card,’’ because 

program managers do not send a 

‘‘permanent card’’ embossed with the 

consumer’s name until the consumer 

registers the card. Further, the Bureau 

understands that unless a GPR card is 

registered, there is typically a cap on the 

amount of funds a consumer can load 

onto the card and restrictions on the 

consumer’s use of the card (e.g., the 

consumer might not be able to use the 

card at ATMs or reload funds onto the 

card). 

Registration typically requires the 

consumer to provide specific identifying 

information (i.e., full name, domestic 

residential address, date of birth, and a 

Social Security Number or Taxpayer 

Identification Number, or, in some 

instances, another government-issued 

identification number). The information 

is used by the program manager or 

issuing bank to verify the consumer’s 

identity. If the consumer’s identity 

cannot be verified, the card is not 

considered registered. As noted above, 

customers with unregistered GPR cards 

are generally able to spend their initial 

load but will not be able to reload the 

card or use it at an ATM. Activation 

may require a consumer to provide less 

identifying information than 

registration. 

GPR cards can generally be reloaded 

through direct deposit of wages, 

pensions, or government benefits; a cash 

purchase of a reload product; direct 

cash reload; transfer from another 

prepaid product or a deposit account; or 

deposit of a check at a participating 

check-cashing outlet or via remote 

deposit capture.6 Consumers can 

typically obtain cash from their prepaid 

products via ATM withdrawals, bank 

teller transactions, or by electing to 

obtain cash back on a personal 

identification number (PIN) transaction 

at a merchant. Additionally, consumers 

can typically make purchases with their 

GPR cards wherever the payment 

network brand appearing on the card is 

accepted. A number of programs also 

offer an online bill pay function, which 

sometimes has a fee associated with it. 

Consumers can typically obtain updates 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77105 

7Stephanie Wilshusen et al., Fed. Reserve Bank 

of Phila., Consumers’ Use of Prepaid Cards: A 

Transaction-Based Analysis, at 39 (2012) (2012 FRB 

Philadelphia Study), available at http://

www.philadelphiafed.org/consumer-credit-andpayments/payment-cards-center/publications/

discussion-papers/2012/D-2012-AugustPrepaid.pdf. The authors of the report noted that 

the report’s primary focus is on GPR cards and 

payroll cards, which will be discussed in greater 

detail below. 

8The Pew Charitable Trusts, Consumers Continue 

to Load Up on Prepaid Cards, at 39 (Feb. 2014) 

(2014 Pew Study), available at http://

www.pewtrusts.org/en/research-and-analysis/

reports/2014/02/06/consumers-continue-to-loadup-on-prepaid-cards. 

9 2012 FRB Philadelphia Study, at 6. 

10 Id. 

11The Pew Charitable Trusts, Why Americans 

Use Prepaid Cards: A Survey of Cardholders’ 

Motivations and Views, at 7 (Feb. 2014) (2014 Pew 

Survey). It appears that the prepaid products 

discussed in the report included GPR cards, payroll 

cards, and government benefit cards. The study 

excluded closed-loop prepaid products. 

12 2014 Pew Survey, at 7–8, 11. 

13 Id. at 10–11. 

14 Id. at 14. 

15See e.g., Federal Financial Institutions 

Examination Council Bank Secrecy Act/Anti-Money 

Laundering InfoBase, http://www.ffiec.gov/bsa_

aml_infobase/pages_manual/olm_011.htm. 

16Mercator Advisory Grp., Customer 

Identification Programs in Prepaid: Best Practices, 

at 2 (July 2013). 

17See 2014 Pew Survey, at 7. The Bureau 

recognizes that this figure may include consumers 

that have never tried opening a credit card account, 

as well as those that tried to open a credit card 

account, but had their application denied. 

18 Id. 

19See also Fed. Deposit Ins. Corp., Appendix to 

2013 FDIC National Survey of Unbanked and 

Underbanked Households (Oct. 2014) (2013 FDIC 

Survey), at 46, available at https://www.fdic.gov/

householdsurvey/report.pdf. 

regarding their GPR card’s account 

balance (and, for some programs, recent 

transaction activity) via toll-free 

telephone calls, text messages, email 

alerts, the card program’s Web site, or 

written account histories. Some GPR 

card providers charge consumers to 

speak to a customer service agent or to 

receive a written copy of their account 

history. Consumers may incur fees to 

obtain balance information at an ATM. 

In fact, the Bureau understands that 

GPR cards can vary substantially with 

respect to the fees and charges assessed 

to consumers, both in terms of their 

total volume as well as in the number 

and type of fees assessed. Based on its 

review of the 2012 FRB Philadelphia 

Study, the Bureau believes average 

cardholder costs for GPR and payroll 

cards range from approximately $7.00 to 

$11.00 per month, depending on the 

type and distribution channel of the 

account.7 In a 2014 paper, the Pew 

Charitable Trusts estimated that the 

median consumer using one of the 66 

major GPR cards it examined would be 

charged approximately $10.00 to $30.00 

every month for use of the cards, on 

average, depending on the consumer’s 

understanding of the card’s fee structure 

and ability to alter behavior to avoid 

fees.8 The 2012 FRB Philadelphia Study 

also found that in terms of total value, 

maintenance and ATM withdrawal fees 

are among the most significant fees 

incurred by users of open-loop prepaid 

products.9

Consumers’ Use of GPR Cards 

The 2012 FRB Philadelphia Study 

found that most of the prepaid products 

in its study are used for both cash 

withdrawals and purchases of goods 

and services. In particular, it found that 

depending on the product, cash 

withdrawals account for about one-third 

to one-half of the value taken off the 

product. The study also reported that it 

believed that prepaid cards are used 

primarily to purchase nondurable goods 

and noted that many of the products 

studied are also used to pay bills.10

Further, as discussed in greater detail 

below, both the type of consumers who 

use GPR cards and the reasons for 

which they use them vary. Although it 

has been reported that the majority of 

users of open-loop prepaid products 

have had checking accounts at some 

point and that most users also have 

experience using credit cards,11 it also 

has been observed that for some 

consumers, the lack of access to 

checking accounts and other types of 

more established financial products and 

services such as credit cards appear to 

be the key driver of their use of GPR 

cards.12 The 2014 Pew Survey found 

that 58 percent of consumers that use 

prepaid products are currently without 

checking accounts, but indicated they 

want to have a checking account in the 

future.13 The survey also found that 26 

percent of prepaid product users 

without checking accounts indicated 

that they use prepaid products because, 

among other reasons, they would not be 

approved for a checking account.14

When consumers open a checking or 

savings account, they must satisfy the 

depository institution or credit union’s 

customer identification program (CIP) 

obligations, which is part of the 

institution’s Bank Secrecy Act (BSA) 

and anti-money laundering compliance 

program.15 In addition, banks and credit 

unions generally review information 

about prospective customers obtained 

from specialized reporting agencies that 

can reveal prior history of involuntary 

account closure, unsatisfied balances, 

and other issues with prior checking 

account use. 

Customer identification and 

verification procedures (other than 

those related to credit or similar 

inquiries) are largely identical between 

checking and GPR accounts. First, the 

customer identification and verification 

requirements for providers and sellers of 

prepaid access issued by the Financial 

Crimes Enforcement Network (FinCEN), 

a bureau of the U.S. Treasury 

Department (Treasury), are largely 

similar to the CIP requirements for 

depository institutions and credit 

unions. Second, the Bureau understands 

that for most prepaid products, the 

issuer (i.e., the depository institution or 

credit union providing access to the 

networks and holding the funds) sets 

the minimum standards for the CIP.16

However, there are differences. The 

primary difference is usually with 

respect to the method of customer 

verification. Checking and savings 

accounts are more frequently opened in 

person at a financial institution’s branch 

location (and thus use ‘‘documentary’’ 

forms of identification, such as a 

driver’s license or passport, to verify 

identity). Prepaid products, however, 

even those purchased at retail locations, 

are usually registered via telephone or 

online (and thus use ‘‘nondocumentary’’ forms of verification such 

as using information obtained from 

consumer reporting agencies). 

When consumers apply for credit 

cards, a card issuer will generally rely 

on a rigorous process to determine 

whether an applicant is an appropriate 

credit risk. In contrast, most GPR cards 

do not contain similar requirements. 

The 2014 Pew Survey found that 33 

percent of monthly users of open-loop 

prepaid products have never had a 

credit card.17 GPR cards may also be 

more accessible to consumers than debit 

cards that require the cardholder to have 

opened a traditional transactional 

account such as a checking account as 

a prerequisite. The 2014 Pew Survey 

found that 41 percent of monthly users 

of open-loop prepaid products currently 

do not have a checking account.18

Similarly, a 2013 survey by the Federal 

Deposit Insurance Commission (FDIC) 

found that of those people whom it 

surveyed, approximately 33 percent of 

those who reported using a prepaid card 

in the 30 days prior to being surveyed 

were unbanked.19 Additionally, debit 

card issuers may evaluate potential 

customers for credit risk more closely 

than prepaid card issuers. The Bureau 

understands that debit card issuers often 

provide faster fund availability than 

prepaid card issuers and thus may bear 


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20 2013 FDIC Survey, at 4. 

21 2013 FDIC Survey, at 35–36. 

22 2013 FDIC Survey, at 29. 

23 2013 FDIC Survey appendix, at 46–47. 

24 2014 Pew Survey, at 8; see also id. at 13–14 

(explaining that 46 percent of respondents 

indicated that one of the major reasons they use 

prepaid cards is to ‘‘Avoid overdraft fees;’’ 51 

percent of respondents said one of their major 

reasons is ‘‘Helping you not spend more money 

than you actually have’’). 

25Nearly all depository institutions the Bureau 

considered assess overdraft fees on a per-item basis. 

Among those that do, both the median and modal 

lowest-tier overdraft fee is $35. Some depository 

institutions have higher overdraft fees that apply 

after a certain number of overdraft occurrences. 

However, the Bureau’s analysis considers only the 

lowest-tier fees a consumer would encounter if de 

minimis or other policies do not preclude a fee. For 

depository institutions that charge different 

amounts in different regions, Bureau staff 

considered pricing for the region where the 

depository institution is headquartered. 

26See, e.g., 2014 Pew Study, at 4, 9–10. 

27 Id. 

28See, e.g., NBCPA Web site, What are Prepaid 

Cards, http://www.nbpca.com/en/What-ArePrepaid-Cards/Prepaid-Card-Benefits.aspx (‘‘[With 

prepaid cards] . . . [avoid] the risk of overspending or overdraft, thus avoiding the interest, 

fees and potential negative credit score implications 

of traditional credit cards. [For parents], prepaid 

cards [help] maintain control over [children’s 

spending].’’) 

29 2014 Pew Survey, at 7 (59 percent of prepaid 

card users also have a checking account.) 

30See, e.g., 2014 Pew Survey, at 1, 13. 

31See, e.g., Fed. Reserve Bank of St. Louis, Cards, 

Cards and More Cards: The Evolution to Prepaid 

Cards, Inside the Vault, Fall 2011, at 1, 2, available 

at http://www.stlouisfed.org/publications/itv/

articles/?id=2168 (‘‘Competition among prepaid 

card issuers and increased volume have helped 

lower card fees and simplify card terms’’); 2014 

Pew Study, at 2 (‘‘[O]ur research finds that the 

providers are competing for business by lowering 

some fees and are facing pressure from new entrants 

in the market’’). 

32 2014 Pew Survey, at 5, 6. 

33A j-hook is a looped hook used by retailers to 

hang prepaid cards (and other products). Retailers 

often sell prepaid cards on j-hooks in a standalone 

display rack at the end of an aisle in a store. 

34See, e.g., Consumer Reports, Prepaid Cards: 

How They Rate on Value, Convenience, Safety and 

greater depositor credit risk such as the 

risk that a deposited check never clears. 

The 2013 FDIC Survey also suggests 

that unbanked and underbanked 

consumers are more likely than the 

general population to use open-loop 

prepaid products such as GPR cards. It 

found that there are approximately 30 

million unbanked and underbanked 

households in the United States.20 It 

also found that these households tend to 

be disproportionate users of GPR cards 

and payroll cards. It observed that 19.7 

percent of underbanked and 27.1 

percent of unbanked households, as 

well as 33 percent of previously banked 

households, reported having used such 

cards (compared with 12 percent 

reported use in the entire population).21

The FDIC also found that while usage 

among all households remained 

relatively stable since 2009, the 

proportion of unbanked households that 

had used a prepaid card increased from 

12.2 percent in 2009 to 17.8 percent in 

2011 and 27.1% in 2013.22 In addition 

to the lack of access to traditional 

financial products and services as a 

shared characteristic of some of the 

consumers that use GPR cards, the FDIC 

study shows that prepaid card users 

were more likely than the general 

population to be young, single mothers, 

disabled, or have sub-$50,000 incomes, 

and less likely to be homeowners, 

white, have college degrees, or be 

employed.23

Further, the 2014 Pew Survey noted 

that the desire to avoid fee-based 

overdraft services associated with 

checking accounts appear to motivate 

some consumers to choose open-loop 

prepaid products over checking 

accounts. Indeed, the survey concluded 

that 41 percent of users have closed or 

lost a checking account due to overdraft 

fees.24 Checking accounts can become 

costly. For instance, Bureau staff has 

determined that the median checking 

account overdraft fee charged as of July 

2014 among the largest fifty U.S. 

depository institutions ranked by 

consumer checking balances is $35 per 

item.25 By contrast, except for a few 

exceptions discussed below, GPR cards 

are generally not offered with an 

overdraft service nor other credit 

features.26 Moreover, GPR card 

providers that offer such services or 

features charge lower fees than the fees 

depository institutions or credit unions 

charge for checking account overdraft.27

Thus, for consumers who do not want 

to, or cannot open a checking account, 

the Bureau believes that a GPR card 

could be a viable substitute. Indeed, the 

Bureau observes that many GPR cards 

are advertised as a ‘‘safe’’ or ‘‘secure’’ 

alternative to a checking account.28

Consumers with access to traditional 

financial products and services use GPR 

cards as well.29 The Bureau understands 

that one of the ways in which many 

consumers use such cards is for a 

limited purpose such as while traveling 

or making online purchases, because 

they may believe that using prepaid 

cards is safer than using cash, a credit 

card, or a debit card in those 

situations.30 These consumers may not 

ever register and reload the card. 

Instead, they may let the card become 

dormant or discard it after spending 

down the initial balance, and then 

purchase another GPR card at a later 

date if new needs arise. The Bureau 

understands that another popular way 

in which consumers use GPR cards is as 

a budgeting tool. For example, a family 

might budget a fixed amount each 

month for dining out and put that 

money on a GPR card, or parents may 

provide a GPR card to a child at college 

to control the child’s spending. 

Further, based on the Bureau’s market 

research and analysis, the Bureau 

believes that additional consumers will 

continue to adopt GPR cards. It also 

believes that consumers that currently 

use GPR cards may increasingly find 

that they no longer want to have 

traditional financial products and 

services such as a checking account or 

a credit card in addition to their GPR 

card. The Bureau notes that GPR card 

functionality has been expanding. For 

example, some GPR card programs have 

started to offer checking account-like 

features such as check-writing using 

pre-authorized checks, the ability to 

send direct deposits via an ACH to the 

GPR card, and, in some limited cases, 

the ability of third parties to debit and 

credit the GPR card account via ACH 

(e.g., crediting the card account through 

direct deposit). Additionally, many GPR 

card programs have offered consumers 

ways to access their account online, 

including through mobile devices such 

as smartphones. For example, 

oftentimes consumers can use mobile 

phone applications to closely monitor 

their GPR card transactions, balances, 

and fees; to load funds to their GPR 

cards; and to transfer funds between 

accounts. Lastly, like credit and debit 

cards, GPR cards provide access to 

payment networks. Consumers may find 

this to be an important feature of GPR 

cards in that some merchants may only 

accept payment through a card that 

provides access to one of these 

networks. 

Marketing and Sale of GPR Cards 

In recent years, the GPR card segment 

has grown increasingly competitive, 

which has resulted in a decrease in 

prices, coupled with an increase in 

transparency for many products.31

Nevertheless, GPR card providers 

market the cards in ways that may 

negatively affect consumers’ ability to 

make meaningful comparisons.32 Card 

packaging is often limited in size. 

Because many of them are designed to 

be sold in retail stores, the card package, 

also known as a J-hook package, is no 

larger than 4 inches by 5.25 inches.33

Thus, card packages have limited space 

in which to explain their product and 

disclose key features. It has also been 

reported that fee information for prepaid 

products is sometimes hard to find and 

difficult to understand, thus making 

comparison shopping challenging.34


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Fee Accessibility and Clarity, (July 2013), at 24, 

available at http://www.consumerfinance.gov/blog/ 

prepaid-cards-help-design-a-new-disclosure/. 

35 2012 FRB Study, at 6, 39, 72; Fumiko Hayashi 

& Emily Cuddy, General Purpose Reloadable 

Prepaid Cards: Penetration, Use, Fees and Fraud 

Risks, at 33–35 (Fed. Reserve Bank of Kansas City, 

Working Paper No. RWP 14–01, 2014) (Kansas City 

Fed Study), available at https://

www.kansascityfed.org/publicat/reswkpap/pdf/

rwp14-01.pdf. 

36For example, earlier this year Blackhawk 

Network Holdings, Inc. extended its exclusive 

distribution arrangement with Safeway Inc. through 

2019. See Press Release, Blackhawk Network, 

Safeway and Blackhawk extend exclusive prepaid 

card distribution agreement through 2019 (Mar. 7, 

2014), available at http://.com/blackhawkcomments-on-parent-company-safeways-spin-offannouncement/. 

37See Kansas City Fed Study, at 6. 

38See Aite Grp. LLC, Prepaid Debit Card 

Realities: Cardholder Demographics and Revenue 

Models, at 17 (Nov. 2013). 

39 Id. 

However, the Bureau believes that 

consumers benefit from comparison 

shopping. For example, the 2012 FRB 

Philadelphia Study found that total 

cardholder costs vary by the type of 

open-loop prepaid product. 35

In addition to the size limitations to 

GPR card packaging related to the fact 

that many GPR cards are sold through 

the retail channel on J-hooks, certain 

aspects of purchasing GPR cards in 

retail settings may pose additional 

issues. For instance, some retail 

locations may only offer one or a 

handful of products. Retailers may not 

always have a broad selection of GPR 

cards that consumers can compare 

while in a particular store, because 

prepaid card providers can establish 

exclusive marketing arrangements that 

may prevent competitors’ cards from 

being sold in the same store.36 The 

Bureau acknowledges that the lack of 

choice is not necessarily unique to GPR 

cards sold in certain retail locations. For 

example, any one bank or credit union 

may only offer a limited range of 

transactional accounts. Further, in some 

stores, prepaid products including GPR 

cards may be displayed behind a 

register, requiring a consumer to ask to 

see each product packaging 

individually. The Bureau believes that 

this process likely makes comparisonshopping more time-consuming, even 

when choice among products exists. 

Lastly, in a retail setting, GPR cards may 

be displayed near closed-loop prepaid 

products such as gift cards. This could 

contribute to consumer confusion. For 

the above reasons, the Bureau believes 

that a consumer looking to comparison 

shop among different GPR cards in a 

retail setting may incur high search 

costs. 

Additionally, in a retail setting, 

consumers desiring to purchase GPR 

cards may only allot limited time to 

consider their purchases. The Bureau 

believes that consumers often purchase 

a GPR card while purchasing groceries 

and convenience items, and may not 

take the time to fully review and 

comprehend the terms of the card that 

they are acquiring. Moreover, the selling 

of GPR cards in convenience and other 

retail stores that do not otherwise sell 

financial products (as opposed to, for 

example, at a bank) may not be 

conducive to helping a consumer 

understand the terms and conditions of 

the GPR card or that the consumer may 

be starting a long-term financial 

relationship that could entail significant 

expense for the consumers. For 

example, the Bureau believes that a 

salesperson at a convenience store 

where a GPR card is sold may not be 

able to provide adequate information to 

a consumer about the product. In 

contrast, the Bureau expects that an 

employee at a bank or credit union 

would be better informed. 

Further, once a consumer can review 

the full terms and conditions of a GPR 

card, the consumer has typically already 

purchased the card and loaded funds 

onto it, making returns difficult or 

impossible due to the inability of the 

retail store to refund the cash loaded 

onto a prepaid product including a GPR 

card. During outreach, several prepaid 

product providers have informed the 

Bureau that they provide refunds related 

to the purchase of a prepaid card, but 

the Bureau believes that few consumers 

realize that this is an option. The 

Bureau acknowledges that consumers 

who determine they do not want to 

establish a long term relationship with 

the GPR prepaid card they purchased 

may also end the relationship more 

easily (as compared to closing a 

checking or credit card account). Such 

consumers could spend down the funds 

initially loaded onto the card and then 

discard it. However, the Bureau believes 

that the consumer could still incur fees 

such as monthly maintenance fees for 

using the GPR card. 

Structure of Typical GPR Card Programs 

GPR card products are generally 

provided by combinations of entities 

working together rather than by a single, 

vertically-integrated entity operating all 

aspects of the program. In fact, the 

Bureau understands that the typical 

GPR card supply chain involves more 

parties than the supply chains for 

traditional checking or savings accounts 

or for credit cards. Although a consumer 

may only interact with a single entity or 

limited number of entities involved in 

the supply chain such as those entities 

whose logos are displayed on the GPR 

card or its packaging, the Bureau 

believes that the fact that many different 

entities can be involved in the supply 

chain could expose consumers as well 

as the entities themselves to greater 

risks such as potential losses resulting 

from the insolvency or malfeasance of 

other entities involved in the supply 

chain, when compared to the risks 

associated with a traditional checking or 

savings account. The Bureau discussed 

the various entities that may be 

involved in a typical GPR card program 

below. 

Entities involved in a typical GPR 

card program. First, entities known in 

the industry as program managers may 

design, manage, market, and generally 

operate GPR card programs. Program 

managers may include depository 

institutions and credit unions, but are 

typically non-depository entities. 

Program managers typically establish or 

negotiate a GPR card program’s terms 

and conditions, market the card, assume 

most of the financial risks associated 

with the program, and reap the bulk of 

the revenue from the program.37 The 

program manager is also, in most cases, 

the primary consumer-facing party in 

connection with a GPR card, because it 

is typically the program manager’s 

brand on the card as well as its 

packaging.38 While a handful of 

program managers appear to have had a 

large majority of the market share as 

recently as 2012, the Bureau notes that 

the GPR card industry is fast-changing. 

Indeed, it appears that new entrants— 

both start-ups and established financial 

institutions—have led to both increased 

competition and growth in the market 

over just the last few years.39

Program managers typically contract 

with various third-party service 

providers for various tasks. One of the 

most important entities involved in GPR 

card program is the prepaid card issuer, 

which is typically either a depository 

institution or credit union. Virtually all 

GPR cards must be issued by depository 

institutions or credit unions that are 

authorized by the retail electronic 

payment card networks. Issuers may 

manage the accounts that hold funds 

loaded onto the cards. Some depository 

institutions and credit unions are 

actively involved in the GPR cards they 

issue by serving as both issuer and 

program manager for their own 

programs. Other depository institutions 

may only act as an issuer and provide 

sponsorship into specific payment 

networks, but may work closely with 

the entity that is the program manager 

for a specific GPR card program to 

design, market and administer the 


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40 In some cases, a white label model is used 

whereby banks and credit unions rely upon another 

institution to issue prepaid accounts, which may be 

branded with the bank or credit union’s name. 

There are a handful of such programs through 

which banks and credit unions, including some that 

are small, offer prepaid accounts (typically as a 

convenience to their customers or members). 

41 2012 FRB Philadelphia Study, at 6. 

42Mercator Advisory Grp., Eleventh Annual U.S. 

Prepaid Cards Market Forecasts, 2014–2017, at 32 

(Nov. 2014). 

program. In sum, the particular services 

that issuers provide and their degree of 

involvement in any GPR card program 

may vary.40 The Bureau understands 

that variations can be due to the extent 

to which the program manager performs 

particular services by itself, as well as 

due to the particular features of a 

specific GPR card program. 

To produce, market and sell GPR 

cards, program managers work with, as 

applicable, manufacturers and 

distributors. The Bureau understands 

that distributors arrange for GPR cards 

to be sold through various channels 

including through retailers, money 

transfer agents, tax preparers, check 

cashers, and payday lenders. Further, in 

many cases, the Bureau understands 

that third-party processors may provide 

many of the back-office processing 

functions associated with initial account 

opening (including those related to 

transitioning from temporary to 

permanent cards), transaction 

processing, and account reporting. 

Lastly, the payment networks 

themselves also establish and enforce 

their own rules and security standards 

related to payment cards generally and 

prepaid products such as GPR cards 

specifically. The networks also facilitate 

card acceptance, routing, processing, 

and settling of transactions between 

merchants and card issuers. 

How funds are held. In contrast to a 

traditional checking or savings account, 

prepaid products including GPR cards 

are unique in that the underlying funds 

are typically held in a pooled account 

at a depository institution or credit 

union. This means that rather than 

establish individual accounts for each 

cardholder, a program manager may 

establish a single account at a 

depository institution or credit union in 

its own name, but typically title the 

account to indicate that it is held for the 

benefit of each individual underlying 

cardholder. The Bureau understands 

that the program manager, sometimes in 

conjunction with the issuing depository 

institution or credit union or the 

depository institution or credit union 

holding the funds, will typically 

establish policies and procedures and 

put in place systems to demarcate each 

cardholder’s funds within the pooled 

account. As discussed in detail below, 

these pooled accounts may qualify for, 

as applicable, FDIC pass-through 

deposit insurance or National Credit 

Union Administration’s (NCUA) Share 

Insurance Fund (NCUSIF) pass-through 

share insurance. Whether the accounts 

in fact qualify depends on how the 

account is structured and whether 

certain other conditions are met. Also 

discussed in greater detail below, both 

the FDIC and NCUA have special rules, 

regarding how pool accounts may 

qualify for, as applicable, FDIC or 

NCUSIF pass-through insurance. 

Revenue generation. The Bureau 

understands that GPR cards typically 

generate revenue through an up-front 

purchase price paid by the consumer, 

the assessment of various monthly 

maintenance and transactional fees, and 

interchange fees collected from 

merchants by the payment networks. 

The 2012 FRB Philadelphia Study found 

that ‘‘while not as important as 

cardholder fees, interchange revenues 

(fees paid by a merchant or acquiring 

bank for the purpose of compensating 

an issuer for its involvement in an 

electronic prepaid, debit, or credit card 

transaction) account for more than onefifth of the issuer revenues in the 

general-purpose programs and almost 

half of revenues in the payroll 

programs.’’ 41 Revenue is shared among 

some or all of the entities involved in 

the GPR card supply chain, although as 

also discussed above, program managers 

generally reap the bulk of the revenue 

from GPR card programs. Further, the 

Bureau notes that publicly-available 

details of how revenue is distributed 

and expenses are accounted for are 

sparse. Additionally, the Bureau 

believes that the distribution of revenue 

and the sharing of expenses among the 

entities involved the GPR card supply 

chain likely vary across programs. 

Prepaid Products Loaded by Third 

Parties 

The Bureau understands that 

consumers also receive networkbranded open-loop prepaid products 

from third parties that disburse funds to 

consumers by loading the funds onto 

such accounts. Previously, funds may 

have been distributed to the consumer 

via paper check, direct deposit into a 

traditional checking or saving account, 

or cash. Payroll cards are the most 

common example of prepaid products 

used by third parties to distribute funds 

to consumers. In 2013, over five million 

payroll cards were issued, and $30.6 

billion was loaded onto them.42 The 

Bureau understands that an employer 

may establish payroll cards for its 

employees, directly or indirectly, for the 

express purpose of delivering on an 

ongoing basis, recurring payments of an 

employee’s wages, salary, or other 

compensation, and an employee may 

choose having his compensation 

distributed via a payroll card over other 

options for receiving compensation. 

If an employee chooses a payroll card, 

the Bureau understands that the 

employer will provide the employee 

with a network-branded prepaid card 

that accesses a subaccount assigned to 

the individual employee. Moreover, on 

each payday, the employer will transfer 

the employee’s compensation to the 

payroll card account, instead of 

providing the employee with a paper 

check or making a direct deposit of 

funds to the employee’s checking or 

savings account. The employee can use 

the payroll card to withdraw funds at an 

ATM or over-the-counter via a bank 

teller. The employee can also use the 

payroll card to make purchases online 

and at physical retail locations. An 

employee may even be able to obtain 

cash back at the point-of-sale (POS). 

Some payroll cards may offer features 

such as convenience checks and 

electronic bill payment. The Bureau 

understands that employers market 

payroll cards as an effective means for 

employees who may lack a traditional 

banking relationship to receive wages. 

Indeed, the Bureau believe that payroll 

cards may provide some consumers a 

more suitable, cheaper, and safer 

method of receiving their wages, as 

compared to other methods, such as 

receiving a check and going to a checkcashing store, if the consumer does not 

have a checking account. 

Within the last ten years, however, 

there have been increasing concerns 

raised about payroll cards, with specific 

focus on potentially harmful fees and 

practices associated with payroll cards. 

As explained in greater detail below, the 

Board extended a modified form of 

Regulation E coverage to payroll cards 

in 2006, but did not extend these rules 

to GPR cards and other prepaid 

products. Among the relevant 

provisions of Regulation E that apply to 

payroll cards is the provision on 

compulsory use. Pursuant to this 

provision, no financial institution or 

other person can mandate that a 

consumer receive an electronic fund 

transfer into an account at a particular 

institution as a condition of 

employment. 12 CFR 1005.10(e)(2). 

The Bureau issued a guidance bulletin 

in September 2013 to clarify the 

application of § 1005.10(e)(2) to payroll 


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43CFPB Bulletin 2013–10, Payroll Card Accounts 

(Regulation E) (Sept. 12, 2013), available at http:// 

.consumerfinance.gov/f/201309_cfpb_payroll-cardbulletin.pdf. 

44See, e.g., Press Release, MasterCard MasterCard 

Introduces Payroll Card Standards (Dec. 13, 2013), 

available at http://newsroom.mastercard.com/

press-releases/mastercard-introduces-payroll-cardstandards/. 

45See, e.g., N.Y. State Attorney Gen., Labor 

Bureau, The Impact of Payroll Cards on Low-Wage 

Workers, available at http://www.ag.ny.gov/pdfs/

Pinched%20by%20Plastic.pdf. 

46See, e.g., http://paycard.americanpayroll.org/

compliance-regulations (listing the various State 

regulations that apply to payroll cards). 

47U.S. Gov’t Accountability Office, GAO–14–91, 

College Debit Cards Actions Needed to Address 

ATM Access, Student Choice and Transparency, at 

8 (Feb. 2014) (GAO 2014 College Card Report), 

available at http://www.gao.gov/assets/670/

660919.pdf. 

48 GAO 2014 College Card Report, at 9. 

49 Id. at 15. 

50U.S. Gov’t Accountability Office, GAO 

Highlights: Highlights of GAO–14–91, a Report to 

the Chairman, Committee on Health, Education, 

Labor, and Pension, U.S. Senate (Feb. 2014), 

available at http://www.gao.gov/assets/670/

660920.pdf. 

51 Id. 

52 78 FR 69612 (Nov. 20, 2013). 

53Mercator Advisory Grp., Tenth Annual U.S. 

Prepaid Cards Market Forecasts, 2013–2016, at 42– 

43 (Oct. 2013). 

54See e.g., https://www.ventrachicago.com/ (The 

city of Chicago’s mass transit card has reloadable 

open-loop features). See also http://www.septa.org/ 

key/ (The city of Philadelphia announced that its 

mass transit card will also have reloadable openloop features). 

55Treasury has established the Direct Express 

program for the distribution of government benefits 

such as Social Security payments. 

56See e.g., Nat’l Consumer Law Ctr., 2013 Survey 

of Unemployment Compensation Prepaid Cards, at 

7 (Jan. 2013), available at http://www.nclc.org/

issues/unemployment-compensation-prepaidcards.html (noting that 42 States offer some form of 

Continued 

card accounts.43 The bulletin reminded 

employers that they cannot require their 

employees to receive wages on a payroll 

card. It also explained some of the 

Regulation E protections that apply to 

payroll card accounts, such as those 

pertaining to fee disclosure, access to 

account history, limited liability for 

unauthorized use, and error resolution 

rights. Since the Bureau issued the 

bulletin, it understands that certain 

industry stakeholders have worked to 

develop industry standards 

incorporating and building upon the 

guidance given in it.44 Nevertheless, the 

Bureau believes that concerns persist as 

to whether and how employers and 

financial institutions are complying 

with the compulsory use provision and 

other provisions of Regulation E, as well 

as related State laws applicable to the 

distribution of wages.45 For example, 

employees may not always be aware of 

the ways in which they may receive 

their wages, because States may have 

differing and evolving requirements.46

The Bureau additionally believes that 

payroll card accounts raise disclosure 

issues beyond those addressed by its 

payroll card accounts guidance bulletin, 

discussed above. Employers may offer a 

payroll card account when an employee 

starts employment, and the issue of how 

the employee is to be paid is likely to 

be one among the many and varied 

human resource issues confronting the 

employee during orientation. An 

employee may be provided with a stack 

of forms to complete and may not have 

the time or opportunity to review them. 

It is also possible that the employee may 

be unaware that receiving wages via a 

payroll card account is optional, 

particularly if the employer does not 

present the options clearly. These forms 

the employee may receive from the 

employer may not always include all of 

the relevant information regarding the 

terms and conditions of the payroll card 

account, such as fees associated with 

the card and how cardholders can 

withdraw funds on the card. Separately, 

some have raised concerns about the 

extent to which payroll card providers 

share program revenue with employers 

and, if so, whether that revenue sharing 

has negative consequences for 

cardholders. 

Payroll cards are just one type of 

network-branded open-loop prepaid 

products consumers may receive from 

third parties that disburse funds to 

consumers by loading the funds onto 

such accounts. For example, institutions 

of higher education may partner with 

certain entities to disburse student 

financial aid proceeds into networkbranded open-loop prepaid products 

endorsed by those institutions. See 34 

CFR 668.164(c)(2) (setting forth that 

certain Federal student aid payments 

disbursed via ‘‘an account that underlies 

a stored-value card’’ is considered a 

direct payment to a student or parent). 

Like with payroll card accounts, some 

have raised concerns about revenue 

sharing in connection with prepaid 

cards provided to students. 

A 2014 Government Accountability 

Office (GAO) report found that of the 

U.S. colleges and universities 

participating in Federal student aid 

programs for the 2011–2012 school year 

that had agreements with financial firms 

to provide debit and prepaid card 

services for students, approximately 80 

percent of such agreements were for 

debit cards, with the remainder for 

prepaid cards.47 The report also stated 

that more than 80 percent of the schools 

identified in the report with card 

agreements indicated that students 

could use their cards to receive financial 

aid and other funds from the school.48

Further, the report found instances 

where certain third-party providers 

involved in college card programs work 

with a bank partner.49

Among other things, the GAO noted 

concerns about the fees on student debit 

and prepaid cards, as well as the lack of 

ATM access and the lack of the schools’ 

neutrality toward the card programs.50 It 

found instances in which schools 

appeared to encourage students to enroll 

in the school’s specific prepaid card 

program, rather than present neutral 

information about disbursement options 

for financial aid.51 Relatedly, the 

Department of Education is in the 

process of a negotiated rulemaking 

regarding the use of third-party entities 

to disburse Federal student aid, 

including those that may distribute 

funds via prepaid products.52

Further, the Bureau understands that 

prepaid cards are also used by some 

insurance providers to pay certain 

insurance claims such as claims related 

to a property or casualty loss.53 During 

outreach, some insurance providers 

informed the Bureau that, where 

permitted by State law, it is faster and 

more economical to provide workers 

compensation payments on prepaid 

cards relative to mailing paper checks. 

Additionally, after a natural disaster, the 

disbursement of funds from insurance 

claims onto prepaid cards may allow 

funds to be delivered to consumers that 

may be unable to use or access 

traditional checking or savings 

accounts. 

Similarly, taxpayers may direct tax 

refunds onto prepaid cards provided by 

tax preparers or government entities. 

These prepaid cards are typically openloop cards. Other disbursements onto 

prepaid cards include disbursement of 

mass transit or other commuting-related 

funds, which are typically onto 

restricted closed loop cards. However, 

the Bureau understands that new transit 

payment models are emerging, and 

these models tend to involve open-loop 

prepaid cards.54 Aid distributed by 

relief organizations or government 

agencies in response to natural disasters 

is usually loaded onto open-loop cards. 

In some of these cases, the cards may be 

reloaded by the entity that initially 

disbursed funds onto the card. 

Finally, government entities also 

distribute various funds onto prepaid 

products. In addition to distributing tax 

refunds onto such products, the Federal 

government and various State 

governments may use prepaid products 

to distribute government benefits such 

as Social Security Payments,55

unemployment insurance benefits,56


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prepaid card for distribution of employment 

compensation payments). 

57 Id. at 1. 

58See EFTA section 904(d)(2)(B); Regulation E 

§ 1005.15(a)(2). 

59See, e.g., Navy Cash/Marine Cash, http://

fms.treas.gov/navycash/index.html and Eagle Cash, 

http://fms.treas.gov/eaglecash/index.html. As 

discussed further below, the Navy Cash and Marine 

Cash products may have multiple ‘‘purses’’ such 

that one ‘‘purse’’ can only be used at a limited 

number of linked merchants (such as various places 

on a Naval vessel) while the other ‘‘purse’’ can be 

linked to a payment card network that provides 

global acceptance to unaffiliated merchants. 

60Aite Grp. LLC, Money Goes Mobile, (May 2014), 

available at http://www.aitegroup.com/report/

money-goes-mobile. 

61 Id. 

62See e.g., http://www.google.com/wallet/

index.html (last accessed on Oct. 28, 2014) (‘‘The 

Wallet Balance is the money in your Google Wallet 

. . . [money will be stored in the wallet]. [Use] your 

Wallet Balance to send money to friends [and shop], 

or transfer money to your bank account. You can 

also add money to your Wallet Balance . . . from 

a credit card, debit card or linked bank account.’’); 

see also, https://www.serve.com/ (last accessed on 

Oct. 28, 2014) (‘‘Use the American Express Serve 

Mobile App to check your balance and recent 

transactions, pay bills on the go, add checks, and 

send money to family or friends who have a Serve 

Account. Download the American Express Serve 

Mobile App for iOS or Android.’’). 

63See e.g., Visa Checkout Terms of Service, 

https://secure.checkout.visa.com/pages/

terms?country=US&locale=en (last accessed on Oct. 

28, 2014). 

64See e.g., Google Wallet Terms of Service, 

https://wallet.google.com/termsOfService? 

type=BUYER&gl=US (last accessed on Oct. 28, 

2014). 

65See e.g., Boost Mobile Wallet Terms of Service, 

(https://boostmobile.wipit.me/legal/terms.aspx (last 

accessed on Oct. 28, 2014). 

66As discussed further below, overdraft services 

evolved from ad hoc, discretionary programs in 

which financial institutions would sometimes cover 

particular transactions that would otherwise 

overdraw an account as a courtesy to the consumer 

child support payments, and other types 

of disbursements including needs-tested 

benefits. Needs-tested benefits include 

funds related to Temporary Assistance 

for Needy Families (TANF), Special 

Supplemental Nutrition Program for 

Women, Infants and Children (WIC) and 

the Supplemental Nutrition Assistance 

Program (SNAP). State and local 

government programs for distributing 

needs-tested benefits are typically 

referred to as electronic benefit (EBT) 

programs. Most States offer a choice 

between at least direct deposit to a 

traditional checking or savings account 

or a prepaid product for the receipt of 

unemployment insurance benefits. 

However, the Bureau understands that 

several States require the distribution of 

such benefits onto prepaid products.57

With respect to other government 

benefits, as noted below in the 

discussion of relevant law, Regulation E 

does not apply to EBT programs.58 In 

addition, Treasury’s Bureau of the Fiscal 

Service, on behalf of the United States 

military, provides both closed-loop and 

open-loop prepaid cards for use by 

servicemembers and contractors in the 

various branches of the armed forces.59

The features of and fees charged in 

connection with these cards may vary. 

The Bureau believes that as a general 

matter, prepaid products loaded by 

third parties present some of the same 

consumer protection issues as GPR 

cards such as the lack of clear 

disclosures about fees and other 

important terms and conditions, and the 

lack of opportunity for consumers to 

compare and evaluate different products 

before acceptance. Consumers may use 

these products as their primary 

transaction account, particularly when 

the product is loaded with all of the 

consumer’s incoming funds (e.g., wages, 

unemployment benefits, student loan 

proceeds, etc.). In accepting the product, 

a consumer may not fully grasp all of its 

fees and terms and how those fees and 

terms might impact the consumer over 

time. In addition and as previously 

noted, consumers may be offered these 

products in situations that make 

comparison shopping difficult. 

However, the Bureau believes that many 

prepaid accounts with funds loaded by 

third parties may present distinct set of 

issues as well. The Bureau understands 

many types of these accounts are 

distributed to very specific segments of 

consumers such as college-age students 

or very low-income consumers, and 

accordingly, there may be distinct 

consumer protection issues associated 

with these prepaid products. 

Digital Wallets 

In recent years, there has been 

increasing industry interest in 

developing ‘‘digital wallets’’ and 

‘‘mobile wallets.’’ A consumer may keep 

cash, debit and credit cards, GPR cards, 

and gift cards in a physical wallet or 

purse. Digital wallets have been 

marketed as a viable alternative to a 

physical wallet, because a number of 

digital wallets currently available can 

store one or more of the consumer’s 

payment credentials electronically.60

For example, a digital wallet may allow 

a consumer to store the consumer’s bank 

account, debit card, credit card, and/or 

prepaid card credentials in the wallet, 

which may be accessed by the consumer 

through a Web site. Digital wallets that 

a consumer could access using a mobile 

device such as a smartphone have been 

described as mobile wallets.61 Further, 

some, but not all, digital wallets 

currently available to consumers allow 

a consumer to store funds in it directly 

or by funding a prepaid product, and 

draw down the stored funds.62

Digital wallets have been marketed as 

allowing consumers to electronically 

transmit funds in multiple settings. 

Currently, digital wallets can be used by 

a consumer for online purchases,63

payments at brick-and-mortar retailers 

through, for example, contactless 

communication at the point of sale,64 as 

well as person-to-business (i.e. bill pay) 

and P2P transfers.65 The Bureau 

understands that there may be 

significant variations in how funds are 

held in digital wallets and how 

payments are processed by digital 

wallets and that payment processing by 

digital wallets is evolving quickly. For 

instance, some digital wallets provide 

methods for accessing the ACH system 

to make a payment. In this case, a 

consumer might use a digital wallet to 

pay for an online purchase, and the 

digital wallet facilitates the transfer of 

funds from the consumer’s checking 

account to fund the transaction. In other 

cases, the consumer’s funds are first 

transferred to the digital wallet either by 

the consumer or by the digital wallet 

provider, and then transferred to 

ultimate payee. For example, it may be 

possible for a consumer to maintain a 

positive balance in the wallet through 

transfers from sources such as a bank 

account, a credit, debit, or prepaid card, 

or a P2P transfer. The consumer’s digital 

wallet balance may be held in the name 

of the digital wallet provider in a pooled 

account that is not further divided into 

subaccounts that are held in the name 

of any individual consumer. 

A mobile wallet may act as a passthrough that enables consumers to pay 

for goods at a store using payment 

credentials for other accounts, such as 

credentials for a consumer’s credit card, 

debit, or prepaid card that the consumer 

has stored on the mobile wallet. For 

example, a consumer could use a mobile 

wallet on a smartphone to select the 

consumer’s debit card to fund a 

payment for a good or service, and then 

use near field communication to tap the 

phone at a point-of-sale terminal to pay. 

The Bureau expects that variations of 

digital wallets will continue to grow and 

observes that the methods described 

herein are a few of the funding options 

available in the current market. 

Credit Features, Overdraft Programs & 

Prepaid Products 

As currently offered and marketed, 

most prepaid products do not allow 

consumers to spend more money than is 

loaded onto the product. Although there 

are a few exceptions, most providers of 

prepaid products do not currently offer 

overdraft services,66 a linked line of 


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rather than return the transaction and subject the 

consumer to a non-sufficient-funds (NSF) fee, 

merchant fees, and other negative consequences 

from bounced checks. Overdraft services fees are 

imposed on a per transaction basis, and the 

financial institution takes the balance owed as soon 

as additional funds are deposited into the account. 

Further, as explained below, the Board exempted 

overdraft services from regulation under TILA and 

Regulation Z, as long as they are provided pursuant 

to an agreement that does not obligate the financial 

institution to cover any particular transaction. In 

addition, these programs are not typically subject to 

traditional underwriting processes used for other 

credit products. Under Regulation E, financial 

institutions must obtain an opt-in by the consumer 

before imposing overdraft fees on ATM and onetime point of sale transactions by debit card. See 

Regulation E, § 1005.17(b). 

67A linked line of credit is a separate line of 

credit that a financial institution ‘‘links’’ to a 

deposit account or prepaid product to draw funds 

automatically where transaction made using funds 

from the account or product would otherwise take 

the balance on the account or product negative. 

Such a credit feature is generally subject to interest 

rates, traditional credit underwriting, and the Truth 

in Lending Act and Regulation Z. Similarly, some 

financial institutions offer consumers an option to 

link their credit card to a deposit account to provide 

automatic ‘‘pulls’’ to cover transactions that would 

otherwise exceed the balance in the account. 

68A deposit advance product (DAP) is a smalldollar, short-term loan or line of credit that a 

financial institution makes available to a customer 

whose deposit account reflects recurring direct 

deposits. The customer obtains a loan, which is to 

be repaid from the proceeds of the next direct 

deposit. DAPs typically do not assess interest and 

are fee-based products. Repayments are typically 

collected from ensuing deposits, often in advance 

of the customer’s other bills. (See CFPB Whitepaper 

on Payday and Deposit Advance Products: Initial 

Data Findings, Apr. 30, 2013, see also OCC and 

FDIC Final Guidance on Supervisory Concerns and 

Expectations Regarding Deposit Advance Products, 

78 FR 70552, 70624 (Nov. 26, 2013). Publication of 

the Bureau’s White Paper and the guidance issued 

by the FDIC and OCC has caused many financial 

institutions to reevaluate their DAP programs. 

69For example, a financial institution could offer 

a product whereby consumers with a credit account 

access that account and ‘‘push’’ the credit into their 

prepaid accounts where it can be spent. 

70See, e.g., NBCPA, What are Prepaid Cards?, 

http://www.nbpca.com/en/What-Are-PrepaidCards/Prepaid-Card-Benefits.aspx (last visited Oct. 

28, 2014) (‘‘For many Americans, prepaid cards 

serve as a tool with which to more effectively 

budget their spending. With a prepaid card, 

consumers avoid the risk of over-spending or 

overdraft, thus avoiding the interest, fees and 

potential negative credit score implications of 

traditional credit cards. And for parents, prepaid 

cards provide tools to maintain control over their 

teens’ or college students’ spending.’’); see also 

Examining Issues in the Prepaid Card Market: 

Hearing before the Subcomm. On Fin. Inst. and 

Consumer Prot., S. Comm. on Banking, Housing and 

Urban Affairs, 112th Cong. 2 (2012) (Remarks of 

Dan Henry, Chief Executive Officer, NetSpend 

Holdings, Inc.) (‘‘Our customers are typically 

working Americans who want control. . . .’’). 

71 2014 Pew Survey, at 14 ex.12 (noting that the 

top two reasons consumers claim to use prepaid 

cards related to avoiding credit card debt (67 

percent) and helping them not spend more money 

than they actually have (66 percent). 

72 2014 Pew Survey, at 13–14. 

73 ICF Report, at 5. 

74 2014 Pew Survey, at 7–8 (noting both that 

‘‘Most prepaid card users who have had a checking 

account in the past have paid associated overdraft 

fees for debit card usage’’ and that ‘‘Among those 

prepaid card users who have ever had a bank 

account, 41 percent of them say they have closed 

or lost a checking account because of overdraft or 

bounced check fees’’). 

75 Id. at 8 (noting that one-third of prepaid 

consumers who have ever had a checking account 

say they have closed a bank checking account 

themselves because of overdraft or bounced check 

fees and 21 percent who say they have had a 

financial institution close their account because of 

overdraft or bounced check fees). 

76See ICF Report, at 5; 2014 Pew Survey, at 14 

ex.12 (noting that 72 percent of prepaid consumers 

say that a reason they have a prepaid card is to 

make purchases online and other places that do not 

accept cash). 77See In the Matter of MetaBank, Office of Thrift 

Supervision, Order No. CN 11–25 (July 15, 2011), 

available at http://www.occ.gov/static/ots/

enforcement/97744.pdf. 78See CFSI Prepaid Industry Scorecard (noting 

that only two in a survey of 18 GPR programs 

representing 25% of the market currently offers an 

opt-in overdraft service); CFPB Overdraft 

Whitepaper, at 14 (summarizing data showing that 

most banks and credit unions offer opt-in overdraft 

programs). Apart from actual overdraft programs, 

some prepaid programs, according to their terms 

and conditions, reserve the right to impose a fee for 

a negative balance on a prepaid account. (These 

programs’ agreements typically state that the 

cardholder is not permitted to spend beyond the 

balance in the prepaid account, but if circumstances 

were to occur that cause the balance to go negative, 

a fee will or may be imposed. Some agreements 

state that repeated attempts to spend beyond the 

card balance will or may result in the prepaid 

account being closed). Roughly 10 percent of 

reviewed agreements noted such a charge. 

credit,67 access to a deposit advance 

product 68 or other method of accessing 

credit in connection with a prepaid 

product.69 Instead, prepaid products, 

including many GPR cards, are actively 

marketed as ‘‘safe’’ alternatives to 

checking accounts with opt-in overdraft 

services, credit cards, or other credit 

options.70

As the Bureau observed above, it 

appears that a desire to avoid fee-based 

overdraft services motivates a sizeable 

portion of consumers to choose prepaid 

products, such as GPR cards, over 

checking accounts.71 Further, a slight 

majority of consumers that participated 

in the 2014 Pew Survey stated that one 

of the major reasons that they use 

prepaid products is that they help those 

consumers control their spending.72

Similarly, the Bureau’s own focus 

groups also found that many consumers 

choose prepaid products because they 

help them control their spending.73

Unlike deposit accounts with an 

overdraft feature or linked lines of 

credit, credit cards, and other credit 

products, consumers that use prepaid 

products without credit features (i.e., 

most prepaid consumers) cannot spend 

funds that have not been loaded into the 

account. 

It also appears that many consumers 

specifically seek to acquire prepaid 

products that do not offer overdraft 

services or credit features because they 

have had negative experiences with 

credit products, including checking 

accounts with overdraft features or want 

to avoid fees related to such products. 

For example, the 2014 Pew Survey 

found that many prepaid consumers 

previously had a checking account and 

either lost that account (due to failure to 

repay overdrafts or related issues) or 

gave up the checking account due to 

overdraft or bounced check fees.74

Relatedly, prepaid products are often 

used by consumers who cannot obtain 

a checking account due to bad credit or 

other issues.75 GPR cards—which are 

sometimes marketed as involving ‘‘no 

credit check’’—provide consumers with 

access to electronic payment networks, 

the ability to make online purchases, 

and increased security and convenience 

over alternatives such as cash.76 Prepaid 

consumers often are unable to open 

credit card accounts and cannot get a 

traditional checking account with a 

debit card due to negative reports with 

credit reporting agencies focusing on 

checking-account related credit issues. 

Apart from consumers’ reasons for 

favoring prepaid products, regulatory 

factors may also have discouraged 

prepaid product providers from offering 

overdraft services or credit features in 

connection with their products. The 

Bureau understands that some prepaid 

product issuers have received guidance 

from their prudential regulators that has 

deterred those financial institutions 

from allowing prepaid products they 

issue to offer overdraft services or credit 

features. Relatedly, the Bureau believes 

that a 2011 Office of Thrift Supervision 

enforcement action regarding a linked 

deposit advance feature may also have 

had a chilling effect on the growth of 

DAPs.77 Finally, while a number of 

industry commenters to the Bureau’s 

Advance Notice of Proposed 

Rulemaking (Prepaid ANPR) expressed 

interest in offering overdraft services or 

credit features in connection with 

prepaid products, some industry 

commenters also expressed their 

reluctance to proceed until there is 

greater certainty as to whether this 

rulemaking would alter the permissible 

bounds of such a program. 

The Bureau understands that the only 

credit features being offered on prepaid 

accounts currently are structured as 

overdraft services.78 To date, overdraft 

services on prepaid accounts have been 

generally structured similar to overdraft 

services offered by financial institutions 

on checking accounts, but in some 

ways, are more consumer-friendly. For 

example, the programs charge a pertransaction fee each time the consumer 

incurs an overdraft (e.g., one program 


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79Bureau staff determined the median figure for 

checking account overdraft fees through an analysis 

of the overdraft fees charged by the largest 50 U.S. 

banks ranked by consumer checking balances. 80According to information supplied to the 

Bureau as part of its large bank overdraft study and 

reported in its Overdraft White Paper, overdraft and 

NSF-related fees from consumer checking accounts 

constituted 61 percent of consumer and 37 percent 

of total deposit account service charges earned by 

study banks in 2011. If aggregate study bank fee 

revenue ratios could be extrapolated to all FDICinsured institutions, this would imply the banking 

industry earned roughly $12.6 billion in consumer 

NSF and overdraft fees in 2011. See CFPB Overdraft 

White Paper, at 14–15. 

81See Cathy Corby Parker, Is ‘‘What’s Old New 

Again’’ for Financial Institutions in Prepaid? (Aug. 

2012), available at https://www.aba.com/Tools/

Offers/Documents/ 

What’s%20Old%20Is%20New%20Again

%20White%20Paper.pdf. 

82For example, in 2013 one major program 

manager derived approximately 32 percent of its 

operating revenue from cash-reload fees and 30 

percent from interchange fees. See Green Dot Corp., 

2013 Annual Report, at 30 (2014) available at 

http://phx.corporate-ir.net/phoenix.zhtml?

c=235286&p=irol-reportsAnnual. 

83The Bureau understands that prepaid product 

providers that offer overdraft services typically do 

so with respect to both their GPR cards and payroll 

card accounts, to the extent they offer both 

products. 

84The Bureau found in its Study of Prepaid 

Account Agreements that some programs’ 

agreements state that while they do not offer formal 

overdraft services, they will impose negative 

balance or other similar fees for transactions that 

may take an account negative despite generally not 

permitting such activity. See Study of Prepaid 

Account Agreements, at 24–25. The Bureau does 

not believe such fees are typically charged. 

85 75 FR 80335 (Dec. 22, 2010). 

86 76 FR 45403 (July 29, 2011). 

87FDIC General Counsel Opinion No. 8, 

Insurability of Funds Underlying Stored Value 

Cards and Other Nontraditional Access 

Mechanisms, 73 FR 67155, 67157 (Nov. 13, 2008) 

(FDIC 2008 General Counsel Opinion). 

88Office of the Comptroller of Currency, OCC 

Bulletin 2011–27, Prepaid Access Programs, Risk 

Management Guidance and Sound Practices (June 

28, 2011), available at http://www.occ.gov/newsissuances/bulletins/2011/bulletin-2011-27.html. 

charges $15) although the fee tends to be 

lower than fees typically charged for 

checking accounts (median fee as of July 

2014 is $35).79 In addition, issuers of 

certain prepaid products with overdraft 

services will waive the overdraft fee if 

the consumer repays the overdraft 

quickly (e.g., within 24 hours) or if the 

overdraft is only for a nominal amount 

(e.g., $5 or $10). Further, these terms 

and conditions also limit the number of 

overdrafts that will be permitted in a 

given month and the amount by which 

the account balance can go negative, 

and contain ‘‘cooling off’’ periods after 

a consumer has incurred more than a 

certain number of overdrafts. During the 

cooling off period, the consumer is 

typically prohibited from using the 

overdraft service. 

With respect to the issue of fees, 

revenue from overdraft services does not 

appear to have significantly influenced 

the pricing structure of prepaid 

products in the same way that overdraft 

services have influenced traditional 

checking accounts. Indeed, as discussed 

above, overdraft services offered in 

connection with prepaid products are 

relatively rare, and fees are relatively 

modest compared to similar fees 

associated with checking account 

overdraft programs. As discussed in 

greater detail in the section-by-section 

analysis below, as a result of several 

regulatory exemptions discussed below, 

the Bureau believes that checking 

account overdraft programs have 

evolved from courtesy programs under 

which financial institutions would 

decide on a manual, ad hoc basis to 

cover particular transactions and help 

consumers avoid negative consequences 

to automated programs that are the 

source of as much as two-thirds of 

financial institutions’ deposit account 

revenue.80 As a result, depository 

institutions and credit unions have 

developed checking accounts to have 

low (or sometimes no) up-front costs, to 

add services such as online bill pay 

(including not only electronic payments 

through the ACH network but also 

manual generation of checks authorized 

through the bank or credit union’s online bill pay portal) at no additional 

cost, and to rely on ‘‘back end’’ fees 

such as per-transaction overdraft fees 

and NSF fees to maintain profitability. 

While some prepaid products may also 

have low or no upfront fees associated 

with them, the Bureau believes that this 

is largely due to the fact that as a general 

matter, fixed costs for prepaid products 

are substantially lower than similar 

costs for many checking accounts.81

Moreover, financial institutions that 

issue prepaid accounts typically do not 

earn their revenue from ‘‘back-end’’ 

overdraft fees or NSF fees. Instead, they 

earn revenue from other types of fees, 

such as ATM fees, and interchange fees 

collected from use of a prepaid account 

on a payment network.82

As discussed in greater detail below, 

certain prepaid products, such as 

payroll card accounts and prepaid 

accounts that receive Federal payments, 

must comply with Regulation E’s 

overdraft provisions. However, because 

many prepaid products are not now 

currently subject to Regulation E, they 

may not be required to comply with its 

provisions specific to overdraft services. 

Nonetheless, the Bureau understands 

that program managers of prepaid 

products with overdraft services or 

credit features have structured their 

products to comply with Regulation E’s 

rules regarding overdraft services. 

Specifically, the Bureau understands 

that overdraft programs on GPR cards 

and payroll card accounts typically 

provide a disclosure similar to Model 

Form A–9 in appendix A to Regulation 

E.83 This model form contains 

disclosures that require a consumer to 

opt-in to the overdraft service before a 

financial institution may charge the 

consumer a fee for a point-of-sale debit 

or ATM transaction that results in an 

overdraft of a consumer’s account.84

The Bureau understands that prepaid 

products that are associated with 

overdraft services or credit features 

generally offer such services only to 

those consumers that meet specified 

criteria, such as evidence of recurring 

deposits over a certain dollar amount. 

These recurring deposits presumably 

allow the financial institution to have 

some confidence that there will be 

incoming funds of adequate amounts to 

repay the debt. Further, the Bureau 

understands that the terms and 

conditions of prepaid product overdraft 

programs typically require that the next 

deposit of funds into the prepaid 

product—through either recurring 

deposits or cash reloads—be used to 

repay the overdraft, or they will claim 

such funds for the purpose of repaying 

the overdraft. 

B. Existing Regulation of Prepaid 

Products 

There are several Federal regulatory 

regimes, including those regarding 

consumer protection; receipt of Federal 

payments; interchange; and 

international money laundering, 

terrorist financing, and other financial 

crimes that apply to some or all types 

of prepaid products. In addition to 

EFTA, its implementing regulation, 

Regulation E, and related guidance, 

other relevant regulations include 

Treasury’s Financial Management 

Service’s rule on the receipt of Federal 

payments on prepaid cards; 85 the 

Board’s Regulation II on debit card 

interchange and routing (12 CFR part 

235); and FinCEN’s prepaid access 

rule.86

Prudential regulators have also issued 

guidance about the application of their 

regulations to prepaid products, 

program managers, and financial 

institutions that issue prepaid products. 

For example, the FDIC has issued 

guidance regarding pass-through deposit 

insurance for prepaid accounts.87 The 

Office of the Comptroller of the 

Currency (OCC) has published a 

guidance bulletin to provide guidance to 

national banks for assessing and 

managing the risks associated with 

prepaid access programs.88 However, as 


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89See Public Law 95–630; 92 Stat. 3728 (1978). 

90Public Law 111–203, section 1084, 124 Stat. 

2081 (2010) (codified at 12 U.S.C. 1693). 

91These provisions were originally adopted as 12 

CFR part 205 but, upon transfer of authority in the 

Dodd-Frank Act to implement Regulation E to the 

Bureau were renumbered as 12 CFR part 1005. 76 

FR 81020 (Dec. 27, 2011). Unless otherwise noted, 

historical provisions noted described as residing in 

12 CFR part 1005 originally were contained in 12 

CFR part 205. 

92 44 FR 18468, 18480 (Mar. 28, 1979). 

93An access device is a card, code, or other 

means of access to a consumer’s account, or any 

combination thereof, that may be used by the 

consumer to initiate EFTs. § 1005.2(a)(1). 94 78 FR 18221 (Mar. 26, 2013). 

95 59 FR 10678 (Mar. 7, 1994). 

96Public Law 104–193, 110 Stat. 2105 (1996). 

97 62 FR 3242, 3243 (Jan. 22, 1997). 

98 62 FR 43467 (Aug. 14, 1997). 

99 61 FR 19696 (May 2, 1996). 

discussed below, the Bureau believes 

that there are gaps in the existing 

Federal regulatory regimes that cause 

certain prepaid products not to receive 

full consumer protections, in particular 

under Regulation E. In addition to 

Federal regulations that apply to 

prepaid products, the Bureau also 

discusses below some State consumer 

protection laws and other regulations 

specific to prepaid products. 

1. The Electronic Fund Transfer Act and 

Related Provisions in Regulation E Core 

Provisions of EFTA and Regulation E 

Congress enacted EFTA in 1978 with 

the purpose of ‘‘provid[ing] a basic 

framework establishing the rights, 

liabilities, and responsibilities of 

participants in electronic fund transfer 

systems.’’ However, EFTA’s primary 

objective is ‘‘the provision of individual 

consumer rights.’’ 89 Congress also 

empowered the Board to promulgate 

regulations implementing EFTA. EFTA 

section 904(a). With the adoption of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act), authority to implement most of 

EFTA transferred to the Bureau.90 See 

Dodd-Frank Act sections 1061(b) and 

1084; 12 U.S.C. 5581(b); 15 U.S.C. 1693a 

et seq. 

The regulations first promulgated by 

the Board to implement EFTA now 

reside in subpart A of Regulation E, 12 

CFR part 1005.91 These rules provide a 

broad suite of protections to consumers 

who make electronic fund transfers 

(EFTs). An EFT is any transfer of funds 

initiated through an electronic terminal, 

telephone, computer, or magnetic tape 

for the purpose of ordering, instructing, 

or authorizing a financial institution to 

debit or credit a consumer’s account. 

§ 1005.3(b)(1). Regulation E also 

provides protections for accounts from 

which consumers can make EFTs. In its 

initial rulemaking to implement EFTA, 

the Board developed a broad definition 

of ‘‘account,’’ which closely mirrored 

the definition of ‘‘account’’ in EFTA.92

The definition provides that, subject to 

certain specific exceptions, an account 

is a demand deposit (checking), savings, 

or other consumer asset account (other 

than an occasional or incidental credit 

balance in a credit plan) held directly or 

indirectly by a financial institution and 

established primarily for personal, 

family, or household purposes. 

§ 1005.2(b)(1). 

For covered accounts, Regulation E 

mandates that consumers receive certain 

initial disclosures, in writing and in a 

form that the consumer can keep. 

§ 1005.4(a)(1). As applicable, the initial 

disclosures must include, among other 

things, disclosures regarding a 

consumer’s liability for unauthorized 

EFTs, an error resolution notice, contact 

information for the financial institution 

providing the account, the types of 

transfers a consumer may make and any 

limitations on the frequency and dollar 

amount of transfers, and the fees 

associated with making EFTs. See 

generally § 1005.7(b). Regulation E also 

sets forth substantive provisions on 

error resolution and impose limits on a 

consumer’s liability for unauthorized 

EFTs. See §§ 1005.6 and 1005.11. 

Moreover, Regulation E contains, among 

other things, provisions specific to 

periodic statements that generally must 

be provided in writing (§ 1005.9(b)), the 

issuance of access devices (§ 1005.5),93

preauthorized EFTs and compulsory use 

(§ 1005.10), requirements for overdraft 

services (§ 1005.17), and ATM 

disclosures (§ 1005.16). 

As discussed above, the Dodd-Frank 

Act transferred authority to implement 

most of EFTA from the Board to the 

Bureau. Since assuming the transferred 

authority, the Bureau has amended 

Regulation E in two substantive 

respects. First, as discussed in more 

detail in the section-by-section analysis 

below, the Bureau added consumer 

protections to Regulation E for certain 

international fund transfers. 12 CFR 

1005.30 et seq. Additionally, the Bureau 

amended Regulation E with respect to 

certain rules pertaining to ATM fee 

notices.94 However, before authority 

transferred from the Board to the 

Bureau, the Board had revised 

Regulation E on multiple occasions to 

add, among other things, protections for 

products used for the electronic 

distribution of government benefits, 

payroll card accounts, gift cards, and 

gift certificates. The Board’s 

amendments to Regulation E to expand 

coverage to these additional account 

types are discussed below. 

Amendments to Regulation E Regarding 

Additional Account Types 

In 1994, the Board amended 

Regulation E to extend Regulation E’s 

protections to accounts used for the 

electronic distribution of government 

benefits in what was then 12 CFR 

205.15 (1994 EBT Rule).95 After the 

Board finalized the 1994 EBT Rule, 

Congress limited the application of 

EFTA and Regulation E with respect to 

State and local electronic benefit 

transfer programs to only those 

programs that are ‘‘non-needs tested,’’ 

when it enacted the Personal 

Responsibility and Work Opportunity 

Reconciliation Act of 1996, a 

comprehensive welfare reform law.96

The enactment of the statute 

necessitated a change to the 1994 EBT 

Rule to exempt needs-tested government 

benefit programs established or 

administered under State or local law 

(e.g., benefits such as those provided 

under SNAP and the Aid to Families 

with Dependent Children program). As 

the Board explained at the time, the 

revision to EFTA was ‘‘enacted by the 

Congress at the urging of State officials, 

who expressed concern about the costs 

of compliance with EFTA and 

Regulation E. In particular, the States 

believed that EFTA provisions limiting 

a recipient’s liability for unauthorized 

transfers could raise serious budgetary 

problems at the [S]tate level.’’ 97 As a 

result, the Board ultimately adopted a 

rule exempting EBT programs 

established or administered by State or 

local government agencies from 

Regulation E. However, all accounts 

used to distribute benefits for Federallyadministered programs (including 

Federal needs-tested programs) and 

non-needs tested State and local 

government benefit programs, such as 

employment-related ones, remained 

covered by Regulation E.98

When the Board resumed rulemaking 

after enactment of the welfare reform 

legislation, it also took notice that 

prepaid cards (at the time referred to as 

stored-value cards) were beginning to be 

used by more consumers. The Board 

sought comment on whether to adopt 

rules specific to prepaid financial 

products (other than government benefit 

accounts) pursuant to its authority 

under EFTA (1996 Stored-Value 

Proposal).99 The Board explained that 

the facts, as it understood them, 

supported a determination to include 

stored-value accounts as accounts under 

Regulation E. Among the provisions 

considered in the 1996 Stored-Value 

Proposal, the Board proposed to extend 

Regulation E’s error resolution 


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100Public Law 104–208, 110 Stat. 3009 (1996). 

101Bd. of Governors of the Fed. Reserve Sys., 

Report to Congress on the Application of the 

Electronic Fund Transfer Act to Electronic StoredValue Products, at 75 (Mar. 1997), available at 

http://www.Federalreserve.gov/boarddocs/

rptcongress/efta_rpt.pdf. Notably, the products 

examined by the Board in this report differ from 

most prepaid products in use today. 

102 Id. 

103 69 FR 55996 (Sept. 17, 2004). 

104 71 FR 51437, 51438 (Aug. 30, 2006). 

105 71 FR 51437, 51441 (Aug 30, 2006). 

106 71 FR 1473, 1475 (Jan. 10, 2006). 

107 Id. 

108Public Law 111–24, 123 Stat. 1734 (2009). 

109 75 FR 16580 (Apr. 1, 2010). 

provisions to stored-value accounts and 

provide a periodic statement alternative 

for such accounts similar to what was 

adopted for government benefit cards in 

the 1994 EBT Rule. In the proposal, the 

Board noted pending legislation in 

Congress that would address storedvalue cards. H.R. 2520, 104th Cong., 

§ 443; S. 650, 104th Cong., § 601 (1995). 

Ultimately, Congress directed the 

Board to conduct a study to evaluate 

whether provisions of EFTA could be 

applied to stored-value products 

without adversely affecting the cost, 

development, and operation of such 

products.100 The Board concluded in a 

March 1997 report that: 

[G]iven the limited experience [at that 

time] with electronic stored–value products 

to date, it is difficult to predict whether the 

benefits to consumers from any particular 

Regulation E provision would outweigh the 

corresponding costs of compliance. . . . 

[F]ull application of Regulation E would 

likely impose substantial operating and 

opportunity costs of compliance. Partial 

application of Regulation E would be less 

burdensome than full application but, 

depending on the details, could still impose 

significant operating and opportunity costs 

for some electronic stored-value products.101

The Board ultimately did not finalize 

the 1996 Stored-Value Proposal. In the 

report, it concluded that the market was 

evolving rapidly and was not yet ripe 

for regulation.102

The Board next considered changes to 

Regulation E with respect to prepaid 

products in 2004, when it proposed 

amendments to Regulation E to extend 

it to payroll card accounts established 

by an employer for providing an 

employee’s compensation on a regular 

basis.103 The Board concluded that 

extending a modified form of Regulation 

E protections was warranted for payroll 

card accounts because they are often 

used as account substitutes. However, as 

discussed in greater detail below, yet 

again, the Board decided not to extend 

such protections to other prepaid 

products such as general-use prepaid 

cards, because it concluded that 

consumers used such cards in many 

different ways. 

In its final rule, the Board included 

payroll card accounts within the 

definition of account in § 1005.2(b) 

(Payroll Card Rule).104 The Board also 

established provisions in Regulation E 

specific to payroll card accounts that 

modified certain Regulation E 

provisions as the Board deemed 

appropriate. As noted above, Regulation 

E generally requires financial 

institutions to provide periodic 

statements in writing. See § 1005.9(b). 

The Board allowed providers of payroll 

card accounts to avoid this requirement, 

if the institution makes available to the 

consumer: (1) The account balance, 

through a readily available telephone 

line; (2) an electronic history of account 

transactions that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)); 

and (3) a written history of account 

transactions that is provided promptly 

in response to an oral or written request 

and that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)). 

See § 1005.18(b). Related provisions in 

§ 1005.18(c) modify other requirements 

of Regulation E with respect to payroll 

card accounts. They include 

modification related to the requirements 

for initial disclosures, annual error 

resolution notices (otherwise required 

by § 1005.8(b)), and error resolution and 

limitations on liability, in recognition of 

the modified periodic statement 

requirement. 

As noted above, in adopting the 

Payroll Card Rule, the Board considered 

whether also to include GPR cards 

within Regulation E. The Board 

ultimately concluded that, as of 2006, it 

was premature to do so. In its view of 

the marketplace at that time, the Board 

noted that consumers did not often use 

other prepaid products such as generaluse prepaid cards in the same way that 

they used payroll card accounts. The 

Board stated that ‘‘[F]or payroll card 

accounts that are established through an 

employer, there is a greater likelihood 

[than for general-use prepaid cards] that 

the account will serve as a consumer’s 

principal transaction account and hold 

significant funds for an extended period 

of time.’’ 105

Similarly, in an earlier interim final 

rule that established that payroll card 

accounts are covered accounts under 

Regulation E, the Board expressed its 

belief that to the extent that consumers 

use general-use prepaid cards like gift 

cards, ‘‘consumers would derive little 

benefit from receiving full Regulation E 

protections for a card that may only be 

used on a limited, short-term basis and 

which may hold minimal funds, while 

the costs of providing Regulation E 

initial disclosures, periodic statements, 

and error resolution rights would be 

quite significant for the issuer.’’ 106 It 

also noted that GPR cards are ‘‘generally 

designed to make one-time or a limited 

number of payments to consumers and 

are not intended to be used on a longterm basis.’’ 107

In 2009, Congress enacted the Credit 

Card Accountability Responsibility and 

Disclosure Act of 2009 (Credit CARD 

Act).108 Among other provisions, the 

Credit CARD Act instructed the Board to 

promulgate new rules regarding 

expiration dates and dormancy or 

inactivity fees for gift cards, gift 

certificates, and certain types of generaluse prepaid cards that are marketed or 

labeled as gift cards. The statute 

generally excluded general-use prepaid 

cards that are reloadable and not 

marketed or labeled as a gift card or gift 

certificate. Credit CARD Act section 

401; EFTA section 915. In 2010, the 

Board issued the resulting 

implementing regulations, set forth in 

§ 1005.20 of current Regulation E (Gift 

Card Rule).109

Following the Credit CARD Act, the 

Gift Card Rule only covers certain 

general-use prepaid cards. Under the 

rule, covered general-use prepaid cards 

are those that are non-reloadable cards 

or that are reloadable and marketed or 

sold as a gift card. See § 1005.20(a)(3) 

(definition of a ‘‘general-use prepaid 

card’’). Moreover, like the statute, the 

Gift Card Rule excludes those generaluse prepaid cards that are reloadable 

and not marketed or labeled as a gift 

card or gift certificate. § 1005.20(b)(2). 

For covered prepaid products, the Gift 

Card Rule requires the disclosure of 

certain fees and restricts a person’s 

ability to impose dormancy, inactivity, 

or service fees for certain prepaid 

products, primarily gift cards. 

§ 1005.20(d) and (f). Additionally, 

among other things, the Gift Card Rule 

generally prohibits the sale or issuance 

of covered prepaid products that have 

an expiration date of less than five 

years. § 1005.20(e). In adopting the Gift 

Card Rule, the Board did not apply the 

majority of Regulation E’s protections, 

including provisions regarding periodic 

statements, liability for unauthorized 

transactions, and error resolution to 

covered prepaid products. However, 

Congress explicitly gave the Board the 

authority to do so. Credit CARD Act 

section 401; EFTA section 915(d)(1). 


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110 75 FR 80335 (Dec. 22, 2010). Prior to the 

effective date of the FMS Rule, prepaid cards (other 

than those issued under FMS-established programs) 

were not eligible to receive Federal payments. 

111 77 FR 30923 (May 24, 2012). 

112 In issuing the FMS Rule, Treasury noted that 

it: 

[B]elieves that a number of prepaid cards already 

provide most, though not necessarily all, of the 

payroll card protections to cardholders. It is our 

expectation that some issuers of existing prepaid 

cards will choose to modify the terms and 

conditions of the card accounts to include all of the 

payroll card protections to cardholders, so that their 

cards will be eligible to receive Federal payments. 

We also anticipate that as new prepaid card 

programs are developed, issuers seeking to make 

the cards available to Federal payment recipients 

will structure their cards to incorporate Regulation 

E’s payroll card protections. 

75 FR 80335, 80338 (Dec. 22, 2010). 

113See, e.g., http://www.fdic.gov/deposit/

deposits/dis/. 

114See, e.g., http://www.ncua.gov/DataApps/

Pages/SI-NCUA.aspx. 

115FDIC General Counsel Opinion No. 8, 

Insurability of Funds Underlying Stored Value 

Cards and Other Nontraditional Access 

Mechanisms, 73 FR 67155, 67157 (Nov. 13, 2008), 

internal citations omitted. 

116The amendment is known as ‘‘The Durbin 

Amendment,’’ after U.S. Senator Richard Durbin of 

Illinois, who was the amendment’s chief sponsor. 

See, e.g., David Morrison, Durbin Amendment 

Lawsuit Unresolved as 2013 Winds Down, Credit 

Union Times Magazine, Dec. 18, 2013, available at 

http://www.cutimes.com/2013/12/18/durbinamendment-lawsuit-unresolved-as-2013-winds; see 

also Zhu Wang, Debit Card Interchange Fee 

Regulation: Some Assessments and Considerations, 

98 Econ. Q. 159 (2012) available at https://

www.richmondfed.org/publications/research/

economic_quarterly/2012/q3/pdf/wang.pdf. 

2. FMS Regulations of the Treasury 

Department 

The Treasury Financial Management 

Service (FMS), now part of Treasury’s 

Bureau of the Fiscal Service, manages 

all Federal payments. In 2010, it 

promulgated an interim final rule that 

permitted delivery of Federal payment 

to prepaid cards (the FMS Rule).110

Among other things, the FMS Rule 

provides that for a prepaid card to be 

eligible to receive Federal payments, the 

card account must be held at an insured 

financial institution. Additionally, the 

card account must be set up to meet the 

requirements for FDIC or NCUSIF passthrough deposit or share insurance, as 

discussed in greater detail below. 

Additionally, the card account must not 

have an attached line of credit or loan 

feature that triggers automatic 

repayment from the card account. 

Moreover, the card account issuer must 

comply with all of the requirements, 

and provide the cardholder with all of 

the consumer protections, that apply to 

payroll card accounts under Regulation 

E. 31 CFR 210(b)(5)(i). 

Based on Bureau outreach including 

discussions with industry participants, 

comment letters received in response to 

the Prepaid ANPR,111 as well as a 

review of numerous prepaid products’ 

terms and conditions, discussed in more 

detail below, the Bureau believes that 

many providers currently comply with 

the FMS Rule for all of their prepaid 

products, including those not receiving 

Federal payments. The Bureau further 

believes that to comply with the FMS 

Rule, many prepaid product providers 

had to adjust their systems and 

programs.112 For example, to the extent 

that a provider did not maintain 

procedures for resolving errors with 

respect to the prepaid products it 

offered (or maintained procedures 

different from what Regulation E 

requires), the provider had to either 

adjust its processes to provide these 

protections or ensure that their prepaid 

products do not receive Federal 

payments. 

3. Pass-Through Deposit Insurance 

The FDIC, among other things, 

protects funds placed by depositors in 

insured depository institutions. FDIC 

insurance protects deposit accounts, 

including checking and savings 

accounts, money market deposit 

accounts and certificates of deposit 

against loss up to $250,000 per 

depositor, per insured depository 

institution, within each account 

ownership category (e.g., for individual 

owners, co-owners, trust beneficiaries, 

and the like).113 The NCUSIF plays a 

similar role for insured credit unions.114

As noted above, the Bureau 

understands that funds loaded onto 

prepaid products are typically held in 

pooled accounts at depository 

institutions or credit unions. Both the 

FDIC and NCUA have special rules, 

discussed below, regarding how such 

accounts may qualify for, as applicable, 

FDIC or NCUSIF pass-through 

insurance. The Bureau believes that 

provided these requirements are met, 

most prepaid products are eligible for 

FDIC (or NCUSIF) pass-through deposit 

(or share) insurance. 

With respect to the FDIC’s rules for 

determining the ownership of deposits 

placed at insured depository institutions 

by agents or custodians of the true 

holder of the funds, its 2008 General 

Counsel Opinion No. 8 provides that 

FDIC’s deposit insurance coverage will 

‘‘pass through’’ the custodian to the 

underlying individual owners of the 

deposits in the event of failure of an 

insured depository institution, provided 

that three specific criteria are met. 

Those criteria are as follows. First, the 

account records of the insured 

depository institution must disclose the 

existence of the agency or custodial 

relationship. This requirement can be 

satisfied by opening the account under 

a title such as the following: ‘‘ABC 

Company as Custodian for 

Cardholders.’’ Second, the records of the 

insured depository institution or records 

maintained by the custodian or other 

party must disclose the identities of the 

actual owners and the amount owned by 

each such owner. Third, the funds in 

the account actually must be owned 

(under the agreements among the parties 

or applicable law) by the purported 

owners and not by the custodian (or 

other party).115

The NCUA’s regulations similarly 

state that: 

[I]f the account records of an insured credit 

union disclose the existence of a relationship 

which may provide a basis for additional 

insurance, the details of the relationship and 

the interest of other parties in the account 

must be ascertainable either from the records 

of the credit union or the records of the 

member maintained in good faith and in the 

regular course of business. 

12 CFR 745.2(c)(2). NCUA regulations 

governing share insurance for specific 

types of accounts provide additional 

details. For example, provisions 

governing retirement and other 

employee benefit plan accounts 

specifically address pass-through 

insurance, stating that ‘‘[a]ny shares of 

an employee benefit plan in an insured 

credit union shall be insured on a ‘passthrough’ basis, in the amount of up to 

the [Standard Maximum Share 

Insurance Amount] for the noncontingent interest of each plan 

participant, in accordance with § 745.2 

of this part.’’ 12 CFR 745.9–2(a); see 

also, e.g., 12 CFR 745.3, 745.4, 745.5, 

745.8, 745.9–1. 

4. Interchange and the Board’s 

Regulation II 

Section 1075 of the Dodd-Frank Act 

added new section 920 to EFTA 

regarding debit card interchange and 

amended EFTA section 904(a) to give 

the Board sole authority to prescribe 

rules to carry out the purposes of 

section 920.116 It contains several 

provisions related to debit cards and 

electronic debit transactions. EFTA 

section 920(a)(2) requires that the 

amount of any interchange fee that an 

issuer of debit cards receives or charges 

with respect to an electronic debit 

transaction be reasonable and 

proportional to the cost incurred by the 

issuer with respect to the transaction. It 

directs the Board to establish standards 

for assessing whether the amount of any 

interchange fee is reasonable and 


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117 76 FR 43394 (July 20, 2011); 76 FR 43478 (July 

20, 2011); amended by 77 FR 46258 (Aug. 3, 2012). 

118 76 FR 45403 (July 29, 2011). 

119 76 FR 45403, 45419 (July 29, 2011). 

120The Illinois law defines ‘‘general use 

reloadable card’’ as: 

[A] card, code, or other access device that is: (1) 

Issued on a prepaid basis primarily for personal, 

family, or household purposes to a consumer in a 

specified amount in exchange for payment; (2) 

issued under an agreement containing terms and 

conditions that permit funds to be added to the 

card, code, or other device after the initial purchase 

or issuance, including a temporary non-reloadable 

card issued solely in connection with a general use 

reloadable card, code, or other device; and (3) not 

marketed or labeled as a gift card or gift certificate; 

and (4) redeemable upon presentation at multiple, 

unaffiliated merchants for goods or services or 

usable at automated teller machines. 

205 ILCS 616/10. 

121See, e.g., Pew Charitable Trusts, Imperfect 

Protection—Using Money Transmitter Laws to 

Insure Prepaid Cards (Mar. 2013). 

proportional to the cost incurred by the 

issuer. However, as discussed below, 

there are a few exemptions from the 

limitation on interchange fees that an 

issuer may receive from or charge to a 

merchant. 

EFTA section 920(c) sets forth 

definitions that apply solely for the 

purposes of EFTA section 920. Section 

920(c)(5) defines an electronic debit 

transaction as ‘‘a transaction in which a 

person uses a debit card.’’ Additionally, 

section 920(c)(2) defines debit card to 

include ‘‘a general-use prepaid card, as 

that term is defined in section 

915(a)(2)(A),’’ which is the Credit CARD 

Act’s definition of general-use prepaid 

card. Accordingly, interchange 

transaction fees for transactions made 

with general-use prepaid cards (as 

defined under the Credit CARD Act) 

would be subject to the debit card 

interchange fee restrictions set forth in 

EFTA section 920(a). 

As noted above, EFTA section 920(a) 

provides certain exemptions from the 

interchange fee limitations for certain 

cards. Section 920(a)(7)(A) provides 

exemptions from the fee restrictions for 

general-use prepaid (and debit) cards 

provided to a consumer pursuant to 

government-administered payment 

programs and for certain general 

purpose reloadable prepaid cards. In 

addition, there is a blanket exemption 

from the interchange fee limitations for 

cards of issuers with total assets of less 

than $10 billion. EFTA section 

920(a)(6). Thus, interchange fees for 

transactions made with these prepaid 

cards meeting the criteria for the 

statutory exemptions are generally not 

subject to the fee restrictions of EFTA 

section 920(a). However, EFTA section 

920(a)(7)(B) provides that after July 21, 

2012, interchange fees for transactions 

made with prepaid cards that receive 

the exemption set forth in EFTA section 

920(a)(7)(A) are nonetheless limited by 

the Act’s interchange fee restrictions if 

certain fees such as an overdraft fee may 

be charged with respect to the card. The 

exemption for interchange fees of cards 

of issuers with total assets below $10 

billion is not subject to section 

920(a)(7)(B). In July 2011, the Board 

promulgated Regulation II (12 CFR part 

235) to implement EFTA section 920. 

The provisions regarding debit card 

interchange fee restrictions became 

effective as of October 1 of that year.117

5. FinCEN Rules 

FinCEN also regulates prepaid 

products pursuant to its mission, which 

it describes as to safeguard the financial 

system from illicit use and combat 

money laundering and promote national 

security through the collection, analysis, 

and dissemination of financial 

intelligence and strategic use of 

financial authorities. As noted above, it 

has issued regulations to regulate 

certain prepaid products. In 2011, 

pursuant to a mandate under the Credit 

CARD Act, FinCEN published a final 

rule to amend BSA regulations 

applicable to money services businesses 

with respect to stored value or ‘‘prepaid 

access’’ (FinCEN’s Prepaid Access 

Rule).118 Subject to certain specific 

exemptions, a ‘‘prepaid program’’ is 

defined as an ‘‘arrangement under 

which one or more persons acting 

together provide(s) prepaid access.’’ 31 

CFR 1010.100(ff)(4)(iii). The term 

‘‘prepaid access’’ is defined as ‘‘access 

to funds or the value of funds that have 

been paid in advance and can be 

retrieved or transferred at some point in 

the future through an electronic device 

or vehicle, such as a card, code, 

electronic serial number, mobile 

identification number, or personal 

identification.’’ 31 CFR 1010.100(ww). 

FinCEN’s Prepaid Access Rule 

established a comprehensive approach 

toward regulating prepaid access. 

Among other things, the Rule requires 

each provider or seller of prepaid access 

to: (1) File suspicious activity reports; 

(2) collect and retain certain customer 

and transactional information; and (3) 

maintain an anti-money laundering 

program. These BSA requirements are 

similar to those that apply to other 

categories of money services 

businesses.119

6. State Laws 

Many States have passed consumer 

protection laws or other rules to regulate 

prepaid products in general, and in 

particular, certain types of prepaid 

products such as government benefits 

cards. Illinois is an example of a State 

that has issued regulations applicable to 

prepaid products in general. In 2013, 

Illinois imposed pre-acquisition, oncard and at-the-time-of-purchase 

disclosure requirements on ‘‘general-use 

reloadable prepaid cards.’’ 120 IL SB 

1829 (2013), Public Act 098–0545, 

codified at 205 Ill. Comp. Stat. 616/10 

and 616/46. California is an example of 

a State that has enacted laws on specific 

types of prepaid products. In 2013, 

California enacted a law that extended 

protections similar to the FMS Rule to 

prepaid products receiving 

unemployment benefits and basic-needs 

benefits from the State of California. CA 

A 1820 (2013), ch. 557, codified at Cal. 

Unemp. Ins. Code § 1339.1 and Cal. 

Welf. & Inst. Code § 11006.2. In 2014, 

California enacted another law 

extending similar protections to cards 

used for distribution of child support 

payments. CA A 2252 (2014), ch. 180, 

codified at Cal. Fam. Code § 17325. 

Further, the Bureau understands that 

many States have money transmitter 

laws that may apply to prepaid product 

providers. The laws vary by State but 

generally require companies to be 

licensed and to post a surety bond to 

cover accountholder losses, if the 

providers become insolvent. Most States 

further require that the companies hold 

high-grade investments to back the 

money in customer accounts. However, 

the Bureau also understands that States 

vary in the amount of their oversight of 

companies licensed under the money 

transmitter laws, and many may not 

have streamlined processes to pay out 

funds in the event a prepaid product 

provider were to file for bankruptcy 

protection.121

C. Existing Regulation of Credit 

Products and Overdraft Services Offered 

in Connection With Transaction 

Accounts 

In this rulemaking, the Bureau has 

considered whether and to what extent 

it should regulate credit features offered 

in connection with prepaid accounts. In 

approaching this question, the Bureau is 

conscious of the regulatory framework 

that has developed, including for credit 

products subject to Regulation Z and 

overdraft services on traditional deposit 

accounts that are exempt from 

Regulation Z but subject to certain parts 

of Regulation E. On several occasions, 

Federal regulators have addressed 

deposit account overdraft services in 

various rulemakings including those 

conducted pursuant to Regulations E 

and Z as well as in public guidance 

documents. The relevant actions are 

discussed below. 


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122The term creditor in Regulation Z generally 

means a person who regularly extends consumer 

credit that is subject to a finance charge or is 

payable by written agreement in more than four 

installments (not including a down payment), and 

to whom the obligation is initially payable, either 

on the face of the note or contract, or by agreement 

when there is no note or contract. See 

§ 1026.2(a)(17)(i). 

123Public Law 93–495, 88 Stat. 1511 (1974). 

124As discussed in greater detail in the sectionby-section analysis of § 1026.2(a)(20), open-end 

credit exists where there is a plan in which the 

creditor reasonably contemplates repeated 

transactions; the creditor may impose a finance 

charge from time to time on an outstanding unpaid 

balance; and the amount of credit that may be 

extended to the consumer during the term of the 

plan (up to any limit set by the creditor) is generally 

made available (even if not disclosed) to the extent 

that any outstanding balance is repaid. 

§ 1026.2(a)(20). Closed-end credit is credit that does 

not meet the definition of open-end credit. 

§ 1026.2(a)(10). 

125 Indeed, credit cards are subject to specialized 

and heightened disclosure requirements in 

advertisements, at the time of account opening, 

periodically for each billing cycle (i.e., periodic 

statements), and when certain terms of the account 

change. In addition, for credit card accounts 

disclosures generally are required on or with 

applications or solicitations. Among the required 

disclosures for credit cards on or with an 

application or solicitation is a tabular disclosure 

setting forth seven different disclosures. § 1026.60. 

This ‘‘Schumer box’’ must be similar to model 

forms in Regulation Z appendix G–10 and must set 

forth certain fees, interest rates, transaction charges, 

and other required charges. 

126See Gardner v. Montgomery County Teachers 

Fed. Credit Union, 864 F.Supp.2d (D. Md. 2012) 

(providing an overview of the FCBA’s no offset 

provision). 

127Public Law 111–24, 123 Stat. 1734 (2009). 

128As implemented in Regulation E, 

§ 1005.10(e)(1), this provision contains an exception 

for overdraft credit plans: ‘‘No financial institution 

or other person may condition an extension of 

credit to a consumer on the consumer’s repayment 

by preauthorized electronic fund transfers, except 

for credit extended under an overdraft credit plan 

or extended to maintain a specified minimum 

balance in the consumer’s account.’’ 

1. Open-End (Not Home-Secured) Credit 

Products Under the Truth in Lending 

Act and the Electronic Fund Transfer 

Act 

Credit products are generally subject 

to the Truth in Lending Act and 

Regulation Z, although the application 

of specific provisions of the statute and 

regulation depends on the attributes of 

the particular credit product. In 1968, 

Congress enacted TILA to promote the 

informed use of consumer credit by 

requiring disclosures about its terms 

and cost and to provide standardized 

disclosures. Congress has revised TILA 

several times and its purpose now is to 

‘‘assure a meaningful disclosure of 

credit terms so that the consumer will 

be able to compare more readily the 

various credit terms available to him 

and avoid the uninformed use of credit, 

and to protect the consumer against 

inaccurate and unfair credit billing and 

credit card practices.’’ 15 U.S.C. 1601(a). 

TILA thus defined credit broadly to 

mean the right granted by a creditor to 

a debtor to defer payment of debt or 

incur debt and defer its payment. 15 

U.S.C. 1602(f).122

Congress has amended TILA on 

several occasions to provide consumers 

of certain types of credit products with 

additional protections. The Fair Credit 

Billing Act (FCBA),123 enacted in 1974, 

added a number of substantive 

protections for consumers who use 

open-end credit 124 or use credit cards 

subject to TILA. Public Law 93–495 

(Oct. 28, 1974). For example, the FCBA 

increased rights and remedies for 

consumers who assert billing errors and 

required a minimum 14-day grace 

period for payments for creditors that 

offer a grace period, prompt re-crediting 

of refunds, and refunds of credit 

balances. Credit cards are also subject to 

these requirements,125 but also to a 

broad range of additional protections. 

Regulation Z defines the term ‘‘credit 

card’’ to mean any card, plate, or other 

single credit device that may be used 

from time to time to obtain credit. See 

§ 1026.2(a)(15)(i). A charge card is a 

credit card on an account for which no 

periodic rate is used to compute a 

finance charge. See § 1026.2(a)(15)(iii). 

Cognizant that many financial 

institutions issue credit cards to 

cardholders with whom they also have 

a deposit account relationship, Congress 

in the FCBA also restricted the right of 

such institutions from taking funds out 

of a deposit account to satisfy their 

credit card claims.126 In 1988, Congress 

amended TILA through the Fair Credit 

and Charge Card Disclosure Act. These 

revisions required issuers of credit cards 

and charge cards to provide certain 

disclosures at the time of application 

and solicitation. 

In 2009, Congress enhanced 

protections for credit cards in the Credit 

CARD Act, which it enacted to 

‘‘establish fair and transparent practices 

related to the extension of credit’’ in the 

credit card market.127 The Credit CARD 

Act regulates both the underwriting and 

pricing of credit card accounts. 

Specifically, it prohibits credit card 

issuers from extending credit without 

assessing the consumer’s ability to pay 

and imposes special rules regarding the 

extension of credit to persons under the 

age of 21 and to college students. The 

Credit CARD Act also restricts the fees 

that an issuer can charge during the first 

year after an account is opened, and 

limits the instances and the amount of 

such fees in which issuers can charge 

‘‘back-end’’ penalty fees when a 

consumer makes a late payment or 

exceeds his or her credit limit. The 

CARD Act also restricts the 

circumstances under which issuers can 

increase interest rates on credit cards 

and establishes procedures for doing so. 

The Board generally implemented these 

provisions in subpart G of Regulation Z. 

Thus, while all open-end (not homesecured) credit plans receive some of 

TILA’s protections, generally only openend (not home-secured) credit plans that 

are accessed by credit cards receive the 

additional protections of the Credit 

CARD Act. 

Although EFTA does not generally 

focus on credit issues, Congress 

provided one important protection in 

that statute as well. Known as the 

compulsory use provision, it provides 

that no person may ‘‘condition the 

extension of credit to a consumer on 

such consumer’s repayment by means of 

preauthorized electronic fund 

transfers.’’ EFTA section 913(1).128 (A 

preauthorized electronic fund transfer is 

an electronic fund transfer authorized in 

advance to recur at substantially regular 

intervals, such as a recurring direct 

deposit or ACH debit.) Where 

applicable, the compulsory use 

provision thus prevents a creditor from 

requiring a particular form of payment, 

such as a recurring ACH debit to 

another account, as a form of repayment 

of the credit. This provides consumers 

with the ability to control how and 

when they repay credit and does not 

allow a creditor to insist on a particular 

form of repayment. Thus, as 

implemented in Regulations Z and E, 

some of these protections are broadly 

applicable to credit generally while 

others are specific to particular credit 

products. For example, open-end lines 

of credit that consumers can link to a 

deposit account to pull funds when the 

account has insufficient funds are 

subject to certain disclosure 

requirements under Regulation Z, 

certain provisions of the FCBA, and the 

compulsory use provision under 

Regulation E (although compulsory use 

exempts overdraft lines of credit). 

2. Federal Regulatory Treatment of 

Deposit Account Overdraft Services 

A separate regulatory regime has 

evolved over the years with regard to 

treatment of overdraft services, which 

started as courtesy programs under 

which financial institutions would 

decide on a manual, ad hoc basis to 

cover particular transactions for which 

a consumer lacked funds in their 

deposit account rather than to return the 

transactions and subject consumers to a 


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129 34 FR 2002 (Feb. 11, 1969). 

130Section 1026.4(b)(2) provides that any charge 

imposed on a checking or other transaction account 

is an example of a finance charge only to the extent 

that the charge exceeds the charge for a similar 

account without a credit feature. 

131Later in the 1970s, the Board added provisions 

in Regulation Z specifically addressing credit cards. 

40 FR 43200 (Sept. 19, 1975). The Board 

subsequently carved debit cards, where there is no 

agreement to extend credit, out of the definition of 

credit card. 46 FR 50288, 50293 (Oct. 9, 1981). 

132Public Law 96–221, sec. 601, 94 Stat. 132; 45 

FR 80648 (Dec. 5, 1980). 

133 Id. at 80657. 

134 46 FR 20848, 20855 (Apr. 7, 1981). 

135 46 FR 2972, 2973 (Jan. 13, 1981). 

136See R. Borzekowski et al., Consumers’ Use of 

Debit Cards: Patterns, Preferences, and Price 

Response, at 2 (Apr. 2006) available at http://

www.federalreserve.gov/pubs/feds/2006/200616/

200616pap.pdf (noting that, as of 2006, ‘‘Annual 

debit card transactions at the point of sale have 

been growing at over twenty percent per year since 

1996 and now exceed credit card transactions.’’). By 

2006, debit card payment transaction volumes in 

the United States had exceeded both check and 

credit card payments, and from 2006 to 2011, the 

total volume of U.S. consumer debit card 

transactions nearly doubled. 

137Fumiko Hayashi, Fed. Reserve Bank of Kansas 

City, The New Debit Card Regulations: Initial 

Effects on Networks and Banks, Econ. Rev., 4th 

quarter 2012, at 83 chart 2. With respect to 

‘‘signature debit’’ transactions, a consumer does not 

use a PIN but instead typically signs a copy of a 

transaction receipt provided by the merchant in 

order to affirm the consumer’s identity. For further 

information on the difference between signaturebased and PIN-based card transactions, see, for 

example, the preamble of the Board’s proposed rule 

to implement the Durbin amendment, 75 FR 81722, 

81723 (Dec. 28, 2010). 

138See generally CFPB Overdraft White Paper, at 

11–17 (explaining growth of debit card transactions 

from consumers’ deposit accounts) available at 

http://files.consumerfinance.gov/f/201306_cfpb_

whitepaper_overdraft-practices.pdf. 

139CFPB Overdraft White Paper, at 16. 

140See CFPB Overdraft White Paper, at 11–12. 

141See id., at 16–17. 

not-sufficient-funds (NSF) fee, merchant 

fees, and other negative consequences 

from bounced checks. Although 

Congress did not exempt overdraft 

services or similar programs offered in 

connection with deposit accounts from 

TILA, the Board in issuing Regulation Z 

in 1969 carved financial institutions’ 

‘‘bounce-protection’’ programs out of 

the new regulation.129 See, e.g., 

§ 1026.4(c)(3) (excluding charges 

imposed by a financial institution for 

paying items that overdraw an account 

from the definition of ‘‘finance charge,’’ 

unless the payment of such items and 

the imposition of the charge were 

previously agreed upon in writing); 

§ 1026.4(b)(2).130 The Board 

distinguished between ‘‘bounce 

protection programs’’ where there is no 

written agreement to pay items that 

overdraw the account, and more formal, 

line-of-credit overdraft programs where 

there is a written agreement to pay 

overdrafts. Because financial 

institutions reserved discretion to pay 

particular overdrafts and exercised that 

discretion on an ad hoc basis, the Board 

exempted informal bounce protection 

programs but subjected overdraft lines 

of credit to Regulation Z when the 

creditor imposes a finance charge or the 

line of credit is accessed by a debit 

card.131

The Board revisited the exception of 

bounce protection programs from 

Regulation Z in 1981, in a rulemaking 

in which the Board implemented the 

Truth in Lending Simplification and 

Reform Act.132 In the related proposal, 

the Board considered adjusting its 

overdraft exemption to apply only to 

‘‘inadvertent’’ overdrafts because, the 

Board stated, a charge imposed for 

honoring an instrument under any 

agreement between the institution and 

the consumer is a charge imposed for a 

credit extension and thus fits the 

general definition of a finance charge, 

regardless of whether the charge and the 

honoring of the check are reflected in a 

written agreement.133 Ultimately, 

however, the Board made only a ‘‘few 

minor editorial changes’’ to the 

exception in § 1026.4(c)(3) from the 

definition of finance charge that applied 

to fees for paying items that overdraw 

an account where there is no written 

agreement to pay, concluding that it 

would exclude from Regulation Z 

‘‘overdraft charges from the [definition 

of] finance charge unless there is an 

agreement in writing to pay items and 

impose a charge.’’ 134

The Board also took up the status of 

bounce protection programs in the early 

1980s in connection with the enactment 

of EFTA. As noted above, EFTA’s 

compulsory use provision generally 

prohibits financial institutions or other 

persons from conditioning the extension 

of credit on a consumer’s repayment by 

means of preauthorized electronic fund 

transfers. The Board, however, exercised 

its EFTA section 904(c) exception 

authority to create an exception to the 

compulsory use provision for credit 

extended under an overdraft credit plan 

or extended to maintain a specified 

minimum balance in the consumer’s 

account. See § 1005.10(e)(1). In adopting 

this exception, the Board aligned 

Regulation E with its approach to 

overdraft in Regulation Z—it exempted 

overdraft services from rules otherwise 

applicable to credit products. The Board 

stated that ‘‘overdraft protection is a 

service that financial institutions have 

been providing to consumers at little or 

no extra cost beyond the cost of the 

protected account.’’ 135

Overdraft services in the 1990s began 

to evolve away from the historical 

model of bounce protection programs in 

a number of ways. One major industry 

change was a shift away from manual ad 

hoc decision-making by financial 

institution employees to a system 

involving heavy reliance on automated 

programs to process transactions and to 

make overdraft decisions. A second was 

to impose higher overdraft fees. In 

addition, broader changes in payment 

transaction types also increased the 

impacts of these other changes on 

overdraft services. In particular, debit 

card use expanded dramatically, and 

financial institutions began extending 

overdraft services to debit card 

transactions. In the 1990s, many 

institutions expanded transactional 

capabilities by replacing consumers’ 

ATM-only cards with debit cards that 

consumers could use to make electronic 

payments to merchants and service 

providers directly from their checking 

accounts using the major payment 

networks (and thus most merchants 

could accept them).136 As a result, debit 

card transaction volumes grew quickly 

as payment networks that enable these 

transactions broadened. Acceptance by 

grocery stores, gas stations, fast food 

restaurants, and other retailers helped to 

drive the popularity of debit card 

payments across regional and global 

ATM networks (accessed by using a 

PIN). By the late 1990s, ‘‘signature 

debit’’ transaction volumes became the 

most common type of debit card 

transaction.137 These debit cards offered 

acceptance at all merchants that 

honored payments from the major 

payment networks, such as internet 

retailers.138

As a result of these operational 

changes, overdraft services became a 

significant source of revenue for banks 

and credit unions as the volume of 

transactions involving checking 

accounts increased due primarily to the 

growth of debit cards.139 Before debit 

card use grew, overdraft fees on check 

and ATM transactions formed a greater 

portion of deposit account overdrafts. 

Debit card transactions presented 

consumers with markedly more 

opportunities to incur an overdraft fee 

when making a purchase because of 

increased acceptance and use of debit 

cards for relatively small transactions 

(e.g., fast food and grocery stores).140

Over time, revenue from overdraft 

increased and began to influence 

significantly the overall cost structure 

for many deposit accounts, as providers 

began relying heavily on back-end 

pricing while eliminating or reducing 

front-end pricing (i.e., free checking 

accounts) as discussed above.141


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142Office of the Comptroller of Currency, 

Interpretive Letter No. 914, 3rd Party Program, 

(Aug. 3, 2001) available at http://www.occ.gov/

static/interpretations-and-precedents/sep01/

int914.pdf. 

143OCC Interpretive Letter No. 914. 

144 67 FR 72618, 72620 (Dec. 6, 2002). 

145The March 2003 final rule preamble stated 

that ‘‘[t]he Board’s staff is continuing to gather 

information on these services, which are not 

addressed in the final rule.’’ 68 FR 16185 (Apr. 3, 

2003). 

146 69 FR 31760 (June 7, 2004). 

147 Id. at 31761. 

148 70 FR 29582, 29584–85 (May 24, 2005). In this 

2005 rulemaking, the Board revised Regulation DD 

to address concerns about the uniformity and 

adequacy of information provided to consumers 

when they overdraw their deposit accounts. Among 

other things, the final rule required institutions that 

promote the payment of overdrafts in an 

advertisement to disclose on periodic statements, 

total fees imposed for paying overdrafts and total 

fees imposed for returning items unpaid on periodic 

statements, both for the statement period and the 

calendar year to date, and to include certain other 

disclosures in advertisements of overdraft services. 

Ultimately, in 2009, the Board expanded this 

provision to all institutions not just those that 

promote the payments of overdrafts. See 74 FR 5584 

(Jan. 29, 2009). 

149 70 FR 9127 (Feb. 24, 2005) (Joint Guidance) 

available at http://www.gpo.gov/fdsys/pkg/FR-2005- 

02-24/pdf/05-3499.pdf. See also Office of Thrift 

Supervision Guidance on Overdraft Protection 

Programs, 70 FR 8428 (Feb. 18, 2005). 

150 70 FR 9127, 9129 (Feb. 24, 2005). 

151 Id. at 9128. 

152 Id. 

153Section 5 of the FTC Act prohibits ‘‘unfair or 

deceptive acts or practices in or affecting 

commerce.’’ 15 U.S.C. 45. See also Federal Deposit 

Ins. Act section 8 (extending to the Board authority 

to take appropriate action when unfair or deceptive 

acts or practices are discovered). 12 U.S.C. 1818. 

154 73 FR 28904 (May 19, 2008). 

155 73 FR 28730 (May 19, 2008). 

As a result of the growth of debit card 

transactions and the changing landscape 

of deposit account overdraft services, 

Federal banking regulators expressed 

increasing concern about consumer 

protection issues and began a series of 

issuances and rulemakings. First, in 

September 2001, the Office of the 

Comptroller of the Currency (OCC) 

released an interpretive letter expressing 

concern about overdraft protection 

services.142 The letter noted that 

overdraft services are extensions of 

credit but that related fees may not be 

finance charges under Regulation Z. In 

declining to issue a ‘‘comfort letter’’ 

regarding an unnamed overdraft service, 

the OCC called attention to a number of 

troubling practices, including 

inadequate disclosure to consumers of 

the risk of harm from overdraft services 

and failure to properly help consumers 

who were using overdraft services as ‘‘a 

means of meeting regular obligations’’ to 

find more economical forms of credit.143

The Board also signaled concern with 

overdraft services in a number of 

rulemaking actions. In a 2002 proposal 

to amend Regulation Z with regard to 

the status of certain credit card-related 

fees and other issues, the Board noted 

that some overdraft services may not be 

all that different from overdraft lines of 

credit and requested comment on 

whether and how Regulation Z should 

be applied to banks’ bounce-protection 

services, in light of the Regulation’s 

exclusion of such services but inclusion 

of lines-of-credit where a finance charge 

is imposed or is accessed by a debit 

card.144 The Board did not modify the 

Regulation Z exemptions when it issued 

final rules in 2003,145 but proposed 

revisions to Regulation DD (which 

implements the Truth in Savings Act) 

and its commentary in 2004 to address 

concerns about the uniformity and 

adequacy of institutions’ disclosure of 

overdraft fees generally and to address 

concerns about advertised automated 

overdraft services in particular.146 The 

Board specifically noted that it was not 

proposing to cover overdraft services 

under TILA and Regulation Z, but that 

further consideration of the need for 

such coverage would be appropriate if 

consumer protection concerns about 

these overdraft services were to persist 

in the future.147 When the Board 

finalized the Regulation DD proposal in 

2005, it noted that it declined at that 

time to extend Regulation Z to overdraft 

services. In doing so, it noted that 

industry commenters were concerned 

about the cost of imposing Regulation Z 

requirements on deposit accounts and 

about the compliance burden of 

providing an APR calculated based on 

overdraft fees without corresponding 

benefits to consumers in better 

understanding the costs of credit. The 

Board also noted that some members of 

its Consumer Advisory Council believed 

that overdraft services are the functional 

equivalent of a traditional overdraft line 

of credit and thus should be subject to 

Regulation Z, but that financial 

institutions’ historical practice of paying 

occasional overdrafts on an ad hoc basis 

should not be covered by Regulation Z. 

While not specifically addressing these 

concerns, the Board emphasized that its 

decision not to apply Regulation Z did 

not preclude future consideration 

regarding whether it was appropriate to 

extend Regulation Z to overdraft 

services.148

In February 2005 (prior to the Board 

having finalized the Regulation DD 

changes discussed above), the Federal 

banking agencies also issued joint 

guidance on overdraft programs in 

response to the increased availability 

and customer use of overdraft services 

(Joint Guidance).149 The purpose of the 

Joint Guidance was to assist insured 

depository institutions in the 

responsible disclosure and 

administration of overdraft protection 

services. It grew out of concern that 

[D]isclosure, and implementation of some 

overdraft protection programs, intended 

essentially as short-term credit facilities, are 

of concern [to the Federal banking agencies]. 

For example, some institutions have 

promoted this credit service in a manner that 

leads consumers to believe that it is a line of 

credit by informing consumers that their 

account includes an overdraft protection 

limit of a specified dollar amount without 

clearly disclosing the terms and conditions of 

the service, including how fees reduce 

overdraft protection dollar limits, and how 

the service differs from a line of credit.150

The Joint Guidance stated that ‘‘the 

existing regulatory exceptions [i.e., 

exceptions in Regulation Z such that the 

Regulation does not apply] were created 

for the occasional payment of 

overdrafts, and as such could be 

reevaluated by the Board in the future, 

if necessary. Were the Board to address 

these issues more specifically, it would 

do so separately under its clear [TILA] 

authority.’’ 151 The Joint Guidance went 

on to state that ‘‘[w]hen overdrafts are 

paid, credit is extended. Overdraft 

protection programs may expose an 

institution to more credit risk (e.g., 

higher delinquencies and losses) than 

overdraft lines of credit and other 

traditional overdraft protection options 

to the extent these programs lack 

individual account underwriting.’’ 152

This guidance remains in effect. 

In the late 2000s as controversy 

regarding overdraft services continued 

to mount despite the increase in 

regulatory activity, Federal agencies 

began exploring various additional 

measures with regard to overdraft, 

including whether to require that 

consumers affirmatively opt in before 

being charged for overdraft services. 

First, in May 2008, the Board along with 

the National Credit Union 

Administration and the former Office of 

Thrift Supervision proposed to exercise 

their authority under section 5 of the 

Federal Trade Commission Act (FTC 

Act) 153 to prohibit institutions from 

assessing any fees on a consumer’s 

account in connection with an overdraft 

service, unless the consumer was given 

notice and the right to opt out of the 

service, and the consumer did not opt 

out.154 At the same time, the Board 

issued a proposal under Regulation DD 

to expand disclosure requirements and 

revise periodic statement requirements 

to provide aggregate totals for overdraft 

fees and for returned item fees for the 

periodic statement period and year-todate.155 The Board finalized portions of 


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156 74 FR 5584 (Jan. 29, 2009). Specifically, this 

rule required, among other things, all depository 

institutions to disclose aggregate overdraft fees on 

periodic statements, and not solely institutions that 

promote the payment of overdrafts. 

157 74 FR 59033 (Nov. 17, 2009). 

158 Id. at 59037. 

159 Id. at 59040. 

160Fed. Deposit Ins. Corp., Fin. Inst. Letter FIL– 

81–2010, Overdraft Payment Programs and 

Consumer Protection Final Overdraft Payment 

Supervisory Guidance, (Nov. 24, 2010) (FDIC 

Overdraft Payment Supervisory Guidance), 

available at https://www.fdic.gov/news/news/

financial/2010/fil10081.html. 

161 76 FR 33409 (June 8, 2011). 

162 78 FR 25353 (Apr. 30, 2013). 

163 77 FR 12031 (Feb. 28, 2012). 

164CFPB Overdraft White Paper, available at 

http://files.consumerfinance.gov/f/201306_cfpb_

whitepaper_overdraft-practices.pdf.; CFPB 

Overdraft Data Point, available at http:// 

www.consumerfinance.gov/reports/data-pointchecking-account-overdraft/. 

165See http://www.reginfo.gov/public/do/

eAgendaViewRule?pubId=201404&RIN=3170- 

AA42. 

166 75 FR 80335 (Dec. 22, 2010). 

167 79 FR 58602 (Sept. 29, 2014). 

168 79 FR 58602 at 58616. 

169 79 FR 58602 at 58610. 

the Regulation DD proposal in January 

2009.156 In addition, although the three 

agencies did not finalize their FTC Act 

proposal, the Board ultimately adopted 

a similar opt-in requirement for ATM 

and point of sale transactions under 

Regulation E in late 2009. 

The overdraft opt-in rule in 

Regulation E applies to all accounts 

covered by Regulation E, including 

payroll card accounts. In addressing 

overdraft services for the first time as a 

feature of deposit accounts in 

Regulation E,157 the Board concluded 

that the opt-in rule carried out ‘‘the 

express purposes of EFTA by: (a) 

Establishing notice requirements to help 

consumers better understand the cost of 

overdraft services for certain EFTs; and 

(b) providing consumers with a choice 

as to whether they want overdraft 

services for ATM and one-time debit 

card transactions in light of the costs 

associated with those services.’’ 158 Not 

surprisingly, the rule did not expressly 

discuss GPR cards, which as noted 

above, the Board had not subjected to 

Regulation E coverage.159

Following the adoption of the Board’s 

overdraft opt-in-rule, the FDIC 

expanded on the previously-issued Joint 

Guidance when it issued a Financial 

Institution Letter that reaffirmed its 

existing supervisory expectations with 

respect to overdraft payment programs 

generally and provided specific 

guidance with respect to automated 

overdraft payment programs.160 In 2011, 

the OCC proposed similar guidance 

regarding automatic overdraft programs 

and deposit advance products. This 

guidance, if finalized, would have 

clarified the OCC’s application of 

principles of safe and sound banking 

practices in connection with depositrelated consumer credit products such 

as automated overdraft services and 

direct deposit advance programs.161 The 

OCC withdrew this proposed guidance 

in 2013.162

Since the Bureau assumed authority 

from the Board for implementing most 

of EFTA in 2011, it has taken a number 

of steps—including research, analysis, 

and solicitation of comment—to assess 

the impact and efficacy of the Board’s 

2009 overdraft opt-in rule as it pertains 

to deposit accounts. In early 2012, the 

Bureau issued a Request For 

Information (RFI) that sought input from 

the public on a number of overdraft 

topics, including: Lower cost 

alternatives to overdraft protection 

programs, consumer alerts and 

information provided regarding 

balances and overdraft triggers, the 

impact of changes to Regulations DD 

and E and overdraft opt-in rates, the 

impact of changes in financial 

institutions’ operating policies, the 

economics of overdraft programs, and 

the long-term impact on consumers.163

In response, the Bureau received over 

1000 comments. This RFI did not 

request information specific to prepaid 

products, and few commenters 

specifically addressed prepaid products. 

The Bureau has also undertaken 

significant research into overdraft 

services that has resulted, to date, in the 

release of a white paper of initial data 

findings in June 2013 and a data point 

in July 2014.164

The Bureau has previously indicated 

that it is considering whether rules 

governing overdraft and related services 

in connection with deposit accounts are 

warranted, and, if so, what types of 

rules would be appropriate. A possible 

rulemaking might include new or 

revised disclosures or address specific 

acts or practices.165

3. Other Relevant Federal Regulatory 

Activity 

In addition to the two general 

regulatory regimes governing credit 

products generally and overdraft 

services as outlined above, two Federal 

initiatives have specifically addressed 

the possibility of credit features being 

offered in connection with prepaid 

products. First, the Treasury FMS Rule 

(described above), adopted in late 

December 2011, only permits Federal 

payments to be deposited onto a prepaid 

product if the product is not attached to 

a line of credit or loan agreement under 

which repayment from the account is 

triggered upon delivery of the Federal 

payments, among other conditions. See 

31 CFR 210.5(b)(5)(i)(C). The 

Supplementary Information to that 

Interim Final Rule indicates that the 

goal of this requirement is to prevent 

payday lending and other arrangements 

in which a financial institution or 

creditor ‘‘advances’’ funds to a 

cardholder’s account, and then repays 

itself for the advance and any related 

fees by taking some or all of the 

cardholder’s next deposit.166 The 

Treasury FMS Rule does not, however, 

directly address the permissibility of 

overdraft services. 

Second, as is discussed above in the 

broader regulatory overview, the Board’s 

Regulation II implementing provisions 

of the Dodd-Frank Act generally caps 

interchange fees that may be imposed 

on debit cards. However, Regulation II 

provides exemptions from the fee 

restrictions for certain GPR cards; as a 

result, interchange fees for transactions 

made with these prepaid cards are 

generally not subject to the fee 

restrictions of EFTA section 920(a). 12 

CFR 235.5(d)(1). However, EFTA, as 

amended by the Dodd-Frank Act, carves 

out of this exemption interchange fees 

for transactions made with these 

prepaid cards if, with respect to the 

card, an overdraft fee may be charged. 

EFTA and Regulation E provide a 

separate, blanket exemption for cards or 

issuers with assets of less than $10 

billion, so these cards are not subject to 

the fee restrictions even if overdraft fees 

may be charged on the account. 

Separately, the Department of Defense 

(the Department) recently proposed 

amendments to its regulation (32 CFR 

part 232) that implements the Military 

Lending Act (MLA), 10 U.S.C. 987, et 

se.167 Under the MLA, a creditor 

generally may not apply a military 

annual percentage rate (MAPR) greater 

than 36 percent in connection with an 

extension of consumer credit to a 

military service member or dependent. 

10 U.S.C. 987(b). The Department’s 

proposal would modify its regulation to 

expand the scope of coverage to which 

the regulation applies to a broad range 

of open-end and closed end credit 

products, but would exclude overdraft 

services that are exempted from 

Regulation Z as discussed above.168 For 

open-end (not home secured) credit card 

accounts, any credit-related charge that 

is a finance charge under Regulation Z 

(as well as certain other charges) would 

be included in calculating the MAPR169

for a particular billing cycle and the 

MAPR for that billing cycle could not 


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170 79 FR 58602 at 58619. 

171 79 FR 58602 at 58638. See proposed § 232.4(d) 

of the Department’s proposal. The exclusion from 

the MAPR calculation for bona fide fees does not 

apply to periodic rates. It also does not apply to any 

credit insurance premium, including charges for 

single premium credit insurance, fees for debt 

cancellation or debt suspension agreements, or to 

any fees for credit related ancillary products sold 

in connection with and either at or before 

consummation of the credit transaction or upon 

account opening, because those charges are 

expressly included in the definition of ‘‘interest’’ in 

the applicable statute (10 U.S.C. 987(i)(3)) and 

therefore must be included in the MAPR 

calculation. 

172The comments can be reviewed at http://

www.regulations.gov/#!documentDetail;D=CFPB2012-0019-0001. 

173 79 FR 33731 (June 12, 2014). 

174Press Release, CFPB Begins Accepting 

Consumer Complaints on Prepaid Cards and 

Additional Nonbank Products, available at http:// 

www.consumerfinance.gov/newsroom/cfpb-beginsaccepting-consumer-complaints-on-prepaid-cardsand-additional-nonbank-products./. 

175See http://www.consumerfinance.gov/

complaint/#credit-card. 

176CFPB Consumer Advisory, Risks to Consumers 

Posed by Virtual Currencies (Aug. 2014), available 

at http://files.consumerfinance.gov/f/201408_cfpb_

consumer-advisory_virtual-currencies.pdf. 

177See http://www.consumerfinance.gov/

complaint/#money-transfer. 

exceed 36 percent.170 For such credit 

card accounts, the Department’s 

proposal, however, provides that a card 

issuer does not have to include in the 

calculation of the MAPR any charge that 

is a bona fide fee and that is reasonable 

and customary for that type of fee.171

D. The Bureau’s May 2012 Advance 

Notice of Proposed Rulemaking 

As noted above, the Bureau issued the 

Prepaid ANPR, which posed a series of 

questions for public comment about 

how the Bureau might consider 

regulating GPR cards. The Bureau 

sought input on the following topics: (1) 

The disclosure of fees and terms; (2) if 

consumers should be informed whether 

their funds are protected by FDIC passthrough deposit insurance; (3) 

unauthorized transactions and the costs 

and benefits of requiring card issuers to 

provide limited liability protection from 

unauthorized transactions similar to 

those protections available for other 

accounts under Regulation E; and (4) 

other product features including credit 

features in general and overdraft 

services in particular, linked savings 

accounts, and credit repair or credit 

building features such as features that 

claim to offer consumers the 

opportunity to improve or build credit). 

The Bureau received over 220 

comments from a variety of 

commenters.172 Industry commenters, 

including depository institutions and 

credit unions, prepaid program 

managers, payment networks and 

industry trade associations, submitted 

the majority of comments. The Bureau 

also received comment letters from 

consumer and other interest groups, as 

well as several individual consumers. In 

preparing this notice, the Bureau has 

evaluated the comments received in 

response to the Prepaid ANPR and has 

engaged in additional analysis of 

prepaid products and consumer 

behavior. As discussed in greater detail 

in the section-by-section analysis below, 

the proposal covers a variety of prepaid 

products including GPR cards. The 

Bureau notes that covered account types 

have different characteristics. 

E. Other Payments-Related Bureau 

Actions 

In June 2014, the Bureau issued a 

Request for Information regarding the 

opportunities and challenges associated 

with the use of mobile financial 

products and services (Mobile RFI).173

As part of the Mobile RFI, the Bureau is 

exploring how mobile technologies are 

impacting economically vulnerable 

consumers with limited access to 

traditional banking systems. The Mobile 

RFI asked questions on a number of 

topics, including access for 

economically vulnerable consumers and 

the ways that mobile technologies could 

expand access to financial services, the 

use of mobile technologies for real-time 

money management, the types of 

customer service or technical assistance 

that are available to consumers when 

they use mobile products, and privacy 

and data security issues. The comment 

period on the Mobile RFI ended on 

September 10, 2014. The Bureau 

received approximately 48 comments, 

which it is in the process of reviewing. 

In July 2014, the Bureau began 

accepting consumer complaints about 

prepaid products.174 In addition to 

prepaid cards, consumers may also 

submit complaints about payroll cards, 

government benefit cards, gift cards, and 

mobile wallets.175 In August 2014, the 

Bureau issued a consumer advisory on 

virtual currencies that discussed the 

risks to consumers posed by such 

currencies.176 At the same time, the 

Bureau also began accepting consumer 

complaints regarding virtual 

currencies.177

The section-by-section analysis below 

discusses in greater detail the potential 

application of this proposed rule to 

certain mobile financial products and 

services. The Bureau also recognizes 

that the proposed rule may have 

potential application to virtual currency 

and related products and services. As a 

general matter, however, the Bureau’s 

analysis of mobile financial products 

and services, as well as and virtual 

currencies and related products and 

services, including the applicability of 

existing regulations and this proposed 

regulation to such products and 

services, is ongoing. 

III. Overview of Outreach and Related 

Industry and Consumer Research 

The Bureau conducted extensive and 

significant additional outreach and 

research since it issued the Prepaid 

ANPR as part of its efforts to study and 

evaluate prepaid products. In addition 

to reviewing the comments received, the 

Bureau has engaged in a variety of 

outreach and other research efforts to 

understand better how consumers use 

prepaid products and where problems 

might exist or potentially develop. 

These efforts include meetings with 

industry, consumer groups, and nonpartisan research and advocacy 

organizations, market research and 

monitoring, and related efforts. 

Relatedly, the Bureau has collected 

information from industry participants 

pursuant to section 1022(c)(4) of the 

Dodd-Frank Act, which allows the 

Bureau to gather information from time 

to time regarding the organization, 

business conduct, markets, and 

activities of covered persons and service 

providers to aid its market monitoring 

efforts. 

Further, as discussed in greater detail 

below, the Bureau conducted qualitative 

testing of prototype disclosure forms 

with consumers who use prepaid cards 

and reviewed numerous prepaid 

products’ terms and conditions. The 

Bureau sought to determine current 

industry practices in a number of areas 

to inform its understanding of the 

potential costs and benefits of extending 

various Regulation E provisions to 

prepaid accounts. As described in 

greater detail below, Bureau staff 

conducted a study of publicly-available 

account agreements for prepaid 

products that appear to meet the 

Bureau’s proposed definition of the term 

‘‘prepaid account.’’ 

A. Focus Groups and Consumer Testing 

As noted above, in formulating this 

notice, the Bureau engaged a third-party 

vendor, ICF International (ICF), to 

coordinate qualitative consumer testing 

consisting of informal focus groups and 

one-on-one interviews. The Bureau 

sought to gain insight about how and 

why consumers use prepaid cards 

(including GPR and payroll cards), as 

well as to see how they interact with 

prototype forms developed by the 

Bureau. Under direction from the 

Bureau, ICF facilitated four focus groups 

in December 2013 to gather in-depth 


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77122 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

178For a detailed discussion of the Bureau’s 

consumer testing, see ICF Report, available at 

http://files.consumerfinance.gov/f/201411_cfpb_

summary-findings-design-testing-prepaid-carddisclosures.pdf. 

179For a detailed discussion of the methodology 

used in the consumer testing, including participant 

selection, see ICF Report, at 2–4. 

180Based on oral responses, it appeared that 

perhaps one out of the forty focus group 

participants may have only used a gift card and not 

a GPR or payroll card. See ICF Report, at 4. 

181The Bureau notes, however, that under the 

proposal, the short form would be disclosed in all 

acquisition scenarios, not just retail stores. See 

section-by-section analysis of § 1005.18(b), below. 

information about how consumer shop 

for prepaid cards and factors they 

consider when acquiring such products. 

Each focus group lasted approximately 

ninety minutes, included eight to ten 

participants, and was held in Bethesda, 

Maryland. In early 2014, ICF facilitated 

three rounds of one-on-one interviews, 

each lasting approximately 60 to 75 

minutes, in Baltimore, Maryland; Los 

Angeles, California; and Kansas City, 

Missouri. Each round included nine or 

ten participants. In conjunction with the 

release of this notice, the Bureau is 

making available a report prepared by 

ICF regarding the focus groups and 

consumer testing (ICF Report).178 The 

testing and focus groups were 

conducted in accordance with OMB 

Control Number 3170–0022. 

A total of sixty-nine consumers 

representing a range of ages, races, and 

education levels participated in the 

focus groups and individual 

interviews.179 Specifically, 40 

consumers participated in the focus 

groups, and 29 consumers participated 

in the interviews. All testing was 

conducted in English, but both the focus 

groups and individual interviews 

included native speakers of languages 

other than English. All participants selfidentified as having used a prepaid card 

in the previous six months (for focus 

group participants) or 12 months (for 

interview participants).180 Several 

participants had payroll cards in 

addition to or in lieu of GPR cards. 

Participants reported that they used 

prepaid cards for a variety of reasons. 

While some participants reported using, 

as applicable, a GPR card or payroll 

card, in lieu of a deposit account, others 

reported that they also had a deposit 

account and used their prepaid cards 

only occasionally. Still others 

specifically mentioned using their cards 

primarily for online purchases. These 

participants expressed the belief that 

prepaid cards addressed some of their 

privacy and security concerns, in that 

cards could remain anonymous and 

cardholders could not lose more funds 

than what they loaded onto the card. 

Some participants, particularly those 

that did not have deposit accounts, 

described prior bad experiences with 

banks in general and overdraft fees on 

checking accounts in particular, in 

explaining why they chose to use a 

prepaid card. 

Focus group findings highlights. Few 

focus group participants reported doing 

any formal comparison shopping before 

purchasing a prepaid card in a retail 

store. Further, while some participants 

who had purchased their cards online 

reported doing more research about 

different cards’ terms and conditions 

pre-purchase, they, too, rarely engaged 

in systematic comparison shopping. 

Most participants reported that they 

were very aware of the fees associated 

with their current prepaid card, but few 

reported understanding all of the fees 

when they purchased their prepaid 

cards. Instead, most reported learning 

about a card’s fees post-acquisition after 

unknowingly incurring certain fees and 

seeing that the fees were deducted from 

their card balance. When asked about 

which fees were most important to 

them, almost all participants cited one 

of the following fees: (1) Monthly 

maintenance fees; (2) per purchase fees; 

(3) ATM withdrawal fees; and (4) cash 

reload fees. ICF also asked participants 

to share their thoughts about how easily 

they could understand the information 

included in on-package disclosures from 

two existing prepaid cards (brand names 

redacted). Comprehension varied. Many 

participants overlooked any asterisks 

included on these disclosures to explain 

how fees may be assessed or how fees 

differ from what was disclosed. 

Participants were also confused about 

whether the disclosures provided a 

comprehensive overview of all potential 

fees. 

Based on the observations from and 

information gathered in focus groups 

and the Bureau’s outreach more 

generally, the Bureau and ICF 

developed several prototype disclosure 

forms to test with participants in the 

individual interview segment of the 

consumer testing. The Bureau and ICF 

focused mainly on designing and testing 

‘‘short form’’ disclosures that would 

highlight key information about a 

hypothetical prepaid product in a 

format that would be easy to 

understand, yet small enough to fit on 

existing packaging material used to 

market prepaid products on J-hooks in 

retail stores.181 The Bureau and ICF 

developed short form prototypes that 

would accommodate prepaid products 

that have a single service plan and 

prototypes for products that have 

multiple service plans. A ‘‘long form’’ 

prototype form that included all of the 

hypothetical prepaid product’s fees was 

also developed. 

Individual interviews findings 

highlights. ICF asked participants 

questions to assess how well they were 

able to comprehend the fees and other 

information included on prototype 

forms. In some cases, ICF asked 

participants to engage in shopping 

exercises to compare fee information 

printed on different prototype forms. 

After each round of testing, ICF 

analyzed and briefed the Bureau on the 

results of testing. The Bureau used this 

feedback to make changes, as necessary, 

to the form design for the following 

round of testing. 

In the first round of testing, the 

Bureau focused on testing a variety of 

prototype short form disclosures. 

Specifically, the Bureau tested short 

forms that: (1) Included a ‘‘top-line’’ of 

four fees displayed more prominently 

than the other fees; (2) grouped similar 

fees by category; or (3) listed fees 

without including either the top-line or 

categories. Generally, participants were 

able to understand the basic fee 

information presented in all of the 

prototype disclosure forms. However, 

many participants expressed a desire for 

a form that is both easy to read and that 

prominently displays the most 

important fee information. These 

participants also expressed that they felt 

that prototype forms that included a 

‘‘top line’’ disclosure of certain fees 

accomplished these objectives. 

Another design issue on which the 

Bureau and ICF focused was whether 

and how to develop a form that might 

not include all of a prepaid product’s 

fees and full explanations of the 

conditions under which those fees 

could be imposed. In other words, the 

Bureau used testing to determine how to 

best present a subset of key information 

about a prepaid product in the short 

form disclosure, while effectively 

indicating to consumers that additional 

information not included on the form 

was also available. The first round’s 

prototype forms included multiple 

asterisks to indicate additional 

information was available for fees that 

could vary in amount. Many 

participants, however, did not notice 

the text associated with the asterisks or 

struggled to accurately identify which 

symbol was associated with which fee. 

In an attempt to improve 

comprehension, the Bureau introduced 

forms in the second round of testing that 

only included a single symbol and 

explanatory sentence to indicate all of 

the fees that might vary on the form. 

This modification appeared to increase 

the frequency with which participants 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77123 

182Eric Goldberg, Prepaid cards: Help design a 

new disclosure, CFPB Blog Post, (Mar.18, 2014), 

http://www.consumerfinance.gov/blog/prepaidcards-help-design-a-new-disclosure/. 

183Available at http://files.consumerfinance.gov/ 

f/201411_cfpb_study-of-prepaid-accountagreements.pdf. 

184See existing §§ 1005.18 and 1005.15, 

respectively. 

185The Bureau does not intend for a program’s 

inclusion in or exclusion from the Study of Prepaid 

Account Agreements to be a determination as to 

whether this proposed rule would or would not 

apply to that prepaid account program. 

noticed the language associated with the 

symbol, and thus, the frequency which 

participants noticed that fees could vary 

also increased. In the third round of 

testing, in addition to reviewing 

additional short form prototypes, 

participants engaged in a shopping 

exercise with a prototype long form 

disclosure to compare the relative utility 

of the short form and long form 

disclosures. 

Before the second round of testing, 

the Bureau also posted a blog on its Web 

site that included two of the prototype 

short form designs used during the 

second round of testing in Los 

Angeles.182 The Bureau invited the 

public to provide impressions of the 

prototypes and suggest how the Bureau 

could improve their design and submit 

their feedback through comments 

directly on the blog, by sending an 

email, or through posting a message to 

the Bureau via social media. The Bureau 

received over 80 comments from 

industry, consumer advocacy groups 

and individual consumers, in addition 

to email submissions and other 

correspondence. These comments 

informed the Bureau’s form design 

process for the third round of testing as 

well as the model forms. 

B. Study of Prepaid Product Features 

In order to better understand existing 

compliance with Regulation E and other 

features and protections currently 

offered by prepaid products, the Bureau 

conducted a study of publicly-available 

account agreements for prepaid 

products that appear to meet the 

Bureau’s proposed definition of the term 

‘‘prepaid account’’ (Study of Prepaid 

Account Agreements).183 Specifically, 

the Bureau sought to determine current 

industry practices in a number of areas 

to inform its understanding of the 

potential costs and benefits of extending 

various Regulation E provisions to 

prepaid accounts. Bureau staff 

examined certain key provisions in the 

account agreements of prepaid cards 

and other similar prepaid programs 

currently available to consumers and 

compared those terms against one 

another and, for some provisions, 

against the protections presently 

provided by Regulation E for payroll 

card accounts and cards used for the 

distribution of certain government 

benefits 184 (and, by virtue the FMS 

Rule, to other prepaid cards receiving 

Federal payments as well). 

The Study of Prepaid Account 

Agreements covers 325 publiclyavailable account agreements for 

prepaid programs that, the Bureau 

believes, could be subject to the 

definition of prepaid account set forth 

in this proposal.185 The analysis 

includes agreements for GPR card 

programs (including GPR cards 

marketed for specific purposes, such as 

travel or receipt of tax refunds, or for 

specific users, such as teenagers or 

students), as well as payroll cards, cards 

used for the distribution of certain 

government benefits, and similar card 

programs were included. Agreements 

for prepaid programs specifically used 

for P2P transfers that appeared to be 

encompassed by the proposed definition 

of prepaid account were also included. 

Gift, incentive and rebate card 

programs, health spending account and 

flexible spending account programs, and 

needs-tested State and local government 

benefit card programs were not included 

in the analysis, as the Bureau is 

proposing to exclude such products 

from this proposed rulemaking. While 

the Bureau collected a large number of 

agreements, it cautions that this 

collection is neither comprehensive or 

nor complete. The Bureau only included 

programs for which agreements were 

readily available online. In addition, 

there does not currently exist any 

comprehensive listing of prepaid card 

issuers, program managers, or programs 

against which the Bureau could 

compare the completeness of its 

analysis. 

The Study of Prepaid Account 

Agreements examines key provisions 

regarding error resolution protections 

(including provisional credit); limited 

liability protections; access to account 

information; overdraft and treatment of 

negative balances and declined 

transaction fees; FDIC (or NCUSIF) passthrough deposit (or share) insurance; 

and general disclosure of fees. Where 

relevant, results of the analysis are 

discussed in the section-by-section 

analysis below. The Study of Prepaid 

Account Agreements is being published 

concurrently with this notice. It 

explains how Bureau staff identified 

publicly available prepaid account 

agreements online for inclusion in the 

analysis. It also discusses the Bureau’s 

methodology, key assumptions, 

observations, and findings for each 

category of review. The Bureau cautions 

that its analysis is, in many ways, 

subjective and thus is not intended to be 

relied upon as an assessment of any 

legal issue including whether a prepaid 

program actually complies with 

Regulation E’s existing provisions 

governing payroll card accounts or cards 

used for the distribution of certain 

government benefits, the FMS Rule, or 

this proposed rule. 

IV. Legal Authority 

A. Electronic Fund Transfer Act 

EFTA section 902 establishes that the 

purpose of the statute is to provide a 

basic framework establishing the rights, 

liabilities, and responsibilities of 

participants in electronic fund and 

remittance transfer systems but that its 

primary objective is the provision of 

individual consumer rights. Among 

other things, EFTA contains provisions 

regarding disclosures made at the time 

a consumer contracts for an electronic 

fund transfer service (EFTA section 

905(a)), notices of certain changes to 

account terms or conditions (EFTA 

section 905(b)), provision of written 

documentation to consumers regarding 

electronic fund transfers (EFTA section 

906), error resolution (EFTA section 

908), consumers’ and financial 

institutions’ liability for unauthorized 

electronic fund transfers (EFTA sections 

909 and 910), and compulsory use of 

electronic fund transfers (EFTA section 

913). With respect to disclosures 

provided prior to opening an account, 

EFTA section 905(a) states that the 

terms and conditions of electronic fund 

transfers involving a consumer’s 

account shall be disclosed at the time 

the consumer contracts for an electronic 

fund transfer service, in accordance 

with regulations of the Bureau. It also 

establishes that the Bureau shall issue 

model clauses for optional use by 

financial institutions to facilitate 

compliance with the disclosure 

requirements of EFTA section 905 and 

to aid consumers in understanding the 

rights and responsibilities of 

participants in electronic fund transfers 

by utilizing readily understandable 

language. As discussed in more detail 

below, proposed revisions to 

§ 1005.18(b) (pre-acquisition disclosure 

requirements) are proposed pursuant to 

the Bureau’s disclosure authority under 

EFTA section 905, and its adjustments 

and exceptions authority under EFTA 

section 904. 

As amended by the Dodd-Frank Act, 

EFTA section 904(a) authorizes the 

Bureau to prescribe regulations 


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77124 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

186See S. Rept. No. 95–1273, at 26 (Oct. 4, 1978). 

187 Dodd-Frank Act section 1002(14) (defining 

‘‘Federal consumer financial law’’ to include the 

‘‘enumerated consumer laws’’ and the provisions of 

title X of the Dodd-Frank Act); Dodd-Frank Act 

section 1002(12) (defining ‘‘enumerated consumer 

laws’’ to include TILA and EFTA). 188TILA section 102(a); 15 U.S.C. 1601(a). 

necessary to carry out the purposes of 

EFTA. As noted above, the express 

purposes of EFTA, are to establish ‘‘the 

rights, liabilities, and responsibilities of 

participants in electronic fund and 

remittance transfer systems’’ and to 

provide ‘‘individual consumer rights.’’ 

EFTA section 902(b). EFTA section 

904(c) further provides that regulations 

prescribed by the Bureau may contain 

such classifications, differentiations, or 

other provisions, and may provide for 

such adjustments or exceptions, for any 

class of electronic fund transfers or 

remittance transfers that the Bureau 

deems necessary or proper to effectuate 

the purposes of EFTA, to prevent 

circumvention or evasion, or to facilitate 

compliance. The Senate Report 

accompanying EFTA noted that 

regulations are ‘‘essential to the act’s 

effectiveness’’ and ‘‘[permit] the 

[Bureau] to modify the act’s 

requirements to suit the characteristics 

of individual EFT services. Moreover, 

since no one can foresee EFT 

developments in the future, regulations 

would keep pace with new services and 

assure that the act’s basic protections 

continue to apply.’’ 186 For reasons 

discussed in this notice, the Bureau is 

proposing amendments to Regulation E 

with respect to prepaid accounts that 

may offer an overdraft service or credit 

feature pursuant to the Bureau’s 

authority under, as applicable, sections 

904(a) and (c). 

B. Section 1022 of the Dodd-Frank Act 

Section 1022(b)(1) of the Dodd-Frank 

Act authorizes the Bureau to prescribe 

rules ‘‘as may be necessary or 

appropriate to enable the Bureau to 

administer and carry out the purposes 

and objectives of the Federal consumer 

financial laws, and to prevent evasions 

thereof.’’ Among other statutes, title X of 

the Dodd-Frank Act, EFTA, and TILA 

are Federal consumer financial laws.187

Accordingly, in adopting this final rule, 

the Bureau is exercising its authority 

under Dodd-Frank Act section 1022(b) 

to prescribe rules under EFTA, TILA, 

and title X that carry out the purposes 

and objectives and prevent evasion of 

those laws. Section 1022(b)(2) of the 

Dodd-Frank Act prescribes certain 

standards for rulemaking that the 

Bureau must follow in exercising its 

authority under section 1022(b)(1). See 

Section 1022(b) Analysis below for a 

discussion of the Bureau’s standards for 

rulemaking under Dodd-Frank Act 

section 1022(b)(2). 

Dodd-Frank Act section 1022(c)(1) 

provides that, to support its rulemaking 

and other functions, the Bureau shall 

monitor for risks to consumers in the 

offering or provision of consumer 

financial products or services, including 

developments in markets for such 

products or services. The Bureau may 

make public such information obtained 

by the Bureau under this section as is 

in the public interest. Dodd-Frank Act 

section 1022(c)(3). Moreover, section 

1022(c)(4) provides that, in conducting 

such monitoring or assessments, the 

Bureau shall have the authority to 

gather information from time to time 

regarding the organization, business 

conduct, markets, and activities of 

covered persons and service providers. 

Proposed § 1005.19 is proposed 

pursuant to the Bureau’s authority 

under Dodd-Frank sections 1022(c) and 

1032(a), as well as its authority under 

EFTA sections 904 and 905. As 

discussed in the section-by-section 

analysis below, proposed § 1005.19 

would mandate the collection of and 

posting by the Bureau of prepaid 

account terms and conditions and 

posting on a Bureau-maintained Web 

site. It would also require that financial 

institutions disclose such terms and 

conditions. 

C. Section 1032 of the Dodd-Frank Act 

Section 1032(a) of the Dodd-Frank Act 

provides that the Bureau ‘‘may prescribe 

rules to ensure that the features of any 

consumer financial product or service, 

both initially and over the term of the 

product or service, are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the product or service, 

in light of the facts and circumstances.’’ 

The authority granted to the Bureau in 

section 1032(a) is broad, and empowers 

the Bureau to prescribe rules regarding 

the disclosure of the ‘‘features’’ of 

consumer financial products and 

services generally. Accordingly, the 

Bureau may prescribe disclosure 

requirements in rules regarding 

particular features even if other Federal 

consumer financial laws do not 

specifically require disclosure of such 

features. 

Dodd-Frank Act section 1032(c) 

provides that, in prescribing rules 

pursuant to section 1032, the Bureau 

‘‘shall consider available evidence about 

consumer awareness, understanding of, 

and responses to disclosures or 

communications about the risks, costs, 

and benefits of consumer financial 

products or services.’’ Accordingly, in 

developing the proposed rule under 

Dodd-Frank Act section 1032(a), the 

Bureau has considered available studies, 

reports, and other evidence about 

consumer awareness, understanding of, 

and responses to disclosures or 

communications about the risks, costs, 

and benefits of consumer financial 

products or services. Moreover, the 

Bureau has considered the evidence 

developed through its consumer testing 

of the model forms as discussed above 

and in the ICF Report. 

In addition, Dodd-Frank Act section 

1032(b)(1) provides that ‘‘any final rule 

prescribed by the Bureau under [section 

1032] requiring disclosures may include 

a model form that may be used at the 

option of the covered person for 

provision of the required disclosures.’’ 

Any model form issued pursuant to that 

authority shall contain a clear and 

conspicuous disclosure that, at a 

minimum, uses plain language that is 

comprehensible to consumers, contains 

a clear format and design, such as an 

easily readable type font, and succinctly 

explains the information that must be 

communicated to the consumer. DoddFrank Act section 1032(b)(2). As 

discussed in more detail below, certain 

portions of the proposed rule are 

proposed pursuant to the Bureau’s 

disclosure authority under Dodd-Frank 

section 1032(a). 

D. The Truth in Lending Act 

As discussed above, TILA is a Federal 

consumer financial law. In adopting 

TILA, Congress explained that: 

[E]conomic stabilization would be 

enhanced and the competition among the 

various financial institutions and other firms 

engaged in the extension of consumer credit 

would be strengthened by the informed use 

of credit. The informed use of credit results 

from an awareness of the cost thereof by 

consumers. It is the purpose of this 

subchapter to assure a meaningful disclosure 

of credit terms so that the consumer will be 

able to compare more readily the various 

credit terms available to him and avoid the 

uninformed use of credit, and to protect the 

consumer against inaccurate and unfair 

credit billing and credit card practices.188

TILA and Regulation Z define credit 

broadly as the right granted by a creditor 

to a debtor to defer payment of debt or 

to incur debt and defer its payment. 

TILA section 103(f); 15 U.S.C. 1602(f); 

12 CFR 1026.2(a)(14); 15 U.S.C. 1602(f). 

TILA and Regulation Z set forth 

disclosure and other requirements that 

apply to creditors. Different rules apply 

to creditors depending on whether they 

are extending ‘‘open-end credit’’ or 

‘‘closed-end credit.’’ Under the statute 

and Regulation Z, open-end credit exists 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77125 

189 71 FR 51437, 51441 (Aug. 30, 2006). 

where there is a plan in which the 

creditor reasonably contemplates 

repeated transactions; the creditor may 

impose a finance charge from time to 

time on an outstanding unpaid balance; 

and the amount of credit that may be 

extended to the consumer during the 

term of the plan (up to any limit set by 

the creditor) is generally made available 

to the extent that any outstanding 

balance is repaid. § 1026.2(a)(20). 

Typically, closed-end credit is credit 

that does not meet the definition of 

open-end credit. § 1026.2(a)(10). 

The term ‘‘creditor’’ generally means 

a person who regularly extends 

consumer credit that is subject to a 

finance charge or is payable by written 

agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract. See 

TILA section 103(g); 15 U.S.C. 1602(g); 

12 CFR 1026.2(a)(17)(i). TILA defines 

finance charge broadly as the sum of all 

charges, payable directly or indirectly 

by the person to whom the credit is 

extended, and imposed directly or 

indirectly by the creditor as an incident 

to the extension of credit. TILA section 

106(a); 12 U.S.C. 1605(a); see 12 CFR 

1026.4. 

The term ‘‘creditor’’ also includes a 

card issuer, which is a person or it’s 

agent that issues credit cards, when that 

person extends credit accessed by the 

credit card. See § 1026.2(a)(17)(iii) and 

(iv); TILA section 103(g); 15 U.S.C. 

1602(g). Regulation Z defines the term 

‘‘credit card’’ to mean any card, plate, or 

other single credit device that may be 

used from time to time to obtain credit. 

See § 1026.2(a)(15). A charge card is a 

credit card on an account for which no 

periodic rate is used to compute a 

finance charge. See § 1026.2(a)(15)(iii). 

In addition to being creditors under 

TILA and Regulation Z, card issuers also 

generally must comply with the credit 

card rules set forth in the FCBA and in 

the Credit CARD Act (if the card 

accesses an open-end credit plan), as 

implemented in Regulation Z subparts B 

and G. See generally §§ 1026.5(b)(2)(ii), 

.7(b)(11), .12 and .51–.60. 

TILA section 105(a). As amended by 

the Dodd-Frank Act, TILA section 

105(a), 15 U.S.C. 1604(a), directs the 

Bureau to prescribe regulations to carry 

out the purposes of TILA, and provides 

that such regulations may contain 

additional requirements, classifications, 

differentiations, or other provisions, and 

may provide for such adjustments and 

exceptions for all or any class of 

transactions, that the Bureau judges are 

necessary or proper to effectuate the 

purposes of TILA, to prevent 

circumvention or evasion thereof, or to 

facilitate compliance. As discussed 

above, pursuant to TILA section 102(a), 

a purpose of TILA is ‘‘to assure a 

meaningful disclosure of credit terms so 

that the consumer will be able to 

compare more readily the various credit 

terms available to him and avoid the 

uninformed use of credit.’’ Moreover, 

this stated purpose is tied to Congress’ 

finding that ‘‘economic stabilization 

would be enhanced and the competition 

among the various financial institutions 

and other firms engaged in the 

extension of consumer credit would be 

strengthened by the informed use of 

credit[.]’’ TILA section 102(a). Thus, 

strengthened competition among 

financial institutions is a goal of TILA, 

achieved through the effectuation of 

TILA’s purposes. 

Historically, TILA section 105(a) has 

served as a broad source of authority for 

rules that promote the informed use of 

credit through required disclosures and 

substantive regulation of certain 

practices. However, Dodd-Frank Act 

section 1100A clarified the Bureau’s 

section 105(a) authority by amending 

that section to provide express authority 

to prescribe regulations that contain 

‘‘additional requirements’’ that the 

Bureau finds are necessary or proper to 

effectuate the purposes of TILA, to 

prevent circumvention or evasion 

thereof, or to facilitate compliance. This 

amendment clarified the authority to 

exercise TILA section 105(a) to 

prescribe requirements beyond those 

specifically listed in the statute that 

meet the standards outlined in section 

105(a). Accordingly, as amended by the 

Dodd-Frank Act, TILA section 105(a) 

authority to make adjustments and 

exceptions to the requirements of TILA 

applies to all transactions subject to 

TILA, except with respect to the 

provisions of TILA section 129 that 

apply to the high-cost mortgages 

referred to in TILA section 103(bb), 15 

U.S.C. 1602(bb). 

For the reasons discussed in this 

notice, the Bureau is proposing 

amendments to Regulation Z with 

respect to certain prepaid accounts that 

are associated with overdraft services or 

credit features to carry out TILA’s 

purposes and is proposing such 

additional requirements, adjustments, 

and exceptions as, in the Bureau’s 

judgment, are necessary and proper to 

carry out the purposes of TILA, prevent 

circumvention or evasion thereof, or to 

facilitate compliance. In developing 

these aspects of the proposal pursuant 

to its authority under TILA section 

105(a), the Bureau has considered the 

purposes of TILA, including ensuring 

meaningful disclosures, facilitating 

consumers’ ability to compare credit 

terms, and helping consumers avoid the 

uninformed use of credit, and the 

findings of TILA, including 

strengthening competition among 

financial institutions and promoting 

economic stabilization. 

V. Section-by-Section Analysis of the 

Proposed Rule 

Regulation E 

Subpart A—General 

Section 1005.2 Definitions 

2(b) Account 

Section 1005.2(b)(1) defines an 

‘‘account’’ for purposes of Regulation E 

as a demand deposit (checking), savings, 

or other consumer asset account (other 

than an occasional or incidental credit 

balance in a credit plan) held directly or 

indirectly by a financial institution and 

established primarily for personal, 

family, or household purposes. As 

discussed above, the Board in 2006 

added a definition for ‘‘payroll card 

account’’ to the definition of account in 

Regulation E. Under the current 

regulation, a payroll card account is an 

account that is directly or indirectly 

established through an employer and to 

which electronic fund transfers of the 

consumer’s wages, salary, or other 

employee compensation (such as 

commissions), are made on a recurring 

basis, whether the account is operated 

or managed by the employer, a thirdparty payroll processor, a depository 

institution or any other person. 

§ 1005.2(b)(2). EFTA and Regulation E 

currently apply to payroll card 

accounts, except as provided in existing 

§ 1005.18. Similar exceptions and other 

provisions specific to accounts used for 

the distribution of government benefits 

are in existing § 1005.15. Gift cards, 

although not included in the § 1005.2(b) 

definition of account, are addressed in 

§ 1005.20. 

The Board, in adopting rules to 

include payroll card accounts within 

the ambit of Regulation E, explicitly 

acknowledged that Regulation E did not, 

at that time, cover general spending 

cards to which a consumer might 

transfer by direct deposit some portion 

of the consumer’s wages.189 As a result, 

some regulators, the prepaid industry, 

and others have thus interpreted 

Regulation E not to apply to various 

types of prepaid products that are not 

payroll card accounts, accounts used for 


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190See, e.g., FMS Rule, 75 FR 80335, 80337 (Dec. 

22, 2010). However, as evidenced by the Study of 

Prepaid Account Agreements, many prepaid 

providers have, for a variety of reasons, elected to 

apply some or all of Regulation E’s provisions (as 

modified by the Payroll Card Rule) to their nonpayroll prepaid products generally. 

191 77 FR 30923, 30925 (May 23, 2012). 

the distribution of government benefits, 

or gift cards.190

After the Bureau assumed authority 

for implementing most of EFTA 

pursuant to the transfer of certain 

authorities from the Board to the Bureau 

under the Dodd-Frank Act, it analyzed 

whether other types of prepaid 

products, in addition to payroll card 

accounts, certain government benefit 

accounts, and gift cards, could or should 

be expressly included within Regulation 

E. In the Prepaid ANPR, the Bureau 

explained that in the six years that had 

elapsed since the Board issued the 

Payroll Card Rule, the prepaid card 

market had changed markedly. Beyond 

just industry growth, consumers also 

have increasingly used prepaid products 

the same way other consumers use 

traditional demand deposit accounts. 

Further, as general use prepaid cards 

become a more accepted and wellknown alternative financial product, the 

difference between prepaid and 

traditional deposit accounts begins to 

blur. Thus, the Bureau sought comment 

in the Prepaid ANPR on how the Bureau 

should define GPR cards in the context 

of Regulation E and whether certain 

prepaid products should not be 

included in this definition, such as 

cards that may serve a limited purpose 

(e.g., university cards or health 

spending cards).191

In the first instance, most commenters 

to the Prepaid ANPR (industry, 

consumer advocacy groups, and others) 

did not object to bringing prepaid 

products within the ambit of Regulation 

E, at least at some broad level. While 

there were some concerns from industry 

and others, which are discussed further 

below, about exactly which types of 

prepaid products the Bureau might 

subject to Regulation E, most 

commenters favored inclusion of GPR 

cards, with some reservations about 

specific provisions of the rule. Among 

other reasons, several trade associations 

noted that insofar as many GPR card 

issuers and program managers already 

voluntarily comply with Regulation E, 

the Bureau should formalize GPR cards’ 

inclusion in Regulation E as a means of 

standardizing protections for 

consumers. 

Most comments focused on the types 

of prepaid products the Bureau should 

include in this rulemaking and the 

scope of any resulting rules. Many 

industry commenters urged the Bureau 

to focus its rulemaking only on those 

products that consumers can or do use 

in the same ways as traditional demand 

deposit accounts. Many commenters 

contrasted such products, which 

include GPR cards (which do not have 

limits on where and how consumers can 

use the product), with those that are 

issued with restrictions on use. 

Commenters suggested, for example, 

that the Bureau exclude Health Savings 

Account cards because they cannot be 

used in the place of a traditional 

demand deposit account due to 

limitations on their use. Similarly, 

industry commenters also suggested that 

the Bureau exclude limited-use transit 

cards, university cards, and mall cards. 

Some industry commenters also urged 

the Bureau to exclude certain corporaterelated cards, such as those used for 

expense reimbursement or for 

distribution of health or transit benefits. 

Within this vein, industry commenters 

also suggested that the Bureau exclude 

cards used to disburse insurance 

payments because, one commenter 

argued, they are not part of the class of 

consumer asset accounts intended to be 

regulated under Regulation E. Another 

industry commenter argued that cards 

that are not reloadable by the consumer 

or that are corporate-funded typically 

serve a limited audience for a limited 

use and therefore should not be covered 

by the proposed rule. Further, these 

commenters warned that if such cards 

were covered by the definition of 

prepaid accounts, the cost of adding 

Regulation E protections could cause 

issuers of those cards to discontinue 

offering them. 

In addition, industry commenters 

disagreed over whether the Bureau 

should limit its proposed rule to 

products represented by physical cards 

or whether it should also include other 

types of prepaid products such as those 

that are entirely online (and might use 

a barcode or QR code displayed on a 

mobile device such as a smartphone or 

other online means to interact with a 

payment network). One prepaid card 

distributor commenter urged the Bureau 

to include these non-card products 

because such products may have the 

same features as physical cards. 

However, commenters urged the Bureau 

to distinguish between digital wallets 

that simply store payment credentials 

for other accounts or cards and those 

non-card products that in fact store 

funds themselves. To the extent that the 

credentials loaded into a digital wallet 

are for other accounts are protected by 

Regulations E or Z, commenters argued 

that those products should provide 

consumers with sufficient protections 

without direct regulation of the wallets 

themselves. With the exception of these 

few topics, however, industry 

commenters generally discussed how 

Regulation E’s substantive requirements 

should be tailored to prepaid products 

rather than what products should be 

defined as prepaid accounts in the first 

instance. These comments are discussed 

in detail below. 

Consumer group commenters 

generally did not favor restrictions on 

any definition the Bureau might 

propose; they instead favored inclusion 

of limited purpose products such as 

university cards, health spending cards, 

and other similar products. They argued 

that the Bureau should include in its 

proposed definition all products that act 

like debit cards and that are currently 

not covered by Regulation E, as well as 

certain reloadable gift cards. Like many 

industry commenters, consumer groups 

urged the Bureau to apply Regulation E 

to those prepaid products that 

consumers can use as transaction 

account substitutes because, in part, 

consumers do not know that debit cards 

may have protections that prepaid 

products lack. The consumer groups 

diverged from industry commenters, 

however, by largely urging the Bureau 

not to modify the substantive 

requirements of Regulation E in 

applying them to prepaid products. 

These differences are discussed in detail 

below. 

In addition to reviewing the 

comments it received on the Prepaid 

ANPR, the Bureau has conducted 

significant outreach to aid its 

understanding of the scope and 

diversity of the prepaid product 

marketplace. In particular, the Bureau 

has spoken with prepaid card program 

managers, issuers, distributors, 

processors, and other parties involved 

in various aspects of the prepaid card 

industry, as well as government 

agencies and non-profits that are 

involved in administering prepaid card 

programs. This outreach has included 

providers of prepaid products that are 

not sold to consumers, such as prepaid 

cards used to distribute financial aid to 

students and insurance payouts to 

consumers. The Bureau understands 

(based on its outreach efforts as well as 

its Study of Prepaid Account 

Agreements) that many providers of 

prepaid products voluntarily comply 

with most or all of Regulation E, as it 

applies to payroll card accounts. As 

discussed in detail below, the Bureau 

believes that objections about the 

burden of including various types of 

products within the ambit of this 

proposed rule are largely negated by the 


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192See S. Rept. No. 95–915, at 2–3 (1978) and 

H.R. Rept. No. 95–1315, at 2–4 (1978). 

193 71 FR 51441 (Aug. 30, 2006). 

194 71 FR 1473, 1475 (Jan. 10, 2006) (also noting 

that GPR cards are ‘‘generally designed to make 

one-time or a limited number of payments to 

consumers and are not intended to be used on a 

long-term basis’’). 

195See, e.g., Fed. Deposit Ins. Corp, Appendix to 

2013 FDIC National Survey of Unbanked and 

Underbanked Households (Oct. 2014) (2013 FDIC 

Survey), at 55, available at https://www.fdic.gov/

householdsurvey/2013report.pdf (finding that for 

households that reloaded prepaid debit cards in the 

last 12 months, 17.7 percent of all households and 

27.7 percent of unbanked households did so via 

direct deposit of a paycheck). 

196See, e.g., id. at 48 (finding that for all 

households that used prepaid debit cards in the last 

12 months, 44.5 percent did so to pay for everyday 

purchases or to pay bills and 19.4 percent did so 

to receive payments). 

197See, e.g., id. (finding that finding that for 

unbanked households that used prepaid debit cards 

in the last 12 months, 65 percent did so to pay for 

everyday purchases or to pay bills and 41.8 percent 

did so to receive payments). 

fact that a significant majority of these 

products are already substantially in 

compliance with existing Regulation E 

provisions. 

In developing this proposal, the 

Bureau first considered the applicability 

of EFTA to prepaid products. EFTA, 

among other things, governs 

transactions that involve an electronic 

fund transfer to or from a consumer’s 

account. It defines an account to be ‘‘a 

demand deposit, savings deposit, or 

other asset account . . . as described in 

regulations of the Bureau, established 

primarily for personal, family, or 

household purposes. . . .’’ EFTA 

section 903(2), 15 U.S.C. 1693a(2). 

Insofar as the statute defines account 

broadly to include any other asset 

account and for the other reasons 

discussed below, the Bureau believes it 

is reasonable to interpret ‘‘account’’ in 

EFTA to include prepaid accounts. 

Thus, it proposes to include prepaid 

accounts expressly within Regulation 

E’s definition of account. To clarify the 

scope of the proposed rule and to 

modify Regulation E to reflect the 

characteristics of prepaid accounts, the 

Bureau proposes to modify the 

definition of ‘‘account’’ under 

§ 1005.2(b) to create a specific subdefinition for prepaid account. 

The Bureau believes that proposing to 

apply Regulation E to prepaid accounts 

is appropriate for several reasons. As 

noted above and by many commenters, 

prepaid products are more frequently 

being used today by consumers as 

transaction account substitutes. In 

particular, GPR cards (including those 

sold at retail locations and online) are 

increasingly being used by consumers as 

a substitute for a checking account, 

credit card, or both. The Bureau also 

understands that consumers use other 

types of prepaid products as transaction 

account substitutes as well. For 

example, students may receive financial 

aid disbursements onto prepaid cards 

that the students then use as their 

primary transaction vehicle during the 

school term. Insurers may pay out 

insurance claims for property or 

casualty losses or workers’ 

compensation claims onto prepaid 

cards. Consumers, in turn, may use this 

card as their primary transaction vehicle 

until the funds are depleted. 

The Bureau recognizes that not all 

consumers use prepaid products as 

transaction account substitutes and that 

not all types of prepaid products lend 

themselves to use as transaction account 

substitutes. Nevertheless, the Bureau 

believes that the features of non-GPR 

card prepaid products as well as the 

ways consumers can and do use those 

products warrant their inclusion as 

prepaid accounts for several reasons. 

First, inclusion aligns appropriately 

with the purposes of EFTA. The 

legislative history of EFTA indicates 

that Congress’ primary goal was to 

protect consumers using electronic fund 

transfer services. Although, at the time, 

providers of electronic payment services 

argued that enactment of EFTA was 

premature and that the electronic 

payment market should be allowed to 

develop further on its own, Congress 

believed that establishing a framework 

of rights and duties for all parties would 

benefit both consumers and 

providers.192 Likewise, the Bureau 

believes that now it is appropriate to 

establish such a framework for prepaid 

accounts, because doing so would 

benefit both consumers and providers. 

In addition, were it to finalize this 

proposal, the Bureau believes that 

consumers will be better able to assess 

the risks of using prepaid products. 

Indeed, the Bureau is concerned that 

because prepaid cards can be so similar 

to credit and debit cards (which are 

protected under Regulations Z and E), 

consumers may not realize that their 

prepaid cards lack the same benefits and 

protections as those other cards. This 

proposal, if finalized, would serve to 

make these protections more consistent 

and eliminate a regulatory gap. 

Second, the Bureau believes that the 

Board’s reasoning in 2006 for excluding 

GPR cards from the Payroll Card Rule is 

now, eight years later, no longer 

applicable. At the time, the Board 

concluded that it was premature to 

cover other prepaid cards under 

Regulation E because, in its view of the 

marketplace at that time, consumers did 

not often use prepaid cards in the same 

way that they used payroll cards; the 

Board noted, ‘‘for payroll card accounts 

that are established through an 

employer, there is a greater likelihood 

[than for GPR cards] that the account 

will serve as a consumer’s principal 

transaction account and hold significant 

funds for an extended period of 

time.’’ 193 The Board also noted that, in 

its opinion, to the extent that consumers 

use GPR cards like gift cards, 

‘‘consumers would derive little benefit 

from receiving full Regulation E 

protections for a card that may only be 

used on a limited, short-term basis and 

which may hold minimal funds, while 

the costs of providing Regulation E 

initial disclosures, periodic statements, 

and error resolution rights would be 

quite significant for the issuer.’’ 194

Third, consumers’ use of prepaid 

products has evolved significantly since 

2006. Although some consumers may 

continue to treat GPR cards and other 

prepaid products as if they were gift 

cards, many do not. Many consumers 

now use other types of prepaid products 

in the same ways and to fill the same 

needs as they did payroll card accounts 

in 2006. Consumers can and do have 

wages and/or benefits loaded onto 

prepaid cards through direct deposit 

and thus may load substantial sums 

onto their cards.195 Consumers use 

prepaid cards for a variety of purposes, 

including making purchases, paying 

bills, and receiving payments.196 For 

those consumers without other 

transaction accounts, they may depend 

entirely on their prepaid cards to meet 

their payment account needs.197 As a 

result, the Bureau believes that such 

products should be considered 

consumer asset accounts subject to 

EFTA and Regulation E. The Bureau 

notes that while not all prepaid 

products can or will be used as 

transaction account substitutes, the 

proposed prepaid account definition 

discussed below appropriately includes 

a variety of prepaid product types that 

the Bureau believes warrant protection 

under Regulation E. The Bureau is 

concerned that to try to carve out very 

specific types of products that are, or 

can be, used for short-term limited 

purposes is complicated and could 

result in consumer confusion as to what 

protections might apply to otherwise 

indistinguishable products. 

As the Bureau’s consumer testing and 

industry studies have shown, many 

consumers are using prepaid accounts 

in the same ways as they use other types 

of accounts, such as debit and credit 

card accounts. Even if not all consumers 


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198See, e.g., ICF Report, at 10 (noting that ‘‘When 

asked what would happen if there were a 

fraudulent or inaccurate charge on their prepaid 

account, most participants believed that their 

prepaid card provider would credit the funds to 

their account. This belief seemed to be based almost 

exclusively on prior experiences with prepaid card 

providers and other financial institutions, rather 

than an understanding of any legal protections that 

may or may not exist.’’) 

199See 75 FR 16580, 16588 (Apr. 1, 2010). 

Congress also used this definition of prepaid card 

in the Dodd-Frank Act provisions governing debit 

card interchange and routing requirements. DoddFrank Act section 1075, EFTA section 

920(a)(7)(A)(ii), 15 U.S.C. 1693o–2(a)(7)(A)(ii). 

200Section 1005.20(a)(3) defines the term general 

use prepaid card as ‘‘a card, code, or other device 

that is: (i) Issued on a prepaid basis primarily for 

personal, family, or household purposes to a 

consumer in a specified amount, whether or not 

that amount may be increased or reloaded, in 

exchange for payment; and (ii) Redeemable upon 

presentation at multiple, unaffiliated merchants for 

goods or services, or usable at automated teller 

machines.’’ 

use their prepaid accounts in this way, 

consumers may not realize that, in many 

ways, their prepaid accounts may 

provide fewer protections than 

substitute products (and, in fact, may 

expect their prepaid cards to be 

safer).198 Further, to the extent the 

Board determined that consumers in 

2006 did not use prepaid accounts in a 

way that warranted regulatory 

protections, the Bureau believes that 

those conditions no longer exist. As 

discussed in detail below, the Bureau is 

proposing to bring a broad range of 

prepaid products within the ambit of 

Regulation E and also is proposing to 

modify certain substantive provisions of 

Regulation E as appropriate for different 

types of prepaid accounts. 

In crafting the proposed definition of 

prepaid account, the Bureau has focused 

on prepaid product attributes and 

consumer use cases. While consumers 

are increasingly using prepaid accounts 

as transaction account substitutes, the 

Bureau does realize, as discussed above, 

that not all consumers will use prepaid 

accounts in that way and that many 

continue to maintain checking and other 

deposit accounts while also using 

prepaid accounts. The Bureau also 

acknowledges that certain accounts 

subject to the proposed definition (e.g., 

products usable only for person-toperson transfers and products that 

cannot be reloaded) cannot be used as 

transaction account substitutes. 

Nevertheless, because the Bureau 

believes that consumer protections are 

best understood when they apply evenly 

across like products, the Bureau is 

proposing a definition that would focus 

on attributes relating to how prepaid 

accounts are issued and used, instead of 

how or where they are loaded (and by 

whom). The Bureau believes it 

appropriate to cast a wide net in 

including products within the proposed 

definition of prepaid account even if, as 

discussed further below, it may also be 

appropriate to adjust certain provisions 

in Regulation E depending on a 

particular product’s features and how it 

can be used. 

The proposed definition of prepaid 

account is discussed below. It is 

followed by a discussion of the 

modifications and limitations the 

Bureau is proposing for that definition. 

Finally, the new requirements and 

modifications the Bureau is proposing 

to Regulation E for prepaid accounts are 

discussed. 

2(b)(2) Bona Fide Trust Account 

The current definition of account in 

Regulation E includes an exception for 

bona fide trust accounts. See existing 

§ 1005.2(b)(3). To accommodate the 

proposed definition for the term prepaid 

account and a proposed adjustment to 

the definition of payroll card account, 

the Bureau proposes to renumber the 

exception for bona fide trust accounts as 

§ 1005.2(b)(2) without any substantive 

changes to the exception. Note that to 

accommodate this proposed change, the 

Bureau does not need to renumber 

existing comments 2(b)(2)–1 and –2 

because those comments are currently 

misnumbered in the Official 

Interpretations to Regulation E. 

2(b)(3) Prepaid Account 

Overview 

In determining to propose revisions to 

Regulation E’s definition of account to 

include prepaid accounts, the Bureau 

considered which types of prepaid 

products should be covered by its 

proposed definition. As discussed 

below, the Bureau proposes to add new 

§ 1005.2(b)(3) to set forth this proposed 

definition. 

2(b)(3)(i) 

Proposed § 1005.2(b)(3)(i) would 

define the term prepaid account as a 

card, code, or other device, that is not 

otherwise an account under 

§ 1005.2(b)(1), that is established 

primarily for personal, family, or 

household purposes, and that satisfies 

three additional criteria as laid out in 

proposed § 1005.2(b)(3)(i)(A) through 

(C), discussed below. 

The Bureau’s proposed definition of 

prepaid account is based on the 

formulation for the definition of generaluse prepaid card in the Gift Card Rule 

(§ 1005.20). As the Board noted when it 

adopted the Gift Card Rule, that 

definition of general-use prepaid card 

largely tracks the language of the Credit 

CARD Act as codified in EFTA Section 

915(a)(2)(A).199 The Bureau examined 

other similar definitions, such as those 

used in FinCEN’s Prepaid Access Rule 

or in the Board’s Regulation II, but 

believes that its proposed approach 

aligns, as explained in detail below, best 

with the types of prepaid products the 

proposed definition is intended to cover 

and with the purposes of EFTA and 

Regulation E. The Bureau believes that 

its proposed definition closely calibrates 

to the products that it intends to cover 

as well as provides greater consistency 

within Regulation E. 

Proposed comment 2(b)(3)(i)–1 would 

clarify that for purposes of subpart A to 

Regulation E, except for § 1005.17 

(requirements for overdraft services), the 

term ‘‘debit card’’ also includes a 

prepaid card. 

The first part of the proposed 

definition—an account established 

primarily for personal, family, or 

household purposes—mirrors a portion 

of the existing definition of account. See 

§§ 1005.2(b)(1). Proposed comment 

2(b)(3)(i)–2 would explain that proposed 

§ 1005.2(b)(3) applies only to cards, 

codes, or other devices that are acquired 

by or provided to a consumer primarily 

for personal, family, or household 

purposes. For further commentary 

interpreting this phrase, proposed 

comment 2(b)(3)(i)–2 would refer to 

existing comments 20(a)–4 and –5. 

2(b)(3)(i)(A) 

Proposed § 1005.2(b)(3)(i)(A) would 

define a prepaid account as either 

issued on a prepaid basis to a consumer 

in a specified amount or not issued on 

a prepaid basis but capable of being 

loaded with funds thereafter. 

This portion of the proposed 

definition expands upon the phrase 

‘‘issued on a prepaid basis’’ used in the 

Gift Card Rule’s definition of generaluse prepaid card in § 1005.20(a)(3).200

However, the Bureau seeks to ensure 

that accounts that are not loaded at 

acquisition are nonetheless eligible to be 

prepaid accounts. Unlike gift cards, 

which are typically loaded with value at 

purchase, other types of prepaid 

products may be issued before a 

consumer or third party loads value 

onto it (e.g., payroll card accounts). The 

Bureau believes that the Gift Card Rule’s 

limitation is unnecessary and 

inappropriate with respect to its 

definition for prepaid accounts. Thus, 

because the Bureau believes that 

prepaid products should be subject to 

the same protections regardless of the 

timing of loading, the proposed 

definition also includes a prepaid 

product that is ‘‘not issued on a prepaid 


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201See 71 FR 51437, 51441 (Aug. 30, 2006). 

basis but capable of being loaded with 

funds thereafter.’’ 

The Bureau is also proposing this 

approach in part because it is concerned 

that prepaid providers could restructure 

existing products to avoid coverage by 

the proposed rule if they were to 

separate account acquisition from initial 

funding. For example, a GPR card 

provider could create a card product 

that did not require an initial load at the 

time of purchase or a university could 

give a card to a student prior to the 

disbursement of financial aid and, 

without the proposed additional 

language, could be outside the proposed 

rule. The Bureau believes that by 

making the scope of the proposed 

definition broad it will limit attempts to 

evade the proposed consumer 

protections for prepaid accounts. In 

addition, the Bureau believes that this 

proposed provision would ensure that 

consumers who use prepaid accounts 

receive the protections in this proposed 

rule—particularly the pre-acquisition 

disclosures regarding fees and other key 

terms—prior to and upon establishment 

of the account. 

Proposed comment 2(b)(3)(i)–3 would 

clarify that to be ‘‘issued on a prepaid 

basis,’’ a prepaid account must be 

loaded with funds when it is first 

provided to the consumer for use. For 

example, if a consumer purchases a 

prepaid account and provides funds that 

are loaded onto a card at the time of 

purchase, the prepaid account is issued 

on a prepaid basis. A prepaid account 

offered for sale in a retail store is not 

issued on a prepaid basis until 

purchased by the consumer. 

Proposed comment 2(b)(3)(i)–4 would 

clarify what types of accounts would 

satisfy the portion of the proposed 

prepaid account definition regarding an 

account that is not issued on a prepaid 

basis but is capable of being loaded with 

funds thereafter. Specifically, proposed 

comment 2(b)(3)(i)–4 would explain that 

a prepaid account that is not issued on 

a prepaid basis but is capable of being 

loaded with funds thereafter includes a 

prepaid card issued to a consumer with 

a zero balance to which funds may be 

loaded by the consumer or a third party 

subsequent to issuance. This does not 

include a product that can never store 

funds, such as digital wallet that only 

holds payment credentials for other 

accounts. 

Proposed comment 2(b)(3)(i)–5 would 

clarify that to satisfy proposed 

§ 1005.2(b)(3)(i)(A), a prepaid account 

must either be issued on a prepaid basis 

or be capable of being loaded with 

funds. This means that the prepaid 

account must be capable of holding 

funds, rather than merely acting as a 

pass-through vehicle. For example, if a 

product is only capable of storing a 

consumer’s payment credentials for 

other accounts but is incapable of 

having funds stored on it, such a 

product would not be a prepaid 

account. However, if a product allows a 

consumer to transfer funds, which can 

be stored before the consumer 

designates a destination for the funds, 

the product would satisfy proposed 

§ 1005.2(b)(3)(i)(A). 

With these examples, the Bureau 

seeks to make clear that it does not 

intend to extend the proposed definition 

of prepaid account to a product that can 

never store funds. To the extent that a 

digital wallet, for example, merely 

stores payment credentials (e.g., a 

consumer’s bank account or payment 

card information), rather than storing 

the funds themselves, the digital wallet 

would not be considered a prepaid 

account under the proposed rule. If, 

however, a digital wallet allows a 

consumer to store funds in it directly, 

then the digital wallet would be a 

prepaid account if the other criteria of 

the proposed definition are also met. 

The Bureau proposes not to limit its 

definition to prepaid accounts that are 

reloadable, as explained in proposed 

comment 2(b)(3)(i)–6, which would 

provide that prepaid accounts need not 

be reloadable by the consumer or a third 

party. Some industry commenters to the 

Prepaid ANPR urged the Bureau to limit 

this proposed rule to those products that 

can be reloaded by a consumer. One of 

these commenters urged exclusion for 

cards issued pursuant to a special 

arrangement (such as insurance cards), 

arguing that such cards are quite 

different than GPR cards since they are 

not reloadable by the consumer. These 

commenters did not cite specific 

evidence to provide a basis for such a 

rationale. On the other hand, some 

industry commenters and several 

consumer group commenters suggested 

a more expansive rule based on how the 

consumer expects to use the card, rather 

than on how it may be loaded with 

funds. 

The Bureau believes that it would be 

inappropriate to exclude a product from 

the definition of prepaid account based 

on whether it can be reloaded or who 

can (or cannot) load funds into the 

account. First, products that may limit 

consumers from loading funds include 

payroll card accounts, which are already 

subject to Regulation E. Other products 

reloadable only by a third party also 

may hold funds which similarly 

represent a meaningful portion of a 

consumer’s available income. This may 

be true, for example, for students 

receiving financial aid disbursements or 

a consumer receiving worker’s 

compensation payments. The Bureau 

believes that, like consumers relying on 

payroll card accounts, which the Board 

previously acknowledged should be 

protected by Regulation E,201 consumers 

may use these products as transaction 

account substitutes even when 

consumers cannot reload the cards 

themselves, and thus such products 

should be similarly protected. 

Second, the Bureau does not believe 

that non-reloadable prepaid products 

should have fewer protections than 

reloadable products. While it is true that 

consumers may not generally use nonreloadable products as transaction 

account substitutes given that the funds 

will eventually be spent down in their 

entirety, the Bureau believes that 

extending protections to all broadly 

usable prepaid accounts is beneficial to 

consumers. As noted, consumers may 

not realize the differences between 

protections available for traditional 

debit cards and prepaid cards and even 

less so between different types of 

prepaid products. Providers’ marketing 

strategies could exacerbate these 

concerns. To the extent prepaid 

accounts are marketed as being ‘‘safer’’ 

than other products, consumers are less 

likely to understand technical and legal 

differences in regulatory coverage. 

Third, if the Bureau excluded nonreloadable cards from the definition of 

prepaid account, a provider intent on 

evading Regulation E could issue nonreloadable cards repeatedly to the same 

consumer instead of reloading a covered 

reloadable card. Including nonreloadable products (that otherwise 

meet the relevant criteria) in the 

proposed definition of prepaid account 

would eliminate this possibility. 

Nevertheless, the Bureau seeks 

comment on the scope of this part of the 

proposed definition, including as to 

specific types of prepaid products that 

should be included or excluded from 

coverage, as well as the rationale for 

inclusion or exclusion. In particular, the 

Bureau seeks comment on whether the 

definition as proposed could have the 

unintended consequence of including 

products that do not warrant protection 

by the Bureau as well as any additional 

concerns regarding products covered by 

the proposed definition. The Bureau 

requests that commenters specifically 

identify the reasons why inclusion of 

particular products in the definition of 

prepaid account would be burdensome 

to providers or not beneficial to 

consumers, including relevant data to 

support claims where available and 

appropriate. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77130 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

202See 75 FR 16580, 16588 (Apr. 1, 2010). 

203The Gift Card Rule explains that a card, code, 

or other device is redeemable upon presentation at 

multiple, unaffiliated merchants if, for example, 

such merchants agree to honor the card, code, or 

device if it bears the mark, logo, or brand of a 

payment network, pursuant to the rules of the 

payment network. See comment 20(a)(3)–1. 

204See, e.g., Dan Rutherford, Giving or receiving 

gift cards? Know the terms and avoid surprises, 

CFPB Blog Post (Dec. 21, 2012), http://

www.consumerfinance.gov/blog/giving-or-receivinggift-cards-know-the-terms-and-avoid-surprises/. 

The Bureau’s proposed definition 

does not focus on particular products 

based on how they are distributed— 

such as GPR cards sold at retail 

locations or payroll card accounts 

distributed by employers—but instead 

focuses on the characteristics of a 

product—such as whether it can store 

funds and how it can be used by a 

consumer. An alternative approach 

would have been to list specific types of 

products. The Bureau is not proposing 

such an approach because it believes 

that it is difficult to craft such a list that 

would remain accurate as products 

evolve and that such a list would create 

opportunities for evasion. Finally, the 

Bureau also requests comment on 

whether it should adopt specific 

exceptions to the proposed definition. 

2(b)(3)(i)(B) 

The next part of the proposed 

definition of prepaid account addresses 

how such products must be able to be 

used to be considered a prepaid 

account. As the Board noted in adopting 

the Gift Card Rule, a key difference 

between a general-use prepaid card and 

a store gift card is where the card can 

be used.202 While store gift cards and 

gift certificates can be used at only a 

single merchant or an affiliated group of 

merchants (see § 1005.20(a)(1)(ii) and 

(2)(ii)), a general-use prepaid card is 

defined, in part, as redeemable upon 

presentation at multiple, unaffiliated 

merchants for goods or services, or 

usable at automated teller machines 

(§ 1005.20(a)(3)(ii)). In response to the 

Prepaid ANPR, commenters largely 

urged that the Bureau maintain this 

distinction. As noted above, some 

industry commenters also urged the 

Bureau to exclude from the proposed 

rule those products that are issued with 

restrictions on how or where they can 

be used, such as health savings account 

cards and certain transit cards. 

The Bureau is proposing to add 

§ 1005.2(b)(3)(i)(B), which would state 

that to qualify as a prepaid account, the 

card, code or other device must be 

redeemable upon presentation at 

multiple, unaffiliated merchants for 

goods or services, usable at automated 

teller machines, or usable for person-toperson transfers. Proposed comment 

2(b)(3)(i)–7 would refer to existing 

comments 20(a)(3)–1 and –2 from the 

Gift Card Rule for guidance regarding 

the meaning of the phrase multiple, 

unaffiliated merchants.203

The Bureau believes it is appropriate 

to limit the definition of prepaid 

account to those products that 

consumers can use at multiple 

unaffiliated merchants for goods or 

services, at ATMs, or for P2P transfers. 

First, a core feature of a conventional 

debit card is that it is usable at multiple, 

unaffiliated merchants and at ATMs. 

Insofar as a purpose of this rulemaking 

is to provide comparable coverage for 

products with comparable 

functionality—in this case traditional 

debit cards and prepaid cards—it is 

appropriate to structure the proposed 

definition in a way that products with 

similar features have the protections 

afforded by Regulation E. Additionally, 

insofar as the Bureau understands that 

consumers expect to have equivalent 

protections on prepaid accounts that 

they do on accounts linked to debit 

cards, it is appropriate to include in the 

definition of prepaid account those 

products that have attributes similar to 

debit cards. 

In other words, a prepaid account 

would be one that is accepted widely at 

unaffiliated merchants, rather than only 

a single merchant or specific group of 

merchants, such as those located on a 

college campus or within a mall or 

defined shopping area. The Bureau 

believes that products usable at a single 

merchant (e.g., a merchant’s gift card) 

do not warrant equivalent protections at 

this time. The Bureau believes it is 

appropriate to exclude closed loop gift 

cards from this rulemaking because of 

how they differ from other prepaid 

products and traditional debit cards. 

Not only can closed loop gift cards not 

be used in lieu of more traditional 

banking products, but they also cannot 

be used for P2P transfers or in any other 

way other than transacting with a 

merchant on the closed loop. As a 

result, consumers are less likely to load 

funds needed for day-to-day use or to 

load a substantial amount of funds onto 

such a card. Thus, the Bureau does not 

believe it appropriate to provide those 

products with the same protections at 

this time. While consumers may 

mistakenly assume that protections that 

apply to debit cards also apply to 

general-use prepaid cards, they are 

unlikely to be similarly confused with 

respect to closed loop gift cards. Indeed, 

consumers often do not register gift 

cards and are frequently instructed to 

treat them like cash.204 However, as 

merchants and others increasingly move 

to accepting card-based payments for 

their products and services, prepaid 

accounts have become more viable 

substitutes for more traditional financial 

products and services. 

Prepaid products are also growing in 

popularity as a vehicle for consumers to 

transmit payments to each other or to 

businesses. The Bureau has identified 

an increasing number of products that 

allow consumers to make P2P or P2B 

payments without using a third-party 

branded payment network. These 

services may not always have wide 

merchant acceptance, but they do allow 

consumers to send money to other 

consumers and businesses. While some 

P2P transfer products may also be 

usable at an ATM or redeemable at 

multiple, unaffiliated merchants, some 

are not. However, unlike many limiteduse prepaid products that have 

acceptance limited to a restricted 

location (such as on a college campus or 

in a mall), P2P products do not have 

such a limitation. Indeed, insofar as a 

P2P product may be accepted by anyone 

that contracts with the P2P provider, the 

model is not very different from a card 

association that contracts with 

unaffiliated merchants. Further, insofar 

as consumers may use these products to 

pay anyone with funds stored in the 

account, the Bureau believes that they 

should be included in the proposed 

definition of prepaid account. 

The Bureau recognizes, however, that 

a product that is solely usable for 

storing funds and P2P transfers is 

different from other types of prepaid 

accounts, such as GPR cards. The 

Bureau believes that there is benefit to 

consumers in harmonizing those 

protections with those currently offered 

(and, if the proposal is finalized, that 

will be offered) by other types of 

prepaid accounts. Thus, the Bureau 

proposes to add new comment 

2(b)(3)(i)–8 to further explain when 

accounts capable of P2P transfers are 

prepaid accounts. Specifically, the 

comment would explain that a prepaid 

account capable of person-to-person 

transfers is an account that allows a 

consumer to send funds to another 

consumer or business. An account may 

qualify as a prepaid account if it permits 

person-to-person transfers even if it is 

neither redeemable upon presentation at 

multiple, unaffiliated merchants for 

goods or services, nor usable at ATMs. 

A transaction involving a store gift card 

would not be a person-to-person transfer 

if it could only be used to make 

payments to the merchant or affiliated 

group of merchants on whose behalf the 

card was issued. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77131 

205The Gift Card Rule defines a general-use 

prepaid card as ‘‘a card, code, or other device that 

is: (i) Issued on a prepaid basis primarily for 

personal, family, or household purposes to a 

consumer in a specified amount, whether or not 

that amount may be increased or reloaded, in 

exchange for payment; and (ii) Redeemable upon 

presentation at multiple, unaffiliated merchants for 

goods or services, or usable at automated teller 

machines.’’ § 1005.20(a)(3). 

206See, e.g., Fed. Trade Comm’n, Consumer 

Information: Gift Cards (Feb. 2011), https://

www.consumer.ftc.gov//0182-gift-cards (Web page 

providing consumers with general information on 

buying and using gift cards). 

The Bureau seeks comment on this 

portion of its proposed definition of 

prepaid account. In particular, the 

Bureau solicits comment on P2P 

payment products and whether they 

warrant inclusion in this rule. Note, of 

course, that a P2P payment product 

must satisfy the other requirements of 

the proposed rule to be a prepaid 

account, including that the product be 

capable of storing funds. The Bureau 

also seeks comment on whether there 

are specific types of products that offer 

P2P services that the Bureau should 

specifically exempt, such as those that 

are provided or established by an 

employer primarily for use at an 

affiliated group of merchants even if 

those products can be used to make 

occasional or incidental transfers to 

other employees, or for P2P products 

that are not available to the general 

public. 

2(b)(3)(i)(C) 

Regulation E’s gift card provisions 

cover some prepaid products that also 

could fall within the proposed 

definition of prepaid account as 

described above. In particular, § 1005.20 

contains provisions applicable to gift 

certificates, store gift cards, and generaluse prepaid cards.205 For those products 

marketed and sold as gift cards (and that 

meet certain other qualifications), the 

Gift Card Rule requires certain 

disclosures, limits the imposition of 

certain fees, and contains other 

restrictions. The Gift Card Rule is 

distinct from the rest of subpart A of 

Regulation E, however, and does not 

provide consumers who use gift cards 

with the other substantive protections of 

Regulation E, such as limited liability 

and error resolution protections, or 

periodic statements. The Gift Card Rule 

expressly excludes those general-use 

prepaid cards that are reloadable and 

not marketed or labeled as gift cards or 

gift certificates, while including generaluse prepaid cards that are not reloadable 

as well as those that are marketed or 

labeled as gift cards or gift certificates. 

See § 1005.20(b)(2). 

In response to the Prepaid ANPR, the 

Bureau received numerous industry 

comments urging it to exclude gift cards 

from this proposed rule. In their letters, 

these commenters argued that the 

protections for gift cards in the Gift Card 

Rule more appropriately match how 

such products are used. As one 

commenter noted, a consumer is 

unlikely to replace a traditional deposit 

account with a gift card that can only be 

used at a single merchant. Other 

commenters noted that many provisions 

of Regulation E would not be easily 

applied to most gift cards. For example, 

to the extent that this proposed rule 

might apply error resolution provisions 

to gift cards, such a rule might be 

difficult to apply because gift card 

holders often do not register the cards, 

thus potentially making it difficult for 

providers to determine when 

unauthorized transactions occur. 

Similarly, providing access to 

transactional account history to gift 

cardholders could also be difficult and 

impractical. 

Commenters were also concerned that 

it would be overly burdensome if 

prepaid products were subject both to 

the requirements of this proposed rule 

and the Gift Card Rule. To the extent 

they expressed an opinion, consumer 

group commenters largely agreed that 

existing protections for gift cards were 

sufficient, although one consumer group 

commenter urged the Bureau to include 

network branded open loop reloadable 

gift cards loaded with at least $500, 

because when a card is loaded with 

$500 the risk of harm from loss is 

higher. 

The Bureau is proposing to add 

§ 1005.2(b)(3)(i)(C), which would 

provide that a prepaid account is not a 

gift certificate as defined in 

§ 1005.20(a)(1) and (b); a store gift card 

as defined in § 1005.20(a)(2) and (b); a 

loyalty, award, or promotional gift card 

as defined in § 1005.20(a)(4) and (b); or 

a general-use prepaid card as defined in 

§ 1005.20(a)(3) and (b) that is both 

marketed and labeled as a gift card or 

gift certificate. 

The Bureau notes that the exemption 

in the Gift Card Rule for general-use 

prepaid cards applies to products that 

are reloadable and not marketed or 

labeled as gift cards or gift certificates. 

See § 1005.20(b)(2). The Bureau is 

proposing to exclude from the definition 

of prepaid account only such generaluse prepaid products that are both 

marketed and labeled as gift cards or gift 

certificates, as the Bureau is concerned 

that some products it intends to include 

may be inadvertently excluded due to 

occasional or incidental marketing 

activities. Comment 2(b)(3)(i)–9 would 

explain this distinction. For example, 

comment 20(b)(2)–2 describes, in part, a 

network-branded general purpose 

reloadable card that is principally 

advertised as a less-costly alternative to 

a bank account but is promoted in a 

television, radio, newspaper, or internet 

advertisement, or on signage as ‘‘the 

perfect gift’’ during the holiday season. 

For purposes of the Gift Card Rule, such 

a product would be considered 

marketed as a gift card or gift certificate 

because of this occasional holiday 

marketing activity. For purposes of 

proposed § 1005.2(b)(3)(i)(C), however, 

such a product would not be considered 

to be both marketed and labeled as a gift 

card or gift certificate and thus would be 

covered by the definition of prepaid 

account. 

Generally speaking, the Bureau 

believes that having to apply both the 

existing gift card regulatory 

requirements and the proposed prepaid 

account requirements could adversely 

impact the gift card market, although 

the Bureau recognizes that some of the 

concerns it has regarding prepaid 

accounts can also be applied to gift 

cards. The Bureau acknowledges that if 

the requirements of this proposed rule 

were applied to gift cards at this time, 

it is possible that those requirements, in 

the context of the typical gift card, could 

confuse consumers and disrupt many 

gift cards’ cost structures. For example, 

the Gift Card Rule already specifies 

disclosure with respect to key fees that 

are typically imposed in connection 

with gift cards. See § 1005.20(c)(3). In 

addition and as noted previously, the 

Bureau believes that consumers may be 

more aware that gift cards have fewer 

protections than other products and 

thus treat gift cards accordingly.206

Because most gift cards are not 

reloadable, not usable at ATMs, and/or 

not open loop, consumers are less likely 

to use gift cards as transaction account 

substitutes. Were the Bureau to impose 

provisions for access to account 

information and error resolution, and 

create limits on liability for 

unauthorized EFTs, the Bureau is 

concerned that the cost structure of gift 

cards could change dramatically; unlike 

other types of prepaid products (which, 

as the Bureau’s Study of Prepaid 

Account Agreements indicates, already 

are frequently in compliance with many 

existing provisions of Regulation E), gift 

cards do not typically offer these 

protections. In addition, while issuers of 

GPR cards typically encourage 

consumers to register their cards (so that 

the cards can become reloadable), the 

same motivations do not exist for openloop gift cards. The Bureau nevertheless 

seeks comment on whether it would be 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77132 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

207See, e.g., Internal Revenue Serv., Publication 

969, Health Savings Accounts and Other TaxFavored Health Plans (Jan. 22, 2014), available at 

http://www.irs.gov/pub/irs-pdf/p969.pdf. 

appropriate to impose the provisions in 

this proposal on some or all types of gift 

cards, the nature of consumer harm with 

respect to gift cards, and whether the 

Bureau’s understanding of gift cards as 

discussed herein is accurate. 

The Bureau understands that there are 

certain non-reloadable products covered 

by the Gift Card Rule that providers do 

not market or sell as gift cards (and 

instead may be marketed more like 

prepaid accounts) and that may be used 

more broadly, and these cards would be 

covered by both the Gift Card Rule and 

this proposal. In addition, these 

products are typically network branded 

and thus appear similar to other types 

of covered prepaid accounts. For 

example, the Bureau understands 

providers are increasingly looking to 

market non-reloadable prepaid products 

to consumers as a means of conducting 

specific transactions (e.g., paying a 

single utility bill or making a purchase 

online). Despite the fact that these may 

be marketed as a single-use (as opposed 

to reloadable) prepaid card, the fact that 

these products are not marketed or 

labeled as gift cards, and are network 

branded and usable at any merchant 

that accepts the network brand may 

imply to consumers that these products 

are the same as the reloadable version 

of the product and thus warrant the 

same protections. The Bureau seeks 

comments on whether and, if so, how 

compliance with both this proposed 

rule and the Gift Card Rule would 

impose unique burdens on financial 

institutions offering such cards. The 

Bureau also seeks comment on whether 

the provisions of the Gift Card Rule 

alone are sufficient to protect those 

consumers that use non-reloadable 

general-use prepaid cards not marketed 

or sold as gift cards or gift certificates or 

whether consumers of such products 

would benefit from the proposed rule’s 

protections. Finally, the Bureau seeks 

comment on whether there are any other 

types of products not discussed herein 

to which the Gift Card Rule applies and 

which might also be affected by this 

proposal. 

2(b)(3)(ii) 

As discussed above, Regulation E 

currently contains provisions specific to 

payroll card accounts and specifically 

defines such accounts. See 

§ 1005.2(b)(2). Insofar as the Bureau is 

generally proposing to adapt existing 

payroll card account rules to prepaid 

accounts in § 1005.18, which currently 

addresses only payroll card accounts, 

the term payroll card account would be 

largely subsumed within the larger 

definition of prepaid account. 

Nevertheless, the Bureau believes that 

because there are certain provisions of 

Regulation E that would remain specific 

to payroll card accounts, it is 

appropriate to propose to maintain the 

term payroll card account as a 

standalone sub-definition of prepaid 

account. Specifically, the Bureau 

proposes that § 1005.2(b)(3)(ii) provide 

that the term ‘‘prepaid account’’ 

includes a ‘‘payroll card account’’ and 

would otherwise restate the existing 

payroll card account definition. In 

addition, the Bureau proposes to 

renumber existing comment 2(b)–2, 

which concerns certain employmentrelated cards not covered as payroll card 

accounts, as comment new 2(b)(3)(ii)–1. 

In addition, the Bureau proposes to add 

to new comment 2(b)(3)(ii)–1 an 

explanation that the existing examples 

given of cards would not be payroll card 

accounts (i.e., cards used solely to 

disburse incentive-based payments, 

such as bonuses, disbursements 

unrelated to compensation, and cards 

used in isolated instances to which an 

employer typically does not make 

recurring payments, such as when 

providing final payments or in 

emergency situations where other 

payment methods are unavailable), such 

cards could constitute prepaid accounts 

generally, provided the other conditions 

of the proposed definition of that term 

in § 1005.2(b)(3) are satisfied. Similar to 

existing comment 2(b)–2, proposed 

comment 2(b)(3)(ii)–1 would also state 

that, in addition, all transactions 

involving the transfer of funds to or 

from a payroll card account or prepaid 

account are covered by the regulation, 

even if a particular transaction involves 

payment of a bonus, other incentivebased payment, or reimbursement, or 

the transaction does not represent a 

transfer of wages, salary, or other 

employee compensation. 

The Bureau seeks comment on this 

portion of its proposed definition of 

prepaid account. 

2(b)(3)(iii) 

As discussed above, Regulation E 

currently contains provisions in 

§ 1005.15 that are specifically applicable 

to an account established by a 

government agency for distributing 

government benefits to a consumer 

electronically. While such accounts are 

currently defined only in existing 

§ 1005.15(a)(2), the Bureau believes that 

given the other modifications to 

Regulation E proposed herein, it is 

appropriate to explicitly add such 

accounts used for the distribution of 

government benefits as a stand-alone 

sub-definition of prepaid account as 

well. Specifically, the Bureau is 

proposing that § 1005.2(b)(3)(iii) state 

that the term prepaid account includes 

a government benefit account, as 

defined in existing § 1005.15(a)(2). The 

Bureau seeks comment on this portion 

of its proposed definition of prepaid 

account. 

2(b)(3)(iv) 

Proposed § 1005.2(b)(3)(iv) would 

address prepaid products established in 

connection with certain health care and 

employee benefit programs. 

Specifically, the proposed provision 

would state that the term prepaid 

account does not include a health 

savings account, flexible spending 

account, medical savings accounts, or a 

health reimbursement arrangement. 

Proposed comment 2(b)(3)(iv)–1 would 

define these terms by referencing 

existing provisions in the Internal 

Revenue Code. Specifically, the Bureau 

is proposing that ‘‘health savings 

account’’ means a health savings 

account as defined in 26 U.S.C. 223(d); 

‘‘flexible spending account’’ means a 

cafeteria plan which provides health 

benefits or a health flexible spending 

arrangement pursuant to 26 U.S.C. 125; 

‘‘medical savings account’’ means an 

Archer MSA as defined in 26 U.S.C. 

220(d); and ‘‘health reimbursement 

arrangement’’ means a health 

reimbursement arrangement which is 

treated as employer-provided coverage 

under an accident or health plan for 

purposes of 26 U.S.C. 106. 

The Bureau believes that while these 

health care and employee benefit 

accounts may, in some ways, be similar 

to other types of prepaid accounts, 

coverage under Regulation E is not 

necessary at this time. These products 

typically come with limits on the 

amount of funds that can be loaded on 

to them, the methods for loading, and 

numerous restrictions on where, when, 

and how those funds can be spent. 

These products can rarely be used to 

withdraw cash or to send money to 

another person or make payment to any 

merchant of the consumer’s choosing 

(such as can be done with a P2P product 

or a GPR card). Instead, health insurers 

or employers (or their service providers) 

typically issue these products in 

connection with a consumer’s 

healthcare or employee benefits plan 

and are governed by the terms of that 

plan and related regulations.207 For 

example, health savings accounts and 

medical savings accounts can typically 

only be used to pay for qualified 

medical expenses. Nevertheless, the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77133 

208See 46 FR 2972, 2973 (Jan. 13, 1981) (‘‘After 

careful consideration of the issues raised, the Board 

is adopting the amendment as proposed. The Board 

believes that it has the legal authority to adopt this 

exception [for overdraft lines of credit] under 

section 904(c) of the act, which expressly authorizes 

the Board to provide adjustments and exceptions 

for any class of electronic fund transfer that in the 

Board’s judgment are necessary or proper to carry 

out the purposes of the act or to facilitate 

compliance.’’). Further, the bases for Bureau’s 

proposal not to extend this exception to prepaid 

accounts is discussed below in the Overview of the 

Bureau’s Regulation Z proposal. 

Bureau seeks comment on whether 

these or other types of health care and 

employee benefit accounts should be 

included within the definition of 

prepaid account in light of the 

important role they play for consumers. 

Scope of Proposed Definition and 

Application to Virtual Wallets and 

Virtual Currency Products 

The Bureau seeks comment on the 

scope of its proposed definition for the 

term prepaid account. In particular and 

as noted above, the Bureau is aware of 

an increasing number of mobile 

financial products, each with different 

features, capabilities, and consumer 

protections. Determining how this 

proposed rule might apply to those 

products may be difficult in light of the 

quick evolution of these products and 

their features. Although the Bureau 

anticipates that this proposal, if 

effective today, would apply to 

relatively few mobile banking products 

(see, e.g., proposed comments 2(b)(3)(i)– 

4 and 2(b)(3)(i)–5), it seeks comment on 

whether it has appropriately predicted 

the scope of products this rule would 

apply to and whether there are products 

it excludes that should be included or 

vice versa. 

With respect to mobile financial 

products and services, the Bureau 

anticipates that this proposed rule 

would apply to certain mobile wallets. 

The Bureau also recognizes that the 

proposed rule may have potential 

application to virtual currency and 

related products and services. As a 

general matter, however, the Bureau’s 

analysis of mobile financial products 

and services, as well as and virtual 

currencies and related products and 

services, including the applicability of 

existing regulations and this proposed 

regulation to such products and 

services, is ongoing. The proposed rule 

does not specifically resolve these 

issues. 

Section 1005.10 Preauthorized 

Transfers 

10(e) Compulsory Use 

10(e)(1) Credit 

In the discussion of the Bureau’s 

proposed changes to Regulation Z, 

below, the Bureau explains in detail its 

approach to regulation of overdraft 

services and credit features on prepaid 

accounts. (That discussion provides an 

overall explanation of the Bureau’s 

proposed approach to overdraft services 

and other credit features in connection 

with prepaid accounts in this 

rulemaking, including with respect to 

proposed changes to Regulation E, the 

details of which are set forth below.) As 

part of that approach, the Bureau is 

proposing to revise the compulsory use 

provision of Regulation E, 

§ 1005.10(e)(1), to make clear that it 

applies to credit features offered on 

prepaid accounts. 

EFTA’s compulsory use provision, 

EFTA section 913(1), prohibits any 

person from conditioning the extension 

of credit to a consumer on the 

consumer’s repayment by means of 

preauthorized electronic fund transfers. 

As implemented in Regulation E, 

§ 1005.10(e)(1) currently states that 

‘‘[n]o financial institution or other 

person may condition an extension of 

credit to a consumer on the consumer’s 

repayment by preauthorized electronic 

fund transfers, except for credit 

extended under an overdraft credit plan 

or extended to maintain a specified 

minimum balance in the consumer’s 

account.’’ The term ‘‘credit’’ is defined 

in § 1005.2(f) to mean the right granted 

by a financial institution to a consumer 

to defer payment of debt, incur debt and 

defer its payment, or purchase property 

or services and defer payment therefor. 

The term ‘‘preauthorized electronic 

fund transfer’’ is defined in § 1005.2(k) 

to mean an electronic fund transfer 

authorized in advance to recur at 

substantially regular intervals. See 

EFTA section 903(10). 

Congress enacted the compulsory use 

provision to prevent financial 

institutions that are creditors from 

mandating repayment of credit by future 

preauthorized electronic fund transfers. 

Were the compulsory use provision not 

to exist, creditors could access 

consumers’ available funds at the same 

institution via direct transfers, or at 

other institutions via recurring ACH 

transfers, to repay the debt. By doing so, 

consumers could lose access to these 

funds and lose the ability to prioritize 

repayment of debits, as a creditor could 

compel the consumer to grant the 

creditor preauthorized transfer access to 

a consumer’s asset account as a 

condition for agreeing to provide credit 

to that consumer. 

As is discussed below, the Bureau 

proposes certain modifications to the 

compulsory use provision. In particular, 

the Bureau proposes not to extend the 

provision’s exception for overdraft 

credit plans to such plans offered on 

prepaid accounts. As discussed in more 

detail in the section-by-section analysis 

of Regulation Z proposed § 1026.12(d), 

the Bureau believes that applying 

§ 1005.10(e)(1), with the proposed 

changes discussed below, along with 

proposed changes to the timing 

requirement for a periodic statement in 

Regulation Z § 1026.5(b)(2)(ii), and the 

prohibition on offsets in Regulation Z 

§ 1026.12(d), would together allow 

consumers to retain control over the 

funds in their prepaid accounts even 

when a credit card feature becomes 

associated with that account. 

By not extending the exception for 

overdraft credit plans in the current 

Regulation E compulsory use 

provision—and consistent with the 

statutory compulsory use provision 

(EFTA section 913(1))—creditors would 

be required to offer prepaid account 

consumers a means to repay their 

outstanding credit balances other than 

by automatic repayment (such as by 

means of a transfer of funds from the 

asset account to the credit account that 

the consumer initiates on the prepaid 

account’s online banking Web site). 

With the proposed changes to the 

Regulation Z periodic statement 

requirement—consistent with TILA 

section 163—creditors would be 

required to adopt reasonable procedures 

designed to ensure that periodic 

statements are mailed or delivered at 

least 21 days prior to the payment due 

date disclosed on the periodic statement 

and the due date disclosed must be the 

same day of the month for each billing 

cycle. And, with the proposed changes 

to the Regulation Z no-offset 

provision—consistent with TILA section 

169—card issuers would be permitted to 

move funds automatically from the 

prepaid account held by the card issuer 

to the credit card account held by the 

card issuer to pay some or all of the 

credit card debt no more frequently than 

once per month, such as on the payment 

due date (pursuant to the consumer’s 

signed, written agreement that the issuer 

may do so). 

Overdraft Credit Plans 

In adopting what is now 

§ 1005.10(e)(1) in 1981 to implement 

EFTA section 913(1), the Board used its 

EFTA exception authority to exclude 

overdraft credit plans from the general 

compulsory use rule of EFTA section 

913(1).208 Comment 10(e)(1)–2 further 

explains that a financial institution may 

require the automatic repayment of an 

overdraft credit plan. 

The Bureau proposes to provide that 

the compulsory use provision’s general 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77134 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

prohibition against conditioning the 

extension of credit to a consumer on the 

consumer’s repayment by means of 

preauthorized electronic fund transfers 

would apply to credit plans, including 

overdraft credit plans, that are credit 

card accounts under Regulation Z 

accessed by prepaid cards that are credit 

cards under proposed Regulation Z 

§ 1026.2(a)(15)(i) or accessed by an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, 

discussed in further detail below. 

Regulation Z proposed comment 

2(a)(15)–2.i.F would provide that the 

term ‘‘credit card’’ in § 1026.2(a)(15)(i) 

includes a prepaid card (including a 

prepaid card that is solely an account 

number) that is a single device that may 

be used from time to time to access a 

credit plan, except if that prepaid card 

only accesses credit that is not subject 

to any finance charge as defined in 

§ 1026.4 or any fee described in 

Regulation Z § 1026.4(c) such as an 

applicable fee to apply for credit or a 

late payment fee and is not payable by 

written agreement in more than four 

installments. Regulation Z proposed 

comment 2(a)(15)–2.i.G, discussed 

below, would provide that the term 

‘‘credit card’’ in § 1026.2(a)(15)(i) also 

includes an account number that is not 

a prepaid card that may be used from 

time to time to access a credit plan that 

allows deposits directly into particular 

prepaid accounts specified by the 

creditor but does not allow the 

consumer to deposit directly extensions 

of credit from the plan into asset 

accounts other than particular prepaid 

accounts specified by the creditor. 

(Such an account number is referred to 

in the proposal as an ‘‘account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor.’’) See also Regulation Z 

proposed § 1026.2(a)(15)(vii). 

The proposal would revise 

§ 1005.10(e)(1) to provide that the 

exception for credit extended under an 

overdraft credit plan or extended to 

maintain a specified minimum balance 

in the consumer’s account does not 

apply to credit extended under a credit 

plan that is a credit card account 

accessed by an access device for a 

prepaid account where the access 

device is a credit card under Regulation 

Z or accessed by an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Proposed comment 10(e)(1)–3 would 

provide guidance on how the 

prohibition in § 1005.10(e)(1) applies to 

credit extended under a credit plan that 

is a credit card account accessed by 

prepaid cards or account numbers that 

are credit cards under Regulation Z as 

discussed above. Proposed comment 

10(e)(1)–3 would explain that under 

§ 1005.10(e)(1), creditors must not 

require by electronic means on a 

preauthorized, recurring basis 

repayment of credit extended under a 

credit plan that is a credit card account 

accessed by an access device for a 

prepaid account where the access 

device is a credit card under Regulation 

Z (§ 1026.2(a)(15)(i)). In addition, 

proposed comment 10(e)(1)–3 would 

provide that § 1005.10(e)(1) also would 

prevent creditors from requiring by 

electronic means on a preauthorized, 

recurring basis repayment of credit 

extended under a credit plan that is a 

credit card account accessed by an 

account number that is a credit card 

under Regulation Z (§ 1026.2(a)(15)(i)) 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. Proposed comment 

10(e)(1)–3 would also provide that the 

prohibition in § 1005.10(e)(1) would 

apply to any credit extended under a 

credit card plan as described above, 

including credit arising from 

transactions not using the credit card 

itself but taking place under plans that 

involve credit cards. For example, if the 

consumer writes a check that accesses a 

credit card plan as discussed above, the 

resulting credit would be subject to the 

prohibition in § 1005.10(e)(1) since it is 

incurred through a credit card plan, 

even though the consumer did not use 

an associated credit card. 

Additionally, proposed comment 

10(e)(1)–3 would cross-reference 

Regulation Z § 1026.2(a)(15)(i), 

comment 2(a)(15)–2.i.F to explain that a 

prepaid card is not a credit card under 

Regulation Z if the access device only 

accesses credit that is not subject to any 

finance charge as defined in Regulation 

Z § 1026.4 or any fee described in 

Regulation Z § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. Thus, the 

prohibition in § 1005.10(e)(1) would not 

apply to credit extended under an 

overdraft credit plan that is not a credit 

card account. An overdraft credit plan 

would not be a credit card account if it 

is accessed only by a prepaid card that 

only accesses credit that is not subject 

to any finance charge as defined in 

Regulation Z § 1026.4 or any fee 

described in Regulation Z § 1026.4(c) 

and is not payable by written agreement 

in more than four installments. 

Proposed comment 10(e)(1)–3.i would 

explain the connection between the 

prohibition in proposed § 1005.10(e)(1) 

on the compulsory use of preauthorized 

electronic fund transfers to repay credit 

extended under a credit plan accessed 

by prepaid cards that are credit cards 

and account numbers linked to prepaid 

accounts that are credit cards under 

Regulation Z § 1026.2(a)(15)(i) and 

comment 2(a)(15)–2.i.F and .G, and the 

prohibition on offsets by credit card 

issuers in proposed § 1026.12(d). Under 

Regulation Z § 1026.12(d)(1), a card 

issuer may not take any action, either 

before or after termination of credit card 

privileges, to offset a cardholder’s 

indebtedness arising from a consumer 

credit transaction under the relevant 

credit card plan against funds of the 

cardholder held on deposit with the 

card issuer. Under proposed Regulation 

Z § 1026.12(d)(3), with respect to credit 

card accounts that are accessed by 

prepaid cards or by account numbers 

where extensions of credit are permitted 

to be deposited directly only in 

particular prepaid accounts specified by 

the creditor, a card issuer generally 

would not be prohibited under 

§ 1026.12(d) from periodically 

deducting all or part of the cardholder’s 

credit card debt from a deposit account 

(such as a prepaid account) held with 

the card issuer (subject to the 

limitations of Regulation Z 

§ 1026.13(d)(1)) under a plan that is 

authorized in writing by the cardholder, 

so long as the creditor does not deduct 

all or part of the cardholder’s credit card 

debt from the deposit account (such as 

a prepaid account) more frequently than 

once per calendar month, pursuant to 

such a plan. A card issuer for such 

credit card accounts would be 

prohibited under § 1026.12(d) from 

automatically deducting all or part of 

the cardholder’s credit card debt from a 

deposit account (such as a prepaid 

account) held with the card issuer more 

frequently than once per calendar 

month, such as on a daily or weekly 

basis, or whenever deposits are made to 

the deposit account. Under proposed 

Regulation Z § 1026.12(d)(3), with 

respect to credit card accounts that are 

accessed by prepaid cards or by account 

numbers where extensions of credit are 

permitted to be deposited directly only 

in particular prepaid accounts specified 

by the creditor, electronic fund transfers 

pursuant to a plan described in 

§ 1026.12(d)(3) would be ‘‘preauthorized 

electronic fund transfers’’ under 

§ 1005.2(k) because such electronic fund 

transfers would be authorized in 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77135 

209See Senate Report No. 95–915 at 16. 

210CFPB Bulletin 2013–10, Payroll Card 

Accounts (Regulation E) (Sept. 12, 2013), available 

at http://files.consumerfinance.gov/f/201309_cfpb_

payroll-card-bulletin.pdf. 

211 Id. at 3. 

advance to recur periodically (but could 

not recur more frequently than once per 

calendar month). Proposed comment 

10(e)(1)–3.i thus would explain that 

§ 1005.10(e)(1) further restricts the card 

issuer from requiring payment from a 

deposit account (including a prepaid 

account) of credit card balances by 

electronic means on a preauthorized, 

recurring basis where the credit card 

account is accessed by an access device 

for a prepaid account, or is accessed by 

an account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Consistent with the statutory text and 

purposes of EFTA, the Bureau proposes 

not to extend the exception for overdraft 

credit plans currently in § 1005.10(e)(1) 

to credit plans that are credit card 

accounts under Regulation Z accessed 

by prepaid cards or accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. The purposes of EFTA are 

to establish the rights, liabilities, and 

responsibilities of consumers 

participating in EFT systems and to 

provide individual consumer rights. See 

EFTA section 902(b). Further, EFTA’s 

legislative history states that EFTA 

compulsory use provision is ‘‘designed 

to assure that EFT develops in an 

atmosphere of free choice for the 

consumer.’’ 209 The Bureau believes its 

proposal not to extend the Regulation’s 

existing exception for overdraft credit 

plans to prepaid accounts should ensure 

that consumers have choice when 

deciding whether and how to link their 

prepaid accounts to credit accounts and 

have control over the funds in their 

prepaid accounts if and when such a 

link is established. 

As is discussed in greater detail below 

in the discussion of Regulation Z, the 

Bureau also believes that not extending 

the exception for overdraft credit plans 

to prepaid accounts is consistent with 

the purposes of and provisions in TILA 

(TILA section 169) and Regulation Z 

(§ 1026.12(d)) that prohibit offsets by 

credit card issuers and will protect 

consumers’ right to exercise control over 

the funds deposited into their prepaid 

accounts. In particular, the Bureau 

believes that the proposed revisions to 

§ 1005.10(e)(1) are necessary to prevent 

results that are contrary to these offset 

provisions. The Bureau is concerned 

that, with respect to credit card 

accounts that are accessed by prepaid 

cards or by account numbers where 

extensions of credit are permitted to be 

deposited directly only in particular 

prepaid accounts specified by the 

creditor, some card issuers may attempt 

to avoid the TILA offset prohibition by 

requiring that all or part of the 

cardholder’s credit card debt be 

automatically deducted from the 

prepaid account to help ensure that the 

debt is repaid (similar to how overdraft 

services function today). For example, 

the Bureau believes that without the 

proposed changes to the compulsory use 

provision, financial institutions might 

require that prepaid account consumers 

set up automated payment plans to 

repay the overdraft credit advances and 

set the payment due date for each 

overdraft advance to align with the 

expected date of subsequent deposits to 

the prepaid account. The Bureau 

believes that this type of payment 

arrangement could undermine the 

purposes of the offset and periodic 

statement provisions in Regulation Z. 

To the extent that the Board justified 

its original treatment of overdraft credit 

plans as providing benefits to 

consumers from automatic payment, the 

Bureau notes that under the proposal 

consumers would still be allowed to 

choose automatic payment for credit 

card accounts linked to prepaid 

accounts (as discussed above) if they 

find it beneficial to do so. The Bureau 

also believes that certain credit card 

rules in Regulation Z that would apply 

under the proposal to credit card 

accounts linked to prepaid accounts (as 

discussed above) would help consumers 

avoid late payments and excessive late 

fees with respect to overdraft plans. For 

example, under the Regulation Z 

proposal, card issuers would be 

required, under proposed 

§ 1026.5(b)(2)(ii)(A)(1), to adopt 

reasonable procedures to ensure that 

Regulation Z periodic statements for 

credit card accounts linked to prepaid 

account (as discussed above) are mailed 

or delivered at least 21 days prior to the 

payment due date disclosed on the 

periodic statement and the due date 

disclosed must be the same day of the 

month for each billing cycle. The 

Bureau believes this will help ensure 

that consumers have sufficient time 

after receiving periodic statements for 

the credit card accounts linked to 

prepaid accounts (as discussed above) to 

make payment on their credit card 

accounts. Also, under the Regulation Z 

proposal, card issuers of credit card 

accounts linked to prepaid accounts (as 

discussed above) would be limited in 

the circumstances in which they could 

increase interest rates for late payments 

and would be limited in the amount of 

late fees they could charge to consumers 

who pay late. See Regulation Z 

§§ 1026.52(b) and 1026.55. 

This proposal does not address 

overdraft plans accessed by access 

devices that do not access prepaid 

accounts and does not amend the 

compulsory use provision as it applies 

to those other products. 

Technical Revisions 

Consistent with proposed 

§ 1005.10(e)(1), comment 10(e)(1)–2 

related to the exception for overdraft 

credit plans would be amended to 

explain that this exception does not 

apply to credit extended under a credit 

plan that is accessed by an access device 

for a prepaid account where the access 

device is a credit card under Regulation 

Z, § 1026.2(a)(15)(i), or is accessed by an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. In 

addition, the proposal would move 

existing guidance in comment 10(e)(1)– 

1 related to when financial institutions 

may provide incentives to consumers to 

agree to automatic repayment plans to a 

new comment 10(e)(1)–4; no substantive 

changes are intended. 

10(e)(2) Employment or Government 

Benefit 

EFTA section 913(2), as implemented 

by § 1005.10(e)(2), provides that no 

financial institution or other person may 

require a consumer to establish an 

account for receipt of electronic fund 

transfers with a particular institution as 

a condition of employment or receipt of 

a government benefit. Existing comment 

10(e)(2)–1 explains that an employer 

(including a financial institution) may 

not require its employees to receive 

their salary by direct deposit to any 

particular institution. These provisions 

regarding compulsory use precede the 

addition of the Payroll Card Rule to 

Regulation E. 

In September 2013, the Bureau 

reiterated the applicability of Regulation 

E’s prohibition on compulsory use for 

payroll card accounts.210 The Bureau 

explained that, among other things, 

Regulation E’s compulsory use 

provision prohibits employers from 

mandating that employees receive 

wages only on a payroll card of the 

employer’s choosing.211

The Bureau believes that the same 

standards should apply to government 


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77136 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

212See, e.g., Bd. of Governors of the Fed. Reserve 

Sys., Report to the Congress on GovernmentAdministered, General-Use Prepaid Cards (July 

2014), available at http://www.federalreserve.gov/

publications/files/2014_Prepaid_Cards_Final.pdf. 

Nearly every State offers a prepaid card to disburse 

child support and unemployment insurance 

payments. Id. at 3. 

213See, e.g., Lauren K. Saunders & Jillian 

McLaughlin, 2013 Survey of Unemployment 

Prepaid Cards: States Save Workers Millions in 

Fees; Thumbs Down on Restricting Choice (Jan. 

2013), available at http://www.nclc.org/images/pdf/ 

pr-reports/report-prepaid-card-2013.pdf. 

benefit accounts. The Bureau is aware 

that many State and local governments 

use prepaid cards for distributing nonneeds tested benefits and similar 

payments, such as unemployment 

insurance and child support 

payments.212 These products are subject 

to EFTA and Regulation E. The Bureau 

understands that most, though not all, 

State governments using prepaid cards 

to distribute unemployment insurance 

payments also offer recipients the 

option of receiving these payments via 

direct deposit and/or paper check.213

Based on discussions with interested 

stakeholders, the Bureau is aware that 

some may have perceived some 

ambiguity surrounding compulsory use 

of prepaid cards to distribute non-needs 

tested state and local government 

benefits. Specifically, some questions 

have arisen as to whether compulsory 

use of prepaid cards for non-needs 

tested benefits is permissible under 

Regulation E. EFTA and Regulation E 

clearly apply to the electronic 

distribution of non-needs tested 

government benefits generally, and 

EFTA section 913(2) prohibits 

‘‘requiring a consumer to establish an 

account for receipt of electronic fund 

transfers with a particular financial 

institution as a condition of . . . receipt 

of a government benefit.’’ 

Therefore, the Bureau believes it is 

appropriate to clarify the application of 

the compulsory use provision in 

Regulation E to accounts established to 

receive such benefits. Thus, the Bureau 

is proposing to add comment 10(e)(2)– 

2, which would make clear that a 

government agency may not require 

consumers to receive government 

benefits by direct deposit to any 

particular institution. A government 

agency may require direct deposit of 

benefits by electronic means if 

recipients are allowed to choose the 

institution that will receive the direct 

deposit. Alternatively, a government 

agency may give recipients the choice of 

having their benefits deposited at a 

particular institution (designated by the 

government agency) or receiving their 

benefits by another means. Relatedly, 

the Bureau seeks comment on whether 

a financial institution would comply 

with this provision if it provides the 

first payment to a benefit recipient on a 

government benefit card and, at that 

time, provides information on how to 

divert or otherwise direct future 

payments to an account of the 

consumer’s choosing. 

The Bureau is also proposing to make 

consumers’ options more clear, for both 

government benefit accounts and 

payroll card accounts, via a notice on 

the pre-acquisition short form 

disclosure for these types of prepaid 

accounts. See section-by-section 

analysis of §§ 1005.15(c)(2) and 

1005.18(b)(2)(i)(A). 

The Bureau requests comment on its 

proposed clarification of the prohibition 

on compulsory use of specific accounts 

for receipt of government benefits. The 

Bureau also seeks comment on whether 

a similar restriction should be extended 

to other types of prepaid accounts (other 

than payroll card accounts and 

government benefit accounts), such as 

cards used by post-secondary 

educational institutions for financial aid 

disbursements or insurance companies 

to pay out claims. In particular, the 

Bureau seeks comment on how 

consumers are enrolled in these other 

types of prepaid accounts, whether 

those enrollment methods involve 

concerns similar to those addressed 

above regarding prepaid cards for 

distribution of government benefits, and 

what the impact, if any, would be of 

expanding this provision to other types 

of prepaid accounts. Finally, the Bureau 

seeks comment on whether other 

interventions are appropriate with 

respect to prepaid products distributed 

by employers, government entities, 

educational institutions, and other third 

parties in connection with the payment 

of funds to particular groups. 

Section 1005.12 Relation to Other 

Laws 

12(a) Relation to the Truth in Lending 

Act 

Section 1005.12(a) provides guidance 

on whether the issuance provisions in 

Regulation E § 1005.5 or the unsolicited 

issuance provisions in Regulations Z 

§ 1026.12(a) apply where access devices 

under Regulation E also are credit cards 

under Regulation Z. (For discussion of 

when this may occur, see the Regulation 

Z proposal, below.) In addition, 

§ 1005.12(a) also provides guidance on 

how the provisions on liability for 

unauthorized use and for resolving 

errors in Regulation E §§ 1005.6 and 

1005.11 and Regulation Z §§ 1026.12(b) 

and 1026.13 interact where a credit 

transaction is incidental to an electronic 

fund transfer. 

Issuance Rules 

Consistent with EFTA section 911(a) 

(15 U.S.C. 1693i(a)), existing § 1005.5(a) 

provides that a financial institution 

generally may issue an access device to 

a consumer only: (1) In response to an 

oral or written request for the device; or 

(2) As a renewal of, or in substitution 

for, an accepted access device whether 

issued by the institution or a successor. 

Nonetheless, consistent with EFTA 

section 911(b) (15 U.S.C. 1693i(b)), 

§ 1005.5(b) provides that a financial 

institution may distribute an access 

device to a consumer on an unsolicited 

basis if four enumerated situations are 

met. 

In contrast, the issuance rules for a 

credit card under Regulation Z are more 

restrictive. Consistent with TILA section 

132, Regulation Z § 1026.12(a), provides 

that regardless of the purpose for which 

a credit card is to be used, including 

business, commercial, or agricultural 

use, no credit card shall be issued to any 

person except: (1) In response to an oral 

or written request or application for the 

card; or (2) As a renewal of, or substitute 

for, an accepted credit card. 

Section 1005.12(a) provides guidance 

on whether the issuance provisions in 

Regulation E or the unsolicited issuance 

provisions in Regulations Z apply where 

access devices under Regulation E also 

are credit cards under Regulation Z. 

Specifically, § 1005.12(a)(1) currently 

provides that EFTA and Regulation E 

subpart A govern: (1) The addition to an 

accepted credit card, as defined in 

Regulation Z (§ 1026.12, comment 12– 

2), of the capability to initiate electronic 

fund transfers; (2) The issuance of an 

access device that permits credit 

extensions pursuant to an overdraft line 

of credit (involving a preexisting 

agreement between a consumer and a 

financial institution to extend credit 

only when the consumer’s account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

account), or under an overdraft service 

(as defined in Regulation E 

§ 1005.17(a)); and (3) The addition of an 

overdraft service, as defined in 

§ 1005.17(a), to an accepted access 

device. On the other hand, 

§ 1005.12(a)(2) provides that TILA and 

Regulation Z apply to (1) the addition of 

a credit feature to an accepted access 

device; and (2) the issuance of a credit 

card that is also an access device, except 

the issuance of an access device that 

permits credit extensions pursuant to a 

preexisting overdraft line of credit or 

under an overdraft service. The 

application of these various provisions 


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to prepaid accounts and proposed 

revisions to the relevant prongs of 

§ 1005.12 are discussed below. 

Generally, the proposal would amend 

§ 1005.12(a) to provide that the 

unsolicited issuances rules in 

Regulation Z § 1026.12(a) apply to the 

addition of a credit feature or plan to an 

access device for a prepaid account 

where the credit feature or plan would 

make the access device into a credit 

card under Regulation Z, even if the 

credit feature is structured as an 

overdraft line of credit. 

First, as noted, § 1005.12(a)(1)(ii) 

provides that the issuance rules of EFTA 

and Regulation E subpart A govern the 

issuance of an access device that 

permits credit extensions (under a 

preexisting agreement between a 

consumer and a financial institution) 

only when the consumer’s account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

account, or under an overdraft service, 

as defined in § 1005.17(a). Current 

comment 12(a)–2 then explains that for 

access devices that also constitute credit 

cards, the issuance rules of Regulation 

E apply if the only credit feature is a 

preexisting credit line attached to the 

asset account to cover overdrafts (or to 

maintain a specified minimum balance), 

known as an overdraft credit plan, or an 

overdraft service, as defined in 

§ 1005.17(a). For checking accounts, a 

consumer may have a preexisting 

agreement with the financial institution 

to cover checks that overdraft the 

account. This overdraft line of credit 

would be subject to Regulation Z. If a 

debit card is then added to access this 

overdraft line of credit under the 

preexisting agreement, 

§ 1005.12(a)(1)(ii) provides that the 

debit card (which would also be a credit 

card under Regulation Z) may be issued 

under the issuance rules in Regulation 

E, instead of the issuance rules in 

Regulation Z. Regulation Z’s issuance 

rules apply if there is another type of 

credit feature being added to a debit 

card that would make the debit card 

into a credit card; for example, one 

permitting direct extensions of credit 

that do not involve the asset account. 

The proposal would amend 

§ 1005.12(a)(1)(ii) to provide that this 

provision does not apply to access 

devices for prepaid accounts. Thus, 

even if an access device for a prepaid 

account is issued to access a preexisting 

overdraft plan, the access device would 

be subject to the unsolicited issuance 

rules in TILA and Regulation Z 

§ 1026.12(a) when that overdraft plan 

would make the access device into a 

credit card under Regulation Z. See 

proposed § 1005.12(a)(2)(ii). The 

proposal also would move comment 

12(a)–2 related to preexisting overdraft 

credit plans to proposed comment 

12(a)–1 and would revise the comment 

to explain that it does not apply to 

access devices for prepaid accounts. 

As discussed above, § 1005.12(a)(1)(ii) 

contemplates the situation where there 

is a preexisting agreement between a 

financial institution and the consumer 

for an overdraft line of credit where the 

institution will cover checks that 

overdraft the account and the 

Regulation E access device is issued to 

access this plan. For the reasons set 

forth in the section-by-section analysis 

of Regulation Z, the Bureau believes that 

credit card rules in Regulation Z, 

including the unsolicited issuance rules 

in § 1026.12(a), generally should apply 

to credit card accounts that are linked 

to prepaid accounts as discussed above. 

Consistent with the unsolicited issuance 

rules in Regulation Z § 1026.12(a), the 

Bureau is proposing these changes 

because it is concerned that unsolicited 

issuance of a prepaid card that can 

access an overdraft credit plan would 

pose risks to consumers. The Bureau 

seeks to ensure that prepaid account 

consumers are fully aware of the 

addition, or potential addition, of a 

credit feature to a prepaid account. 

Similarly, the proposal would carve 

prepaid accounts out from 

§ 1005.12(a)(1)(iii), which provides that 

the issuance rules in EFTA and 

Regulation E govern the addition of an 

overdraft service, as defined in 

§ 1005.17(a), to an accepted access 

device. Current comment 12(a)–3 

provides that the addition of an 

overdraft service, as that term is defined 

in § 1005.17(a), to an accepted access 

device does not constitute the addition 

of a credit feature subject to Regulation 

Z. Comment 12(a)–3 also explains that 

the provisions of Regulation E apply, 

including the liability limitations 

(§ 1005.6) and the requirement to obtain 

consumer consent to the service before 

any fees or charges for paying an 

overdraft debit card or ATM transaction 

may be assessed on the account 

(§ 1005.17). The proposal would amend 

§ 1005.12(a)(1)(iii) to provide that this 

provision does not apply to access 

devices for prepaid accounts. The 

proposal also would move comment 

12(a)–3 to proposed comment 12(a)–2 

and revise the comment to indicate that 

this comment does not apply to access 

devices for prepaid accounts. As 

discussed in more detail in the sectionby-section analysis of § 1005.17, the 

proposal would revise the term 

‘‘overdraft service’’ as defined in 

§ 1005.17(a) to exclude a credit plan that 

is accessed by an access device for a 

prepaid account where the access 

device is a credit card under Regulation 

Z, because these credit plans would be 

subject to the provisions in Regulation 

Z. 

Second, the proposal would also add 

references to prepaid accounts in 

portions of the regulation stating that 

certain activities are subject to TILA and 

Regulation Z issuance rules. For 

example, § 1005.12(a)(2)(i) currently 

provides that the unsolicited issuance 

rules of TILA section 132 and 

Regulation Z § 1026.12(a) apply to the 

addition of a credit feature to an 

accepted access device. The proposal 

would amend § 1005.12(a)(2)(i) to 

provide that the unsolicited issuance 

rules in TILA and Regulation Z 

§ 1026.12(a) would apply to the addition 

of a credit feature or plan to an accepted 

access device, including an access 

device for a prepaid account, that would 

make the access device into a credit 

card under Regulation Z. Proposed 

comment 12(a)–4 would explain that 

Regulation Z governs the addition of 

any credit feature or plan to an access 

device for a prepaid account where the 

access device also would be a credit 

card under Regulation Z. Proposed 

comment 12(a)–4 would note that 

Regulation Z (§ 1026.2(a)(20), comment 

2(a)(20)–2(ii)) provides guidance on 

whether a program constitutes a credit 

plan, and that Regulation Z 

(§ 1026.2(a)(15)(i), comment 2(a)(15)–2) 

defines the term credit card and 

provides examples of cards or devices 

that are and are not credit cards. 

Similarly, § 1005.12(a)(2)(ii) currently 

provides that TILA and Regulation Z 

apply to the issuance of a credit card 

that is also an access device, except as 

provided in § 1005.12(a)(1)(ii). Proposed 

comment 12(a)–3 would cross reference 

proposed § 1005.18(g) and Regulation Z 

§ 1026.12(h), which would prevent 

prepaid cards from accessing credit card 

accounts when the prepaid cards are 

issued. For the reasons discussed in the 

section-by-section analysis of proposed 

§ 1005.18(g), proposed § 1005.18(g)(1)(ii) 

would prohibit a financial institution 

from allowing a prepaid account access 

device to access a credit plan subject to 

Regulation Z that would make the 

access device into a credit card at any 

time prior to 30 calendar days after the 

prepaid account has been registered. In 

addition, proposed § 1005.18(g)(1)(i) 

also would prohibit a financial 

institution from opening a credit card 

account subject to Regulation Z for the 

holder of a prepaid account, or 

providing a solicitation or application to 

open a credit card account subject to 

Regulation Z that would be accessed by 

the access device for a prepaid account 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77138 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

214Section 1026.13(d) provides that a consumer 

need not pay (and the creditor may not try to 

collect) any portion of any required payment that 

the consumer believes is related to a disputed 

amount reflected on the consumer’s credit card bill. 

It also provides that if the cardholder has enrolled 

in an automatic payment plan, the card issuer shall 

not deduct any part of the disputed amount or 

related finance or other charges from the 

consumer’s asset account if the consumer provides 

to the card issuer a billing error notice that the card 

issuer receives any time up to 3 business days 

before the scheduled payment date. Section 

1026.13(g) sets forth requirements governing what 

a creditor must do if it determines that a consumer 

owes all or part of the disputed amount and related 

finance or other charges. 

215 45 FR 8249, 8257 (Feb. 6, 1980). 

216 44 FR 25850, 25857 (May 3, 1979). 

that is a credit card, prior to 30 calendar 

days after the prepaid account has been 

registered. For the reasons discussed in 

the section-by-section analysis of 

Regulation Z proposed § 1026.12(h), 

proposed § 1026.12(h) would require a 

credit card issuer to wait at least 30 

calendar days from prepaid account 

registration before opening a credit card 

account for a holder of a prepaid 

account, or providing a solicitation or 

application to the holder of the prepaid 

account to open a credit card account, 

that would be accessed by the access 

device for a prepaid account that is a 

credit card. 

The Bureau believes that its proposed 

application of Regulations E and Z to 

the issuance of access devices strikes an 

appropriate balance between the 

regulations. The proposal recognizes 

that prepaid card issuers are not likely 

to have preexisting agreements with the 

customer to extend overdraft credit 

prior to issuing the prepaid card. The 

Bureau believes in particular that the 

addition of a credit feature to an 

accepted prepaid access device causes a 

significant transformation with respect 

to a prepaid account. The Bureau 

believes that applying the Regulation Z 

issuance rules to the addition of such a 

credit feature to a prepaid access device 

will help ensure that consumers are 

fully aware of the implications of their 

decision to effect such a transformation. 

Rules Applicable to Limits on Liability 

for Unauthorized Use and to Billing 

Errors Procedures 

Section 1005.6 generally sets forth 

provisions for when a consumer may be 

held liable, within the limitations 

described in § 1005.6(b), for an 

unauthorized electronic fund transfer 

involving the consumer’s account. 

Section 1005.11 generally sets forth the 

procedures for resolving errors relating 

to electronic fund transfers involving a 

consumer’s account. Section 1005.18(e) 

sets forth a consumer’s liability for 

unauthorized electronic fund transfers 

and the procedures for investigating 

errors related to electronic fund 

transfers involving prepaid accounts. 

See generally section-by-section 

analysis of proposed § 1005.18(e). 

Relatedly, Regulation Z § 1026.12(b) 

sets forth limits on the amount of 

liability that a credit card issuer may 

impose on a consumer for unauthorized 

use of a credit card. Regulation Z 

§ 1026.13 generally sets forth error 

resolution procedures for billing errors 

that relate to extensions of credit that 

are made in connection with open-end 

accounts or credit card accounts. 

Regulation E § 1005.12(a)(1)(iv) 

currently provides guidance on how the 

provisions on limits on liability for 

unauthorized use and the provisions 

setting forth error resolution procedures 

under Regulation E and Regulation Z 

apply when credit is extended incident 

to an electronic fund transfer. 

Specifically, § 1005.12(a)(1)(iv) provides 

that EFTA and Regulation E govern a 

consumer’s liability for an unauthorized 

electronic fund transfer and the 

investigation of errors involving an 

extension of credit that occurs pursuant 

to an overdraft line of credit (under an 

agreement between the consumer and a 

financial institution to extend credit 

when the consumer’s account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

account), or under an overdraft service, 

as defined in § 1005.17(a). Comment 

12(a)–1 provides that for transactions 

involving access devices that also 

function as credit cards, whether 

Regulation E or Regulation Z applies 

depends on the nature of the 

transaction. For example, if the 

transaction solely involves an extension 

of credit, and does not include a debit 

to a checking account (or other 

consumer asset account), the liability 

limitations and error resolution 

requirements of Regulation Z apply. If 

the transaction debits a checking 

account only (with no credit extended), 

the provisions of Regulation E apply. If 

the transaction debits a checking 

account but also draws on an overdraft 

line of credit attached to the account, 

Regulation E’s liability limitations 

apply, in addition to Regulation Z 

§ 1026.13(d) and (g) (which apply 

because of the extension of credit 

associated with the overdraft feature on 

the checking account).214 If a 

consumer’s access device is also a credit 

card and the device is used to make 

unauthorized withdrawals from a 

checking account, but also is used to 

obtain unauthorized cash advances 

directly from a line of credit that is 

separate from the checking account, 

both Regulation E and Regulation Z 

apply. Comment 12(a)–1 also sets forth 

examples that illustrate these principles. 

With respect to limits on liability for 

unauthorized use, § 1005.12(a) and 

comment 12(a)–1 are consistent with 

EFTA section 909(c), which applies 

EFTA’s limits on liability for 

unauthorized use to transactions which 

involve both an unauthorized electronic 

fund transfer and an extension of credit 

pursuant to an agreement between the 

consumer and the financial institution 

to extend such credit to the consumer in 

the event the consumer’s account is 

overdrawn. 15 U.S.C. 1693g(c). In 

adopting rules in 1980 to implement 

EFTA, the Board generally applied 

Regulation E’s error resolution 

procedures to credit transactions that 

are incident to an electronic fund 

transfer involving an extension of credit 

that occurs under an agreement between 

the consumer and a financial institution 

to extend credit when the consumer’s 

account is overdrawn or to maintain a 

specified minimum balance in the 

consumer’s account.215 In proposing 

these rules, the Board stated that the 

proposed rule would simplify 

procedures for financial institutions 

where an electronic fund transfer results 

in both a debit to a consumer’s account 

and a credit extension.216

For the reasons discussed in more 

detail in the section by section analysis 

of Regulation Z proposed § 1026.13(i), 

the Bureau proposes to amend 

§ 1005.12(a)(1)(iv) by moving the 

current language to proposed 

§ 1005.12(a)(1)(iv)(A) and applying it to 

access devices that do not access 

prepaid accounts. The Bureau also 

proposes to add proposed 

§ 1005.12(a)(1)(iv)(B) to provide that 

with respect to a prepaid account, EFTA 

and Regulation E govern a consumer’s 

liability for an unauthorized electronic 

fund transfer and the investigation of 

errors involving an extension of credit, 

under a credit plan subject to Regulation 

Z subpart B, that is incident to an 

electronic fund transfer when the 

consumer’s prepaid account is 

overdrawn. Proposed 

§ 1005.12(a)(1)(iv)(B) that applies to 

credit in connection with a prepaid 

account is similar but not the same as 

proposed § 1005.12(a)(1)(iv)(A) which 

applies to accounts other than prepaid 

accounts. Like proposed 

§ 1005.12(a)(1)(iv)(A), proposed 

§ 1005.12(a)(1)(iv)(B) generally would 

apply Regulation E’s limits on liability 

for unauthorized use and error 

resolution procedures to transactions 

that are partially funded through an 


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217This treatment would not apply to plans 

accessed by an account number that is a credit card 

under Regulation Z, where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. See the discussion of Regulation Z 

§ 1026.13(i) below. 

electronic fund transfer using a prepaid 

card and partially funded through credit 

under a plan that is accessed by a 

prepaid card when the consumer’s 

prepaid account is overdrawn.217

However, unlike proposed 

§ 1005.12(a)(1)(iv)(A), proposed 

§ 1005.12(a)(1)(iv)(B) would not focus 

on whether there is an agreement 

between a consumer and a financial 

institution to extend credit when the 

consumer’s prepaid account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

prepaid account. Instead, proposed 

§ 1005.12(a)(1)(iv)(B) focuses on 

whether credit is extended under a 

‘‘plan’’ when the consumer’s prepaid 

account is overdrawn and the plan is 

subject to the provisions in Regulation 

Z subpart B. For example, a credit plan 

that is accessed by a prepaid card that 

is a credit card would be subject to the 

provisions of subpart B. Under the 

proposal, a prepaid card can be a credit 

card under Regulation Z even if the 

creditor retains discretion not to pay the 

credit transactions. As discussed in the 

section-by-section analysis of 

Regulation Z proposed 

§ 1026.2(a)(15)(i), proposed comment 

2(a)(15)–2.i.F would provide that the 

term ‘‘credit card’’ for purposes of 

Regulation Z includes a prepaid card 

that is a single device that may be used 

from time to time to access a credit 

‘‘plan,’’ except if the prepaid card only 

accesses credit that is not subject to any 

finance charge as defined in Regulation 

Z § 1026.4 or any fee described in 

Regulation Z § 1026.4(c) such as an 

application fee to apply for credit or a 

late payment fee and is not payable by 

written agreement in more than four 

installments. As discussed in the 

section-by-section analysis of proposed 

Regulation Z § 1026.2(a)(20), with 

respect to credit that is accessed by a 

prepaid card, a ‘‘plan’’ includes a 

program where the consumer is 

obligated contractually to repay the 

credit. For example, such a plan 

includes a program under which a 

creditor routinely pays transactions 

when a consumer has insufficient or 

unavailable funds in a prepaid account 

and the consumer is obligated 

contractually to repay those 

transactions. Under the proposal, such a 

program would constitute a plan 

notwithstanding that the creditor retains 

discretion not to pay such transactions. 

Thus, proposed § 1005.12(a)(1)(iv)(B) 

focuses on whether credit is extended 

under a ‘‘plan’’ that is subject to the 

provisions of subpart B, rather than 

whether there is an agreement between 

a consumer and a financial institution to 

extend credit when the consumer’s 

account is overdrawn or to maintain a 

specified minimum balance in the 

consumer’s account. 

Comment 12(a)–1 provides guidance 

on determining the applicable 

regulation related to liability and error 

resolution, primarily focusing on 

examples of when a debit card that also 

is a credit card under Regulation Z 

accesses a checking account. Under the 

proposal, comment 12(a)–1 would be 

moved to proposed comment 12(a)–5. 

The proposal also would amend 

proposed comment 12(a)–5 to provide 

guidance on determining the applicable 

regulation related to liability and error 

resolution for overdraft credit plans in 

connection with asset accounts, 

including prepaid accounts. 

Proposed comment 12(a)–5.i would 

also explain that for an account other 

than a prepaid account where credit is 

extended incident to an electronic fund 

transfer under an agreement to extend 

overdraft credit between the consumer 

and the financial institution, Regulation 

E’s liability limitations and error 

resolution provisions apply, in addition 

to Regulation Z § 1026.13(d) and (g) 

(which apply because of the extension 

of credit associated with the overdraft 

feature on the asset account). With 

respect to an account other than for a 

prepaid account, incidental credit that 

is not extended under an agreement 

between the consumer and the financial 

institution where the financial 

institution agrees to extend credit is 

governed solely by the error resolution 

procedures in Regulation E, and 

Regulation Z § 1026.23(d) and (g) do not 

apply. 

Proposed comment 12(a)–5 would 

provide that with respect to a prepaid 

account where credit is extended under 

a credit plan that is subject to 

Regulation Z subpart B, Regulation E’s 

liability limitations and error resolution 

provisions apply, in addition to 

Regulation Z § 1026.13(d) and (g) 

(which apply because of the extension 

of credit associated with the overdraft 

feature on the asset account). Under the 

proposal, a credit plan is subject to 

Regulation Z subpart B if the credit plan 

is accessed by an access device that is 

a credit card under Regulation Z or the 

credit plan is open-end credit. An 

access device for a prepaid account 

would not be a credit card if the access 

device only accesses credit that is not 

subject to any finance charge as defined 

in Regulation Z § 1026.4 or any fee 

described in Regulation Z § 1026.4(c) 

and is not payable by written agreement 

in more than four installments. See 

Regulation Z comment 2(a)(15)–2.i.F. 

Proposed comment 12(a)–5 would 

explain that incidental credit under a 

credit plan that only can be accessed by 

an access device for a prepaid account 

that is not a credit card is not subject to 

Regulation Z subpart B and is governed 

solely by the error resolution procedures 

in Regulation E because the credit plan 

is not accessed by a credit card and the 

plan is not open-end credit. In this case, 

Regulation Z § 1026.13(d) and (g) do not 

apply. 

Comment 12(a)–1.i and ii would be 

moved to proposed comment 12(a)–5–.ii 

and iii, respectively, and would be 

revised to indicate how the principles 

and examples apply generally to asset 

accounts, including checking accounts 

and prepaid accounts. 

The Bureau believes that it is 

appropriate to apply the limits on 

liability and the error resolution 

procedures in Regulation E generally to 

transactions that debit a prepaid 

account but also draw on an overdraft 

plan that is subject to Regulation Z 

subpart B. The Bureau believes that its 

proposed approach is consistent with 

EFTA section 909(c), which applies 

EFTA’s limits on liability for 

unauthorized use to transactions which 

involve both an unauthorized electronic 

fund transfer and an extension of credit 

pursuant to an agreement between the 

consumer and the financial institution 

to extend such credit to the consumer in 

the event the consumer’s account is 

overdrawn. 15 U.S.C. 1693g(c). An 

unauthorized electronic fund transfer on 

a prepaid account generally would be 

subject to the limits on liability in 

§ 1005.6 and proposed § 1005.18(e); an 

unauthorized electronic fund transfer on 

a prepaid account also is an error for 

purposes of error resolution procedures 

set forth in § 1005.11 and proposed 

§ 1005.18(e). See § 1005.11(a)(1)(i). 

Although billing errors under 

Regulation Z § 1026.13(a) include a 

broader category than only 

unauthorized use, the Bureau believes it 

is necessary and proper to apply 

Regulation E’s error resolution 

provisions and limited Regulation Z 

error resolution provisions to these 

transactions, to facilitate compliance 

with EFTA section 908 and TILA 

section 161 on error resolution. The 

Bureau is concerned that conflicting 

provisions could apply to transactions 

that debit a prepaid account but also 

draws on an overdraft plan subject to 

Regulation Z subpart B if Regulation E’s 

provisions applied to limits on liability 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77140 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

218 78 FR 24386, 24391 (Apr. 25, 2013). 

219See 72 FR 36589 (July 5, 2007). 

220Public Law 104–193, 110 Stat. 2105 (1996). 221See, e.g., 62 FR 43467 (Aug. 14, 1997). 

for unauthorized use, and Regulation 

Z’s provisions generally apply to 

investigation of billing errors, including 

transactions involving unauthorized 

use. To avoid these potential conflicts 

and to facilitate compliance, under 

proposed Regulation Z 

§ 1026.12(a)(1)(v), if the transaction 

debits a prepaid account but also draws 

on an overdraft plan subject to 

Regulation Z subpart B, Regulation E’s 

liability limitations and error resolution 

procedures apply to the entire 

transaction and Regulation Z’s error 

resolution rules in § 1026.13(d) and (g) 

apply to the credit portion of the 

transaction. This approach is also 

consistent with the existing provisions 

in § 1005.11(a)(1)(iv) and Regulation Z 

§ 1026.13(i), which applies Regulation 

E’s liability limitation and error 

resolution procedures to extensions of 

credit that is incident to an electronic 

fund transfer. 

The Bureau solicits comment on this 

approach. The Bureau also solicits 

comment on whether there are any other 

preferable approaches to determining 

how the liability limitations and error 

resolution procedures in Regulations E 

and Z should apply to transactions that 

debit prepaid accounts but also draw on 

overdraft plans that are subject to 

Regulation Z subpart B. 

12(b) Preemption of Inconsistent State 

Laws 

In 2013, the Bureau published a final 

determination as to whether certain 

laws of Maine and Tennessee relating to 

unclaimed gift cards are inconsistent 

with and preempted by EFTA and 

Regulation E.218 The Bureau concluded 

that it had no basis for concluding that 

the provisions at issue in Maine’s 

unclaimed property law relating to gift 

cards are inconsistent with, or therefore 

preempted by, Federal law. The Bureau 

did determine, however, that one 

provision in Tennessee’s unclaimed 

property law relating to gift cards is 

inconsistent with, and therefore 

preempted by, Federal law. The 

Bureau’s notice of its preemption 

determination stated that the 

determination would also be reflected in 

the commentary accompanying 

Regulation E. 

The Bureau proposes to add a 

summary of its preemption 

determination with respect to 

Tennessee’s unclaimed property law as 

comment 12(b)–4. Proposed comment 

12(b)–4 would state that the Bureau had 

determined that a provision in the State 

law of Tennessee is preempted by the 

Federal law, effective April 25, 2013. 

Specifically, section 66–29–116 of 

Tennessee’s Uniform Disposition of 

Unclaimed (Personal) Property Act is 

preempted to the extent that it permits 

gift certificates, store gift cards, and 

stored-value cards, as defined in 

§ 1005.20(a), to be declined at the pointof-sale sooner than the gift certificates, 

store gift cards, or stored value cards 

and their underlying funds are 

permitted to expire under § 1005.20(e). 

Existing comment 12(b)–2 states, in 

part, that the Bureau recognizes state 

law preemption determinations made by 

the Board prior to July 21, 2011, unless 

and until the Bureau makes and 

publishes any contrary determination. 

The Bureau proposes to make this 

statement into a standalone comment in 

proposed comment 12(b)–2 under the 

heading Preemption determinations 

generally. The Bureau proposes to 

renumber the remainder of existing 

comment 12(b)–2 as proposed comment 

12(b)–3, to make the heading for that 

comment Preemption determination— 

Michigan for the sake of clarity, and to 

update proposed comment 12(b)–3.i 

through .iv to provide full citations to 

the preempted Michigan law at issue 

therein, which appear in chapter 488 of 

the Michigan Compiled Laws. 

Additionally, the Bureau proposes 

adding language in proposed comment 

12(b)–3.iv to clarify that the preemption 

of sections 488.17 and 488.18 of 

Michigan law does not apply to 

transfers of $15 or less, which, pursuant 

to existing § 1005.9(e), are not subject to 

§ 1005.9. Section 1005.9(e) (then 

§ 205.9(e)) was added by the Board in 

2007 to eliminate the requirement to 

provide terminal receipts for 

transactions of $15 or less.219

The Bureau seeks comment on this 

portion of its proposal. 

Section 1005.15 Electronic Fund 

Transfer of Government Benefits 

Section 1005.15 of Regulation E 

currently contains provisions specific to 

certain accounts established by 

government agencies for distributing 

government benefits to consumers 

electronically, such as through ATMs or 

POS terminals. As discussed in more 

detail above, the Board amended 

Regulation E in 1994 to specifically 

address such accounts. In 1997, the 

Board modified Regulation E to exempt 

‘‘needs-tested’’ EBT programs 

established or administered under State 

or local law in response to a 1996 

change to EFTA made by the Personal 

Responsibility and Work Opportunity 

Reconciliation Act of 1996.220 All 

accounts used to distribute benefits for 

Federally administered programs 

(including needs-tested EBT programs) 

and non-needs tested State and local 

programs, such as those used to 

distribute unemployment insurance 

payments, pensions, and child support, 

are currently covered by § 1005.15.221

Although the Bureau is proposing to 

include these accounts in the general 

definition of prepaid account in 

proposed § 1005.2(b)(3), as discussed 

above, the Bureau is proposing for ease 

of administration to modify existing 

§ 1005.15 to address the proposed 

revisions for government benefit 

accounts, rather than subsuming the 

rules for such accounts into proposed 

§ 1005.18 as the Bureau proposes to do 

with respect to payroll card accounts. 

These proposed revisions and additions 

would generally align the requirements 

in § 1005.15 with the proposed 

requirements for prepaid accounts 

generally in § 1005.18, which are 

discussed in more detail in the sectionby-section analysis of proposed 

§ 1005.18 below. 

15(a) Government Agency Subject to 

Regulation 

Existing § 1005.15(a)(1) provides that 

a government agency is deemed to be a 

financial institution for purposes of 

EFTA and Regulation E if it directly or 

indirectly issues an access device to a 

consumer for use in initiating an 

electronic fund transfer of government 

benefits from an account, other than 

needs-tested benefits in a program 

established under State or local law or 

administered by a State or local agency. 

It also provides that the agency shall 

comply with all applicable requirements 

of EFTA and Regulation E, except as 

provided in § 1005.15. The Bureau is 

proposing to adjust the final sentence of 

§ 1005.15(a)(1) to reflect that proposed 

§ 1005.15, as discussed in detail below, 

is no longer only providing an exception 

to a Regulation E requirement. The 

Bureau is otherwise not proposing to 

modify § 1005.15(a)(1). 

Existing § 1005.15(a)(2) defines, for 

purposes of § 1005.15, the term 

‘‘account’’ to mean an account 

established by a government agency for 

distributing government benefits to a 

consumer electronically, such as 

through ATMs or POS terminals, but 

does not include an account for 

distributing needs-tested benefits in a 

program established under State or local 

law or administered by a State or local 

agency. For ease of reference, the 

Bureau is proposing to define such an 

account as a ‘‘government benefit 


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222See, e.g., Bd. of Governors of the Fed. Reserve 

Sys., Report to the Congress on GovernmentAdministered, General-Use Prepaid Cards, at 3 (July 

2014), available at http://www.federalreserve.gov/

publications/es/2014_Prepaid_Cards_Final.pdf. 

223The Bureau is also proposing, for purposes of 

government benefit accounts, to expand the 

requirement in existing § 1005.7(b)(5) to disclose 

fees related to EFTs to cover all fees related to the 

government benefit account, as discussed below in 

the section-by-section analysis of proposed 

§ 1005.15(f). See also proposed § 1005.18(f) 

(proposing the same requirement for prepaid 

accounts). 

224Specifically, EFTA section 905(a) states that 

‘‘[t]he terms and conditions of electronic fund 

transfers involving a consumer’s account shall be 

disclosed at the time the consumer contracts for an 

electronic fund transfer service, in accordance with 

regulations of the Bureau.’’ 15 U.S.C. 1693c(a) 

account;’’ no substantive change is 

intended by the addition of this 

definition. 

The Bureau does not intend for the 

proposed revisions in § 1005.15 to alter 

the programs or agencies to which 

§ 1005.15 is applicable. Thus, the 

Bureau also does not expect that its 

proposed revisions to § 1005.15 would 

impose significant burden on 

government agencies distributing funds 

via government benefit accounts. 

The Bureau understands that 

government benefit account programs 

are typically administered by financial 

institutions pursuant to a contract 

between the institution and the 

agency.222 The Bureau is not aware of 

any covered programs run solely by an 

agency. Although the Bureau does not 

propose to substantively revise 

§ 1005.15(a), the Bureau requests 

comment as to whether these provisions 

in existing § 1005.15(a) remain relevant 

in light of both current industry 

practices and the Bureau’s proposed 

definition for ‘‘prepaid account’’ in 

§ 1005.2(b)(3). Specifically, the Bureau 

seeks comment on the effect on 

consumers and covered government 

benefit account programs were the 

Bureau to remove it. 

The Bureau notes that although it is 

proposing to maintain § 1005.15 for 

government benefit accounts, there is 

some question as to whether separate 

provisions remain necessary or whether 

the requirements for such accounts 

could be subsumed into proposed 

§ 1005.18. The Bureau thus requests 

comment on whether, in light of the 

proposal herein to address all other 

types of covered prepaid accounts in 

§ 1005.18, the Bureau should subsume 

all requirements for government benefit 

accounts into § 1005.18 as well. 

15(b) Issuance of Access Devices 

Existing § 1005.15(b) explains that for 

purposes of § 1005.15, a consumer is 

deemed to request an access device 

when the consumer applies for 

government benefits that the agency 

disburses or will disburse by means of 

an electronic fund transfer. The agency 

shall verify the identity of the consumer 

receiving the device by reasonable 

means before the device is activated. 

The Bureau is not proposing to modify 

§ 1005.15(b). 

15(c) Pre-Acquisition Disclosure 

Requirements 

The Bureau is proposing new 

disclosure requirements for government 

benefit accounts that would be provided 

before a consumer acquires a 

government benefit account. The 

requirements in proposed § 1005.15(c) 

would be in addition to the initial 

disclosure requirements in existing 

§ 1005.7(b) and would correspond to the 

requirements in proposed § 1005.18(b) 

for prepaid accounts generally.223

EFTA section 905(a) sets forth 

disclosure requirements for accounts 

subject to the Act.224 In addition to 

these disclosures, the Bureau is 

proposing to use its authority under 

EFTA sections 904(a) and (c), 905(a), 

and section 1032(a) of the Dodd-Frank 

Act to require government agencies to 

provide disclosures prior to the time a 

consumer acquires a government benefit 

account. As discussed in more detail in 

the section-by-section analysis of 

proposed § 1005.18(b)(1)(i) below for 

prepaid accounts, the Bureau believes 

that adjustment of the timing 

requirement is necessary and proper to 

effectuate the purposes of EFTA to 

provide a framework to establish the 

rights, liabilities, and responsibilities of 

government benefit account consumers, 

because the proposed revision will 

assist consumers’ understanding of the 

terms and conditions of their 

government benefit accounts. 

The Bureau is proposing in new 

§ 1005.15(c) to extend to government 

benefit accounts the same preacquisition disclosure requirements 

proposed for prepaid accounts, which 

are discussed in detail in the section-bysection analysis of proposed 

§ 1005.18(b) below. Specifically, 

proposed § 1005.15(c)(1) would state 

that before a consumer acquires a 

government benefit account, a 

government agency shall comply with 

the pre-acquisition disclosure 

requirements applicable to prepaid 

accounts as set forth in proposed 

§ 1005.18(b), in accordance with the 

timing requirements of proposed 

§ 1005.18(h). 

To address issues of compulsory use 

(see existing § 1005.10(e)(2) and 

proposed comment 10(e)(2)-2), the 

Bureau is proposing that a notice be 

provided at the top of the short form to 

highlight to consumers that they are not 

required to accept a government benefit 

account. Specifically, proposed 

§ 1005.15(c)(2) would state that before a 

consumer acquires a government benefit 

account, the agency must provide a 

statement pursuant to proposed 

§ 1005.18(b)(2)(i)(A) that the consumer 

does not have to accept the government 

benefit account and that the consumer 

can ask about other ways to get their 

benefit payments from the agency 

instead of receiving them through the 

account, in a form substantially similar 

to proposed Model Form A–10(a). As 

explained in the section-by-section 

analysis of § 1005.10(e)(2) above, the 

Bureau is proposing to clarify that 

Regulation E does not permit a 

government agency to require 

individuals to receive government 

benefits by direct deposit to any 

particular institution. As noted, the 

Bureau believes it is important for 

consumers to realize they have the 

option of not accepting a government 

benefit account before they acquire the 

account, and that receiving such notice 

at the top of the short form will help to 

ensure consumers are aware of this 

right. 

Proposed comment 15(c)–1 would 

explain that Model Form A–10(a) 

contains a model form for the preacquisition short disclosure 

requirements for government benefit 

accounts pursuant to § 1005.15(c). 

Government agencies may use Sample 

Form A–10(e) of Appendix A to this 

part to comply with the pre-acquisition 

long form disclosure requirements of 

§ 1005.15(c)(1). 

Proposed comment 15(c)–2 would 

reiterate that § 1005.18(b)(1)(i) generally 

requires delivery of both the short form 

disclosure required by § 1005.18(b)(2)(i) 

and the long form disclosure required 

by § 1005.18(b)(2)(ii) before a consumer 

acquires a prepaid account. Proposed 

comment 15(c)–2.i would provide an 

example illustrating when a consumer 

receives disclosures before acquisition 

of an account for purposes of proposed 

§ 1005.15(c)(1). Specifically, the 

example would address a situation in 

which a government agency informs a 

consumer that she can receive 

distribution of benefits via a government 

benefit account in the form of a prepaid 

card. In the first example, the consumer 

receives the short form and long form 

disclosures to review at the time the 

consumer receives benefits eligibility 

information from the agency. After 


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225The periodic statement must include 

transaction information for each EFT, the account 

number, the amount of any fees assessed, the 

beginning and ending account balance, the financial 

institution’s address and telephone number for 

inquiries, and a telephone number for 

preauthorized transfers. See § 1005.9(b). 

226See Study of Prepaid Account Agreements, at 

18 tbl.5. All account agreements reviewed for cards 

used to distribute government benefits indicated 

that electronic access to account information is 

available. The Bureau acknowledges that this 

selection may have some bias as all account 

agreements, including those for government benefit 

programs, reviewed in the Study were obtained 

online; as such, those programs may be more likely 

than others to provide electronic access to account 

information. 

227The Study of Prepaid Account Agreements 

found that 95.38 percent of account agreements for 

government benefit cards indicate that those 

programs provide electronic periodic statements (in 

addition to electronic access to account history 

information). See id., at 20 tbl.7. 

receiving the disclosures, the consumer 

agrees to receive benefits via the 

government benefit account. The 

comment explains that these disclosures 

were provided to the consumer preacquisition, and the agency has 

complied with proposed § 1005.15(c)(1). 

By contrast, if the consumer does not 

receive the short form and long form 

disclosures to review until the time at 

which the consumer receives the 

prepaid card, these disclosures were 

provided to the consumer postacquisition and were not provided in 

compliance with proposed 

§ 1005.15(c)(1). 

Proposed comment 15(c)–3 would 

explain that the disclosures and notice 

required by § 1005.15(c)(1) and (2) may 

be given in the same process or 

appointment during which the 

consumer acquires or agrees to acquire 

a government benefit account. When a 

consumer receives benefits eligibility 

information and signs up or enrolls to 

receive benefits during the same process 

or appointment, a government agency 

that gives the disclosures and notice 

required by proposed § 1005.15(c)(1) 

and (2) before issuing a government 

benefit account complies with the 

timing requirements of proposed 

§ 1005.15(c). 

15(d) Access to Account Information 

15(d)(1) Periodic Statement Alternative 

EFTA section 906(c) requires that a 

financial institution provide each 

consumer with a periodic statement for 

each account of such consumer that may 

be accessed by means of an electronic 

fund transfer. Section 1005.9(b), which 

implements EFTA section 906(c), 

generally requires a periodic statement 

for each monthly cycle in which an 

electronic fund transfer occurred or, if 

there are no such transfers, a periodic 

statement at least quarterly.225 Financial 

institutions must deliver periodic 

statements in writing and in a form that 

the consumer can keep, unless consent 

is received for electronic delivery or 

unless Regulation E provides otherwise. 

See §§ 1005.4(a)(1) and 1005.9(b). 

In the 1994 EBT Rule, the Board 

adopted a final rule that modified the 

periodic statement requirement for 

government benefit accounts. Pursuant 

to that rule, existing § 1005.15(c) 

explains that government agencies can 

provide periodic statements that comply 

with the general provisions in 

Regulation E, or alternatively, the 

agency must make available to the 

consumer: (1) The account balance, 

through a readily available telephone 

line and at a terminal (such as by 

providing balance information at a 

balance-inquiry terminal, or providing 

it, routinely or upon request, on a 

terminal receipt at the time of an 

electronic fund transfer); and (2) a 

written history of account transactions 

that is provided promptly in response to 

an oral or written request and that 

covers at least 60 days. 

The Bureau is proposing to revise 

existing § 1005.15(c) as new 

§ 1005.15(d)(1), which would generally 

align the periodic statement alternative 

for government benefit accounts with 

the proposed alternative for prepaid 

accounts discussed below in the 

section-by-section analysis of proposed 

§ 1005.18(c). Specifically, the Bureau is 

proposing in § 1005.15(d)(1) an 

alternative to the periodic statement 

requirement that would allow 

government agencies to instead provide 

access to account balance by telephone 

and at a terminal, 18 months of 

transaction history online, and 18 

months written transaction history upon 

request. To further the purposes of 

EFTA to provide a framework to 

establish the rights, liabilities, and 

responsibilities of prepaid account 

consumers (including government 

benefit account consumers), the Bureau 

believes it is necessary and proper to 

exercise its authority under EFTA 

section 904(c) to continue the exception 

to the periodic statement requirements 

of EFTA section 906(c) for government 

benefit accounts and to modify that 

exception in Regulation E to more 

closely align it with the proposed 

requirements for prepaid accounts 

generally. See also the section-bysection analysis of proposed 

§ 1005.18(c)(1) below. 

Proposed § 1005.15(d)(1) and (1)(i) 

retain the existing language in current 

§ 1005.15(c) and (c)(1), and would state 

that a government agency need not 

furnish periodic statements required by 

§ 1005.9(b) if the agency makes available 

to the consumer the consumer’s account 

balance, through a readily available 

telephone line and at a terminal (such 

as by providing balance information at 

a balance-inquiry terminal or providing 

it, routinely or upon request, on a 

terminal receipt at the time of an 

electronic fund transfer). This language 

is unchanged from existing 

§ 1005.15(c)(1). Existing 

§ 1005.18(b)(1)(i) for payroll card 

accounts and proposed § 1005.18(c)(1)(i) 

for prepaid accounts, however, do not 

include the requirement to provide 

balance information at a terminal. As 

discussed below in the section-bysection analysis of proposed 

§ 1005.18(c)(1)(i), the Bureau is seeking 

comment on whether a similar 

requirement to provide balance 

information at a terminal should be 

added to the requirements of proposed 

§ 1005.18(c) for prepaid accounts 

generally. The Bureau requests 

comment on whether, alternatively, the 

requirement to provide balance 

information for government benefit 

accounts at a terminal should be 

eliminated from § 1005.15 given the 

other enhancements proposed herein 

and for parity with proposed § 1005.18. 

The second piece of the proposed 

periodic statement alternative for 

government benefit accounts, proposed 

§ 1005.15(d)(1)(ii), would be an 

electronic history of the consumer’s 

account transactions, such as through a 

Web site, that covers at least 18 months 

preceding the date the consumer 

electronically accesses the account. As 

noted above, the requirement to provide 

an electronic history of a consumer’s 

account transactions would be new to 

government benefit accounts. This 

provision would mirror proposed 

§ 1005.18(c)(1)(ii) for prepaid accounts 

generally. The Bureau does not believe 

that this proposed requirement would 

impose significant burden on 

government agencies, as the Bureau 

believes that may government benefit 

account programs already provide 

electronic access to account 

information. For example, the Bureau 

found that all the government benefit 

card programs included in its Study of 

Prepaid Account Agreements already 

provide online access to account 

information 226 and, in most cases, 

electronic periodic statements as 

well.227

The third piece of the proposed 

periodic statement alternative, proposed 

§ 1005.15(d)(1)(iii), would be a 

requirement to provide a written history 

of the consumer’s account transactions 

promptly in response to an oral or 

written request and that covers at least 


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18 months preceding the date the 

agency receives the consumer’s request. 

This provision is similar to existing 

§ 1005.15(c)(2), but has been modified to 

change the time period covered by the 

written history from 60 days to 18 

months, and to otherwise mirror the 

language used in proposed 

§ 1005.18(c)(1)(iii) for prepaid accounts 

generally. 

15(d)(2) Additional Access to Account 

Information Requirements 

The Bureau is proposing new 

§ 1005.15(d)(2), which would require 

that a government agency comply with 

the account information requirements 

applicable to prepaid accounts as set 

forth in proposed § 1005.18(c)(2), (3), 

and (4). As discussed in more detail 

below, proposed § 1005.18(c)(2) requires 

that the electronic and written histories 

in the periodic statement alternative 

must include the information set forth 

in § 1005.9(b). This provision currently 

exists for payroll card accounts in 

existing § 1005.18(b)(2), but does not 

presently appear in § 1005.15 for 

government benefit accounts. Proposed 

§ 1005.18(c)(3) would require disclosure 

of all fees assessed against the account, 

in both the history of account 

transactions provided as periodic 

statement alternatives, as well as in any 

periodic statement. Proposed 

§ 1005.18(c)(4) would require 

disclosure, in both the history of 

account transactions provided as 

periodic statement alternatives, as well 

as in any periodic statement, monthly 

and annual summary totals of fees 

imposed on and the total amount of 

deposits and debits made to a prepaid 

account. Proposed comment 15(d)–1 

would refer to proposed comments 

18(c)–1 through –5 for guidance on 

access to account information 

requirements. 

To further the purposes of EFTA to 

provide a framework to establish the 

rights, liabilities, and responsibilities of 

prepaid account consumers (including 

government benefit account consumers), 

the Bureau believes it is necessary and 

proper to exercise its authority under 

EFTA section 904(c) to modify the 

periodic statement requirements of 

EFTA section 906(c) to require inclusion 

of all fees charged and a summary total 

of both monthly and annual fees. See 

also the section-by-section analysis of 

proposed § 1005.18(c)(3) and 

§ 1005.18(c)(4) below. These proposed 

revisions will assist consumers’ 

understanding of the account activity on 

their government benefit accounts. In 

addition, the Bureau is also using its 

disclosure authority pursuant to the 

Dodd-Frank Act section 1032(a) because 

the Bureau believes that disclosure of all 

fees and account activity summaries 

ensure that the features of government 

benefit accounts, over the term of the 

account, are fully, accurately, and 

effectively disclosed to consumers in a 

manner that permits consumers to 

understand the costs, benefits, and risks 

associated with government benefit 

accounts. 

15(e) Modified Disclosure Requirements 

Existing § 1005.15(d) provides that a 

government agency that follows the 

periodic statement alternative in 

existing § 1005.15(c) must modify 

certain initial and ongoing disclosures 

given to consumers. Existing 

§ 1005.15(d)(1) requires modification of 

the initial disclosures given pursuant to 

§ 1005.7(b) to reflect the methods a 

consumer can employ to obtain account 

balance information and copies of 

written account history, and to address 

corresponding changes in the timing 

requirements for the error resolution 

notice required by § 1005.7(b)(10). 

Existing § 1005.15(d)(2) addresses 

modification of the annual error 

resolution notice required by 

§ 1005.8(b). Existing § 1005.15(d)(3) and 

(4) adjust the triggering of the 60-day 

period for reporting unauthorized 

transfers pursuant to the limited 

liability provisions in § 1005.6(b)(3) and 

the error resolution provisions of 

§ 1005.11. Because the Bureau is 

proposing to modify the periodic 

statement alternative for government 

benefit accounts in proposed 

§ 1005.15(d)(1), the Bureau is proposing 

to modify the requirements in existing 

§ 1005.15(d), renumbered as new 

§ 1005.15(e), to adjust the corresponding 

timing provisions therein and to align 

with the requirements of proposed 

§ 1005.18(d) for prepaid accounts 

generally, discussed below. 

15(e)(1) Initial Disclosures 

15(e)(1)(i) Account Information 

Proposed § 1005.15(e)(1)(i) would 

require that a government agency 

modify the disclosures required under 

§ 1005.7(b) by disclosing a telephone 

number that the consumer may call to 

obtain the account balance, the means 

by which the consumer can obtain an 

electronic account history, such as the 

address of a Web site, and a summary 

of the consumer’s right to receive a 

written account history upon request (in 

place of the a periodic statement 

required by § 1005.7(b)(6)), including a 

telephone number to call to request a 

history. The disclosure required by 

proposed § 1005.15(e)(1)(i) may be made 

by providing a notice substantially 

similar to the notice contained in 

proposed appendix A–5. 

15(e)(1)(ii) Error Resolution 

Mirroring existing § 1005.15(d)(1)(iii), 

proposed § 1005.15(e)(1)(ii) would 

require that a government agency 

modify the disclosures required under 

§ 1005.7(b) by providing a notice 

concerning error resolution that is 

substantially similar to the notice 

contained in proposed appendix A–5, in 

place of the notice required by 

§ 1005.7(b)(10). These proposed 

modifications are discussed below in 

the section-by-section analysis of 

appendix A–5. 

15(e)(2) Annual Error Resolution Notice 

Mirroring existing § 1005.15(d)(2), 

proposed § 1005.15(e)(2) would require 

that an agency provide an annual notice 

concerning error resolution that is 

substantially similar to the notice 

contained in proposed appendix A–5, in 

place of the notice required by 

§ 1005.8(b). The Bureau is proposing to 

add that, alternatively, the agency may 

include on or with each electronic or 

written history provided in accordance 

with proposed § 1005.15(d)(1), a notice 

substantially similar to the abbreviated 

notice for periodic statements contained 

in paragraph (b) of appendix A–3, 

modified as necessary to reflect the error 

resolution provisions set forth in 

proposed § 1005.15. The Bureau is 

proposing to allow each electronic and 

written history to include an 

abbreviated error resolution notice, in 

lieu of an annual notice, for parity with 

proposed § 1005.18(d)(2) for prepaid 

accounts generally, which is based on 

existing § 1005.18(c)(2) for payroll card 

accounts. 

The Bureau seeks comment, however, 

on whether it should continue to require 

annual error resolution notices for 

government benefit accounts in certain 

circumstances, such as those accounts 

for which a consumer has not accessed 

an electronic history or requested a 

written history in an entire calendar 

year and thus would not have received 

any error resolution notice during the 

course of the year. 

15(e)(3) Modified Limitations on 

Liability Requirements 

EFTA section 909 governs consumer 

liability for unauthorized electronic 

fund transfers. EFTA section 908 

governs the timing and other 

requirements for consumers and 

financial institutions on error 

resolution, including provisional credit. 

EFTA section 909 on consumer liability 

is implemented by existing § 1005.6. For 

accounts under Regulation E generally, 


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228The required disclosures for this purpose 

include a summary of the consumer’s liability 

under § 1005.6, or under State law or other 

applicable law or agreement, for unauthorized 

electronic fund transfers; the telephone number and 

address of the person or office to be notified when 

the consumer believes an unauthorized transfer has 

been or may be made; and the financial institution’s 

business days. §§ 1005.6(a) and 1005.7(b)(1) 

through (3). 

229The financial institution has 90 days (instead 

of 45) if the claimed unauthorized electronic fund 

transfer was not initiated in a state, resulted from 

a point-of-sale debit card transaction, or occurred 

within 30 days after the first deposit to the account 

was made. See § 1005.11(c)(3)(ii). 

including payroll card accounts, 

§ 1005.6(a) provides that a consumer 

may be held liable for an unauthorized 

electronic fund transfer resulting from 

the loss or theft of an access device only 

if the financial institution has provided 

certain required disclosures and other 

conditions are met.228 If the consumer 

provides timely notice to the financial 

institution within two business days of 

learning of the loss or theft of the access 

device, the consumer’s liability is the 

lesser of $50 or the amount of 

unauthorized transfers made before 

giving notice. § 1005.6(b)(1). If timely 

notice is not given, the consumer’s 

liability is the lesser of $500 or the sum 

of (1) the lesser of $50 or the amount of 

unauthorized transfers occurring within 

two business days of learning of the 

loss/theft and (2) the amount of 

unauthorized transfers that occur after 

two business days but before notice is 

given to the financial institution. 

§ 1005.6(b)(2). Section 1005.6(b)(3) 

provides, in part, that a consumer must 

report an unauthorized electronic fund 

transfer that appears on a periodic 

statement within 60 days of the 

financial institution’s transmittal of the 

statement in order to avoid liability for 

subsequent transfers. 

For government agencies that follow 

the periodic statement alternative in 

existing § 1005.15(c), existing 

§ 1005.15(d)(3) provides that for 

purposes of § 1005.6(b)(3), regarding a 

60-day period for reporting any 

unauthorized transfer that appears on a 

periodic statement, the 60-day period 

shall being with the transmittal of a 

written account history or other account 

information provided to the consumer 

under existing § 1005.15(c). The Bureau 

notes that this provision only modifies 

the 60-day period for consumers to 

report an unauthorized transfer and 

does not alter any other provision of 

§ 1005.6. 

Proposed § 1005.15(e)(3) would 

modify existing § 1005.15(d)(3) to adjust 

the timing requirements for reporting 

unauthorized transfers based on the 

proposed requirement to provide 

consumers with electronic account 

history under proposed 

§ 1005.15(d)(1)(ii), as well as written 

history upon request. Specifically, 

proposed § 1005.15(e)(3)(i) would 

provide that for purposes of existing 

§ 1005.6(b)(3), the 60-day period for 

reporting any unauthorized transfer 

shall begin on the earlier of the date the 

consumer electronically accesses the 

consumer’s account under proposed 

§ 1005.15(d)(1)(ii), provided that the 

electronic history made available to the 

consumer reflects the unauthorized 

transfer, or the date the agency sends a 

written history of the consumer’s 

account transactions requested by the 

consumer under proposed 

§ 1005.15(d)(1)(iii) in which the 

unauthorized transfer is first reflected. 

Proposed § 1005.15(e)(3)(ii), which 

mirrors existing § 1005.18(c)(3)(ii) and 

proposed § 1005.18(e)(1)(ii), would 

provide that an agency may comply 

with proposed § 1005.15(e)(3)(i) by 

limiting the consumer’s liability for an 

unauthorized transfer as provided under 

existing § 1005.6(b)(3) for any transfer 

reported by the consumer within 120 

days after the transfer was credited or 

debited to the consumer’s account. 

The Bureau notes that nothing in this 

proposal modifies the requirement to 

comply with existing § 1005.6(b)(4), 

regarding an extension of time limits if 

a consumer’s delay in notifying the 

agency was due to extenuating 

circumstances, nor any other provisions 

of existing § 1005.6. 

15(e)(4) Modified Error Resolution 

Requirements 

EFTA section 908 governs the timing 

and other requirements for consumers 

and financial institutions on error 

resolution, including provisional credit, 

and is implemented for accounts under 

Regulation E generally, including 

government benefit accounts, in 

§ 1005.11. Section 1005.11(c)(1) and 

(3)(i) requires that a financial 

institution, after receiving notice that a 

consumer believes an electronic fund 

transfer from the consumer’s account 

was not authorized, must investigate 

promptly and determine whether an 

error occurred (i.e., whether the transfer 

was unauthorized), within ten business 

days (20 business days if the electronic 

fund transfer occurred within 30 days of 

the first deposit to the account). Upon 

completion of the investigation, the 

financial institution must report the 

investigation’s results to the consumer 

within three business days. After 

determining that an error occurred, the 

financial institution must correct an 

error within one business day. See 

§ 1005.11(c)(1). Under EFTA section 

909(b), the burden of proof is on the 

financial institution to show that an 

alleged error was in fact an authorized 

transaction; if the financial institution 

cannot establish proof of valid 

authorization, the financial institution 

must credit the consumer’s account. 

Existing § 1005.11(c)(2) provides that 

if the financial institution is unable to 

complete the investigation within ten 

business days, its investigation may take 

up to 45 days if it provisionally credits 

the amount of the alleged error back to 

the consumer’s account within ten 

business days of receiving the error 

notice.229 Provisional credit is not 

required if the financial institution 

requires but does not receive written 

confirmation within 10 business days of 

an oral notice by the consumer. See 

§ 1005.11(c)(2)(i)(A). If the investigation 

establishes proof that the transaction 

was, in fact, authorized, the financial 

institution may reverse any provisional 

credit previously extended (assuming 

there are still available funds in the 

account). See § 1005.11(d)(2). 

For government agencies that follow 

the periodic statement alternative in 

existing § 1005.15(c), existing 

§ 1005.15(d)(4) provides that an agency 

shall comply with the requirements of 

existing § 1005.11 in response to an oral 

or written notice of an error from the 

consumer that is received no later than 

60 days after the consumer obtains the 

written account history or other account 

information under existing § 1005.15(c) 

in which the error is first reflected. The 

Bureau notes that this provision only 

modifies the 60-day period for 

consumers to report an error and does 

not alter any other provision of 

§ 1005.11. 

Proposed § 1005.15(e)(4) would 

modify existing § 1005.15(d)(3) to adjust 

the timing requirements for reporting 

errors based on the proposed 

requirement to provide consumers with 

electronic account history under 

proposed § 1005.15(d)(1)(ii), as well as 

written history upon request. 

Specifically, proposed § 1005.15(e)(4)(i) 

would provide that an agency shall 

comply with the requirements of 

existing § 1005.11 in response to an oral 

or written notice of an error from the 

consumer that is received by the earlier 

of 60 days after the date the consumer 

electronically accesses the consumer’s 

account under proposed 

§ 1005.15(d)(1)(ii), provided that the 

electronic history made available to the 

consumer reflects the alleged error, or 

60 days after the date the agency sends 

a written history of the consumer’s 

account transactions requested by the 

consumer under proposed 


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230 74 FR 59033, 59040 (Nov. 17, 2009). 

§ 1005.15(d)(1)(iii) in which the alleged 

error is first reflected. 

Proposed § 1005.15(e)(4)(ii) would 

provide that in lieu of following the 

procedures in proposed 

§ 1005.15(e)(4)(i), an agency complies 

with the requirements for resolving 

errors in existing § 1005.11 if it 

investigates any oral or written notice of 

an error from the consumer that is 

received by the agency within 120 days 

after the transfer allegedly in error was 

credited or debited to the consumer’s 

account. 

Proposed comment 15(e)–1 would 

refer to proposed comments 18(d)–1 

through –3, discussed below, for 

guidance on modified limited liability 

and error resolution requirements. 

The Bureau notes that proposed 

§ 1005.15 does not contain an exclusion 

that corresponds to proposed 

§ 1005.18(e)(3), which would exempt a 

financial institution from compliance 

with the liability limits and error 

resolution requirements under §§ 1005.6 

and 1005.11 for any prepaid account for 

which it has not completed its 

collection of consumer identifying 

information and identity verification, 

provided the institution has disclosed to 

the consumers the risks of not 

registering the prepaid account. The 

Bureau is not proposing a similar 

exclusion for government benefit 

accounts because existing § 1005.15(b) 

requires that government agencies verify 

consumers’ identities before an access 

device for an account governed by 

§ 1005.15 is activated. 

15(f) Initial Disclosure of Fees and Other 

Key Information 

The Bureau is proposing § 1005.15(f) 

to provide that for government benefit 

accounts, a government agency shall 

comply with the requirements 

governing initial disclosure of fees and 

other key information applicable to 

prepaid accounts as set forth in 

proposed § 1005.18(f), in accordance 

with the timing requirements of 

proposed § 1005.18(h). This proposed 

requirement is in addition to the preacquisition disclosure requirements of 

proposed § 1005.15(c), discussed above. 

As discussed in more detail in the 

section-by-section analysis of proposed 

§ 1005.18(f) below, the Bureau is 

proposing to modify the initial 

disclosure of fees requirement in 

§ 1005.7(b)(5) for prepaid accounts, 

including government benefit accounts. 

EFTA section 905(a)(4) requires 

financial institutions to disclose to 

consumers, as part of an account’s terms 

and conditions, any charges for 

electronic fund transfers or for the right 

to make such transfers. Existing 

§ 1005.7(b)(5) implements this 

requirement by stating that, as part of 

the initial disclosures, any fees imposed 

by a financial institution for electronic 

fund transfers or for the right to make 

transfers must be disclosed. Existing 

comment 7(b)(5)–1 further clarifies that 

other fees (for example, minimumbalance fees, stop-payment fees, or 

account overdrafts) may, but need not, 

be disclosed. The Bureau believes that 

for prepaid accounts (including 

government benefit accounts), however, 

it is important that the initial account 

disclosures provided to consumers list 

all fees that may be imposed in 

connection with the account, not just 

those fees related to electronic fund 

transfers. 

Thus, to further the purposes of EFTA 

to provide a framework to establish the 

rights, liabilities, and responsibilities of 

prepaid account users, the Bureau 

believes it is necessary and proper to 

exercise its authority under EFTA 

section 904(c) to propose an adjustment 

of the requirement EFTA section 

905(a)(4), which is implemented in 

existing § 1005.7(b)(5), for government 

benefit accounts. Specifically, the 

Bureau is proposing § 1005.15(f), which 

would cross-reference § 1005.18(f) to 

require that, pursuant to proposed 

§ 1005.18(f)(1), in addition to disclosing 

any fees imposed by a government 

agency for electronic fund transfers or 

the right to make such transfers, the 

agency must also provide in its initial 

disclosures given pursuant to 

§ 1005.7(b)(5) all other fees imposed by 

the agency in connection with a 

government benefit account. For each 

fee, an agency must disclose the amount 

of the fee, the conditions, if any, under 

which the fee may be imposed, waived, 

or reduced, and, to the extent known, 

whether any third party fees may apply. 

The Bureau believes that most agencies 

are already disclosing all fees in the 

terms and conditions accompanying 

government benefit accounts. These 

disclosures pursuant to proposed 

§§ 1005.15(f) and 1005.18(f) must 

include all of the information required 

to be disclosed pursuant to 

§ 1005.18(b)(2)(ii)(B) and must be 

provided in a form substantially similar 

to Sample Form A–10(e). 

The Bureau believes that for 

consistency purposes and to facilitate 

consumer understanding of a 

government benefit account’s terms, it is 

useful for the fee disclosure provided 

pursuant to § 1005.7(b)(5), as modified 

by proposed § 1005.18(f), to be in the 

same format of the long form disclosure 

requirement of proposed 

§ 1005.18(b)(2)(ii)(A), as applied to 

government benefit accounts via 

proposed § 1005.15(c). 

15(g) Credit Card Plans Linked to 

Government Benefit Accounts 

The Bureau is proposing § 1005.18(g), 

which would require that for credit 

plans linked to government benefit 

accounts, a government agency must 

comply with prohibitions and 

requirements applicable to prepaid 

accounts as set forth in proposed 

§ 1005.18(g). See the section-by-section 

analysis of proposed § 1005.18(g) below 

for additional information on this 

proposed requirement. The Bureau 

seeks comment on this portion of its 

proposal for government benefit 

accounts. 

Section 1005.17 Requirements for 

Overdraft Services 

17(a) Definitions 

Section 1005.17 sets forth 

requirements that financial institutions 

must follow in order to provide 

‘‘overdraft services’’ to consumers 

related to consumers’ accounts. Under 

§ 1005.17, financial institutions must 

provide consumers with notice of their 

right to opt in, or affirmatively consent, 

to the institution’s overdraft service for 

ATM and one-time debit card 

transactions, and obtain the consumer’s 

affirmative consent, before fees or 

charges may be assessed on the 

consumer’s account for paying such 

overdrafts. 

Section 1005.17(a) currently defines 

‘‘overdraft service’’ to mean a service 

under which a financial institution 

assesses a fee or charge on a consumer’s 

account held by the institution for 

paying a transaction (including a check 

or other item) when the consumer has 

insufficient or unavailable funds in the 

account. Section 1005.17(a) also 

provides that the term ‘‘overdraft 

service’’ does not include any payment 

of overdrafts pursuant to: (1) A line of 

credit subject to Regulation Z, including 

transfers from a credit card account, 

home equity line of credit, or overdraft 

line of credit; (2) A service that transfers 

funds from another account held 

individually or jointly by a consumer, 

such as a savings account; or, (3) A line 

of credit or other transaction exempt 

from Regulation Z pursuant to 

§ 1026.3(d). In adopting the provisions 

in what is now § 1005.17, the Board 

indicated that these methods of covering 

overdrafts were excluded because they 

require the express agreement of the 

consumer.230

As discussed in the Overview of 

Regulation Z Proposal section, the 


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231Under the proposal, the term ‘‘debit card’’ in 

subpart A of Regulation E generally includes 

prepaid cards, except for purposes of § 1005.17. See 

proposed comment § 1005.2(b)(3)(i)–8. 

Bureau is declining to extend the 

current regulatory scheme governing 

overdraft services on checking accounts 

to prepaid accounts, and is instead 

proposing to regulate these types of 

services generally under Regulation Z 

(as well as Regulation E’s compulsory 

use provision). The proposal would 

amend § 1005.17(a)(1) to explain that 

the term ‘‘overdraft service’’ does not 

include credit plans that are accessed by 

prepaid cards that are credit cards under 

Regulation Z. Specifically, the proposal 

would amend § 1005.17(a)(1) to provide 

that the term ‘‘overdraft services’’ does 

not include any payments of overdrafts 

pursuant to a line of credit or credit 

plan subject to Regulation Z, including 

transfers from a credit card account, 

home equity line of credit, overdraft line 

of credit, or a credit plan that is 

accessed by an access device for a 

prepaid account where the access 

device is a credit card under Regulation 

Z. Similar to the other exemptions from 

the definition of ‘‘overdraft service,’’ 

credit card plans require the express 

agreement of consumers in that, under 

the proposal, such plans can be added 

to previously issued prepaid accounts 

only upon consumer request. See 

Regulation Z § 1026.12(a)(1) and 

proposed comment 12(a)(1)–7. In 

addition, under the proposal, a credit 

card account may not be added to a 

previously issued prepaid account until 

30 calendar days after the prepaid 

account has been registered. See 

proposed § 1005.18(g)(1) and Regulation 

Z § 1026.12(h). The Bureau believes that 

the provisions in Regulation Z 

§ 1026.12(a)(1) and (h) and 

§ 1005.18(g)(1) would provide sufficient 

protections to ensure that the addition 

of a credit card account to a previously 

issued prepaid account would occur 

only with the consumer’s consent. 

The Bureau also notes that the opt-in 

provision in § 1005.17 would not apply 

to credit accessed by a prepaid card that 

is not a credit card because the card 

only accesses credit that is not subject 

to any finance charge defined in 

Regulation Z § 1026.4 or any fee 

described in Regulation Z § 1026.4(c) 

and is not payable by written agreement 

in more than four installments. This is 

because § 1005.17(a) applies only to 

overdraft services where a financial 

institution assessed a fee or charge for 

the overdraft. For prepaid accounts 

under the proposal, any fees or charges 

for ATM or one-time ‘‘debit card’’ 

transactions (as that term is used in 

§ 1005.17) that access an institution’s 

overdraft service would be considered 

‘‘finance charges’’ under the 

proposal.231 Thus, a prepaid card that is 

not a credit card could not be charging 

any fees or charges for ATM or one-time 

‘‘debit card’’ transactions (as that term is 

used in Regulation E § 1005.17) for 

accessing the overdraft service, such 

that the opt-in provision in Regulation 

E § 1005.17 would apply. If a prepaid 

card was charging any fees or charges 

for ATM or one-time ‘‘debit card’’ 

transactions (as that term is used in 

Regulation E § 1005.17) that accessed 

the overdraft service, the prepaid card 

would be a credit card under Regulation 

Z. In that case, the prepaid card would 

not be subject to the opt-in requirement 

in § 1005.17, but would be subject to 

provisions of Regulation Z, as discussed 

above. 

Section 1005.18 Requirements for 

Financial Institutions Offering Prepaid 

Accounts 

Regulation E currently applies to 

payroll card accounts (as well as 

government benefit accounts, as 

discussed above in the section-bysection analysis of § 1005.15). Section 

1005.18 contains provisions specific to 

payroll card accounts. Because payroll 

card accounts would be largely 

subsumed into the proposed definition 

of prepaid account, the Bureau proposes 

to revise § 1005.18 by replacing it with 

provisions governing prepaid accounts, 

which the Bureau proposes to apply to 

payroll card accounts as well. 

The current provisions in § 1005.18, 

as discussed below, provide an 

alternative to the periodic statement 

requirement of § 1005.9(b) for payroll 

card accounts and make corresponding 

adjustments to certain other provisions 

in Regulation E for financial institutions 

following the periodic statement 

alternative. In addition to providing a 

periodic statement alternative (and 

corresponding adjustments) for prepaid 

accounts, proposed § 1005.18 also 

contains other modifications and 

additions to certain requirements in 

Regulation E, including with respect to 

pre-acquisition and other disclosures, 

limited liability and error resolution, 

and credit card plans linked to prepaid 

accounts. The provisions of proposed 

§ 1005.18 are discussed below in turn. 

The Bureau notes that while proposed 

§ 1005.18 would set forth specific 

requirements for prepaid accounts, there 

are other provisions in Regulation E 

subparts A and B that would apply to 

prepaid accounts by virtue of their being 

deemed accounts in the Regulation. 

Thus, to the extent a provision in 

Regulation E applies to an ‘‘account,’’ 

unless otherwise modified by proposed 

§ 1005.18, that provision would apply to 

a prepaid account. For example, 

§ 1005.8(a) requires provision of a 

change in terms notice in certain 

circumstances. As the Bureau is not 

proposing to modify this requirement 

for prepaid accounts, it would apply to 

prepaid accounts in the same manner as 

it does to all other accounts under 

Regulation E. 

18(a) Coverage 

The Bureau is proposing to modify 

§ 1005.18(a) to state that a financial 

institution shall comply with all 

applicable requirements of EFTA and 

Regulation E with respect to prepaid 

accounts except as modified by 

proposed § 1005.18. Proposed 

§ 1005.18(a) would also refer to 

proposed § 1005.15 for rules governing 

government benefit accounts. 

Existing comment 18(a)–1 addresses 

issuance of access devices under 

§ 1005.5 and explains that a consumer is 

deemed to request an access device for 

a payroll card account when the 

consumer chooses to receive salary or 

other compensation through a payroll 

card account. The Bureau is proposing 

to add a cross-reference to § 1005.5(b) 

(regarding unsolicited issuance of access 

devices) in comment 18(a)–1 and to add 

additional guidance that would explain 

that a consumer is deemed to request an 

access device for a prepaid account 

when, for example, the consumer 

acquires a prepaid account offered for 

sale at a retail store or acquires a 

prepaid account by making a request or 

submitting an application by telephone 

or online. The Bureau notes that while 

financial institutions may provide 

prepaid accounts to consumers on an 

unsolicited basis, they must comply 

with the provisions on unsolicited 

issuance in existing § 1005.5(b) and 

compulsory use in § 1005.10(e)(2). 

The Bureau is also proposing to revise 

existing comment 18(a)–2 regarding 

application of Regulation E to 

employers and services providers to 

refer to prepaid accounts in addition to 

payroll card accounts, but otherwise 

intends to leave comment 18(a)–2 

unchanged. 

The Bureau seeks comment on this 

portion of its proposal. 

18(b) Disclosure Requirements for 

Prepaid Accounts 

Overview 

The Bureau is proposing to adopt new 

disclosures for prepaid accounts that 

would be provided before a consumer 


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232The Bureau is also proposing, for purposes of 

prepaid accounts, to expand the requirement in 

existing § 1005.7(b)(5) to disclose fees related to 

EFTs to require the disclosure of all fees related to 

the prepaid account, as discussed below in the 

section-by-section analysis of proposed § 1005.18(f). 

233 In addition, the Truth in Savings Act (TISA) 

(12 U.S.C. 44, et seq.) contains disclosure 

requirements for accounts issued by depository 

institutions. Specifically, Regulation DD (10 CFR 

part 1030), which implements TISA, requires 

disclosure of the amount of any fee that may be 

imposed in connection with the account (or an 

explanation of how the fee will be determined) and 

the conditions under which the fee may be 

imposed. 12 CFR 1030.4(b)(4). 

234 61 FR 19662, 19674 (May 2, 1996). 

235 61 FR 19662, 19670 (May 2, 1996). 

236 78 FR 18221, 18224 (Mar. 26, 2013). 

237 74 FR 59033, 59053 (Nov. 17, 2009). 

238 71 FR 51437, 51449 (Aug. 30, 2006). 

239 77 FR 50244, 50285 (Aug. 20, 2012). 

240 77 FR 30923, 30925 (May 24, 2012). 

241 Id. 

acquires a prepaid account. These 

proposed disclosures, which the Bureau 

developed during a period of consumer 

testing and outreach, would be adopted 

in proposed § 1005.18(b) and would be 

in addition to the initial disclosure 

requirements in existing § 1005.7(b).232

The Bureau believes that providing 

disclosures before the consumer’s 

acquisition of the prepaid account will 

ensure that all consumers, regardless of 

the type of prepaid account they are 

acquiring, receive the proposed 

disclosures at a relevant time in the 

acquisition sequence. 

The proposal would require that a 

financial institution provide to the 

consumer both a ‘‘short form’’ and a 

‘‘long form’’ disclosure before the 

consumer acquires a prepaid account. 

The short form would set forth the 

prepaid account’s most important fees 

to facilitate basic understanding of the 

account’s key terms and, when feasible, 

comparison shopping with other 

prepaid account products. The Bureau 

believes that this form would quickly 

allow the consumer to assess key fees 

and terms of the prepaid account. 

Meanwhile, the long form disclosure 

would list all of the fees associated with 

the prepaid account and would include 

more detailed information on how those 

fees are assessed. The long form would 

give consumers an opportunity to 

review all fee information about the 

prepaid account before acquiring an 

account. 

The Bureau is also proposing 

exceptions to the general disclosure 

requirement for situations where a 

consumer acquires a prepaid account in 

certain retail stores or orally by 

telephone. In these situations, a 

financial institution would still always 

have to provide the short form 

disclosure to the consumer prior to 

acquisition, but it would have the 

option of providing the long form 

disclosure post-acquisition, as long as 

the financial institution provides 

methods for consumers to access the 

long form electronically and orally prior 

to acquisition. See proposed 

§ 1005.18(b)(1)(i) through (iii). 

Disclosure Requirements Generally 

EFTA section 905(a) sets forth 

disclosure requirements for accounts, 

stating that the terms and conditions of 

electronic fund transfers involving a 

consumer’s account must be provided at 

the time the consumer contracts for an 

electronic fund transfer service, in 

accordance with the regulations of the 

Bureau. Section 905(a) further states 

that the disclosures must include, 

among other things and to the extent 

applicable, any charges for electronic 

fund transfers or for the right to make 

such transfers (section 905(a)(4)), that a 

fee may be imposed for use of certain 

ATMs (section 905(a)(10)), information 

regarding the type and nature of 

electronic fund transfers that the 

consumer can initiate (section 

905(a)(3)), and details regarding the 

consumer’s liability for unauthorized 

transactions and whom to contact in the 

event an unauthorized transaction has 

occurred (section 905(a)(1) and (2)).233

In prior rulemakings, the Board 

implemented provisions in Regulation E 

consistent with these statutory 

requirements, primarily in existing 

§ 1005.7. Specifically, section 1005.7(a) 

states that the required disclosures must 

be provided to a consumer at the time 

a consumer contracts for an electronic 

fund transfer or before the first 

electronic fund transfer is made 

involving the consumer’s account. 

Section 1005.7(b) also sets forth what a 

financial institution must include in its 

initial disclosures, including details 

regarding the types of transfers that the 

consumer may make and the limitations 

on the frequency and dollar amount of 

the transfers, any fees imposed by the 

financial institution for electronic fund 

transfers or for the right to make 

transfers, and a notice that a fee may be 

imposed by an ATM operator when the 

consumer initiates an electronic fund 

transfer or makes a balance inquiry, 

among other requirements. 

At various points, these general 

provisions in § 1005.7 were modified for 

use with other types of accounts or in 

other contexts. See generally 

§ 1005.14(b)(1) (disclosures provided by 

certain service providers);234 current 

§ 1005.15(d) (disclosures related to the 

electronic fund transfer of government 

benefits);235 § 1005.16 (disclosures at 

ATMs);236 § 1005.17(d) (overdraft 

disclosures);237 current § 1005.18(c)(1) 

(payroll card account disclosures); 238

and § 1005.31 (disclosures related to 

remittance transfers).239

Comments Received and Stakeholder 

Outreach Regarding Disclosure 

In proposing new requirements and a 

modification of the existing disclosure 

requirements in § 1005.7(b)(5) for 

prepaid accounts, the Bureau has 

considered comments received in 

response to the Prepaid ANPR, in 

addition to conducting further outreach. 

In the Prepaid ANPR, the Bureau noted 

that one of its goals was to allow 

consumers to easily compare financial 

products by ensuring transparent fee 

disclosure.240 The Bureau also asked 

three specific sets of questions related to 

disclosure: (1) What steps could the 

Bureau take to most effectively regulate 

prepaid products to provide the 

consumer with transparent, useful, and 

timely fee disclosures?; (2) How can the 

Bureau best enable a consumer to 

compare various GPR cards, or other 

payment products, that may have 

different fee structures or be offered 

through various distribution channels? 

Should market participants be required 

to provide disclosure pre-sale, post-sale, 

or both?; and (3) Should the existence, 

or lack thereof, of FDIC pass-through 

insurance associated with a GPR card be 

disclosed to the consumer? If so, how 

and when should the existence of FDIC 

pass-through insurance be disclosed? 241

Comments received in connection 

with the first two sets of these questions 

are addressed below, and the comments 

received in connection with the set of 

questions regarding FDIC pass-through 

deposit insurance are addressed below 

in the section-by-section analysis of 

proposed § 1005.18(b)(2)(i)(B)(13). 

As to the first set of questions, 

commenters focused primarily on 

disclosures that would appear on the 

external packaging material of a GPR 

card sold in a retail store. Many 

industry and consumer advocacy group 

commenters suggested that the Bureau 

develop specific disclosures, such as a 

uniform chart or fee box, that a financial 

institution would affix to a GPR card’s 

packaging when the card is offered for 

sale in a retail store, instead of a more 

general rule that stated only that fees be 

disclosed clearly and conspicuously 

without providing specific instructions 

or model forms. Many of these industry 

commenters suggested that adopting a 

standardized form would be less 

confusing than complying with a clear 

and conspicuous standard. Apart from 

suggesting a standardized form, industry 


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242The ‘‘all-in’’ disclosure concept is discussed in 

more detail in the section-by-section analysis of 

proposed § 1005.18(b). 

243The relevant portion of EFTA section 905 

states that ‘‘[t]he terms and conditions of electronic 

fund transfers involving a consumer’s account shall 

be disclosed at the time the consumer contracts for 

an electronic fund transfer service, in accordance 

with regulations of the Bureau . . .’’ 

commenters mostly agreed that onpackage disclosures should include only 

the fees that a consumer would most 

commonly incur while using a prepaid 

account, in order to increase the 

likelihood that consumers would 

understand and use the disclosures. 

Many consumer advocacy group 

commenters, on the other hand, 

encouraged the Bureau to require full 

disclosure to the consumer of all fees 

associated with a GPR card before the 

consumer acquires an account, rather 

than only a subset of certain fees. These 

groups were concerned that consumers 

would not have a full understanding of 

a prepaid account’s true costs without 

this information and that providers 

could subvert the disclosure’s purpose 

by adjusting fee schedules to increase or 

add fees not required to be disclosed on 

a shorter disclosure. 

Separately, some consumer advocacy 

group commenters suggested that the 

Bureau propose an ‘‘all-in’’ cost 

disclosure. These commenters 

explained that an ‘‘all-in’’ disclosure 

would present a single number to the 

consumer that would estimate the 

approximate cost of a prepaid account 

product. These consumer advocacy 

group commenters also asserted that 

such a disclosure could estimate, for 

example, the average monthly cost of 

using the prepaid account product 

based on one or several different use 

cases. Some of the consumer advocacy 

group commenters also suggested that 

the Bureau could collect actual usage 

data from issuers of prepaid accounts 

and use that data to develop an 

algorithm or other equation to serve as 

the basis for this type of all-in 

disclosure.242

As to the second set of questions 

regarding how to facilitate consumer 

comparison shopping and whether preor post-sale disclosures are necessary, 

many industry and consumer advocacy 

group commenters agreed that it was 

important for consumers to receive 

disclosures before they buy a prepaid 

account. Industry commenters further 

discouraged the Bureau from 

implementing any disclosure 

regulations that would mandate a 

specific method of delivery for 

disclosures provided after the consumer 

acquires a prepaid account, which they 

viewed as potentially imposing a large 

burden on industry without 

significantly benefiting the consumer. 

Industry and consumer advocacy group 

commenters also encouraged the Bureau 

to develop disclosures to accommodate 

the variety of distribution channels 

through which prepaid products are 

distributed and sold, while also 

considering how distribution may 

evolve in the future. Several consumer 

advocacy group commenters 

emphasized the need for the Bureau to 

ensure disclosures provided online 

through a Web site are easy to locate, 

while also considering that many 

consumers lack internet access and 

would have difficulty viewing 

disclosures online. Some commenters 

also suggested that providers implement 

mechanisms to ensure consumers 

purchasing prepaid accounts online 

have actually reviewed the disclosures. 

In addition to reviewing comments 

received in response to the Prepaid 

ANPR, the Bureau has also engaged in 

additional outreach with interested 

stakeholders and conducted consumer 

focus groups and one-on-one testing of 

prototype disclosures. As discussed in 

greater detail above and in the report 

published with this proposal, the 

Bureau engaged a contractor, ICF, to 

hold four focus group sessions to gain 

a general understanding of how and 

why consumers use prepaid accounts. 

The Bureau also worked with ICF to 

conduct one-on-one interviews with 

consumers to test various model form 

prototypes the Bureau developed, 

including variations of the model short 

form and sample long form disclosures 

proposed herein. 

Based on its review of the comments 

received in response to the Prepaid 

ANPR, outreach with stakeholders, 

insights gathered from consumer testing, 

and its general market analysis, the 

Bureau is proposing a new preacquisition disclosure regime that it 

believes will standardize industry 

disclosures, increase consumers’ 

understanding of prepaid accounts’ 

terms, and improve consumers’ ability 

to compare prepaid account products 

prior to acquiring a prepaid account. 

The Bureau is also proposing model 

forms and sample forms. 

Proposed Disclosure Regime 

As noted above, EFTA section 905(a) 

sets forth disclosure requirements for 

accounts subject to the Act.243 Proposed 

section 1005.18(b) would implement 

EFTA section 905(a) for prepaid 

accounts. In addition, the Bureau is 

proposing to use its authority under 

EFTA sections 904(a) and (c), 905(a), 

and section 1032(a) of the Dodd-Frank 

Act to require financial institutions to 

provide disclosures prior to the time a 

consumer acquires a prepaid account 

and for disclosures to include all fees 

that may be charged for the prepaid 

account. The Bureau is also proposing, 

in certain circumstances that financial 

institutions provide disclosures in 

languages other than English. As 

discussed in the section-by-section 

analysis of proposed § 1005.18(b)(1)(i), 

proposed § 1005.18(b)(2)(ii)(A), and 

proposed § 1005.18(b)(6), the Bureau 

believes that adjustment of the timing 

and fee requirement and the disclosure 

language is necessary and proper to 

effectuate the purposes of EFTA to 

provide a framework to establish the 

rights, liabilities and responsibilities of 

prepaid account users, because the 

proposed revision will assist consumers’ 

understanding of the terms and 

conditions of their prepaid accounts. In 

addition, the Bureau believes that preacquisition disclosures of all fees for 

prepaid accounts as well as certain 

foreign language disclosures will, 

consistent with Dodd-Frank section 

1032(a), ensure that the features of the 

prepaid accounts are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the account. 

The Bureau believes that there are 

many ways a consumer could obtain a 

prepaid account and that the proposed 

disclosure regime should be adaptable 

to this variety. For example, a consumer 

might purchase a prepaid account in a 

retail store, online through a provider’s 

Web site, or by calling a provider by 

telephone. A consumer could also 

receive a prepaid account from an 

employer in the form of a payroll card 

account or a student might receive a 

prepaid account from their university in 

connection with the disbursement of 

financial aid. The Bureau believes that 

framing the disclosure regime as one 

that would apply before the consumer’s 

acquisition of the prepaid account will 

ensure that any consumer who obtains 

a prepaid account, regardless of the type 

of prepaid account or its method of 

acquisition, will receive the proposed 

disclosures. 

The proposed pre-acquisition 

disclosure regime would have two parts. 

First, the Bureau is proposing that a 

consumer would receive a ‘‘short form’’ 

disclosure before acquiring a prepaid 

account. The short form, as 

demonstrated in proposed Model Forms 

A–10(a) through (d) and as discussed 

below in the section-by-section analysis 

of proposed § 1005.18(b)(3)(iii)(A), 

would consist of a ‘‘static’’ portion that 

would set forth fees that must be 


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244The Bureau refers to a ‘‘prepaid account 

product’’ to mean a product that offers prepaid 

accounts with identical fee schedules to any 

consumer who opens an account. 

245See section-by-section analysis of proposed 

§ 1005.18(b)(2)(i) for a complete discussion of the 

short form’s contents. 

246See section-by-section analysis of proposed 

§ 1005.18(b)(2)(i)(A) for a discussion of the notice 

requirement on the short form for payroll card 

accounts. See section-by-section analysis of 

proposed § 1005.15(c)(2) for a discussion of the 

notice requirement on the short form for 

government benefit accounts. 

247 In all acquisition scenarios, however, the 

financial institution would have to provide a 

version of the long form in the terms and conditions 

included inside a package in a retail setting or 

provided to the consumer through other methods, 

such as in the mail after acquisition. See comment 

to proposed § 1005.18(f). 

248See, e.g., Ian Ayres & Alan Schwartz, The NoReading Problem in Consumer Contract Law, 66 

Stan. L. Rev. 545 (2014). 

249The Bureau also notes that the proposed 

updating requirements for the proposed incidencebased fee disclosure could result in these fees being 

different for the same prepaid account product due 

to differing proposed requirements for timing of 

revisions to in-store versus online forms. See the 

section-by-section analysis of proposed 

§ 1005.18(b)(2)(i)(B)(8)(I). 

disclosed for all prepaid account 

products, even if such fees are $0 or if 

they relate to features not offered for a 

particular prepaid account product.244

This static portion would have a ‘‘topline’’ component highlighting four types 

of fees (the periodic fee, per-purchase 

fees, ATM withdrawal fees, and the cash 

reload fee) at the top of the form. The 

Bureau believes these fee types are the 

most important to consumers when 

shopping for a prepaid account.245 The 

top-line fees would be displayed in a 

more prominent and larger font size 

than the remainder of the disclosures on 

the form to draw consumers’ attention 

to those fees quickly. Three additional 

fee types (ATM balance inquiry fees, a 

customer service fee, and an inactivity 

fee) and a statement regarding the 

availability of overdraft services and 

other credit features would also be 

required to appear in the static portion 

of the short form. Additionally, the 

short form would include an 

‘‘incidence-based’’ portion that would 

list up to three additional fees that 

consumers most commonly incur for a 

particular prepaid account product. 

Short forms for payroll card accounts 

and government benefit accounts would 

also include a notice at the top of the 

form regarding compulsory use that 

consumers are not required to accept 

such cards as the only method of 

receiving funds).246 See § 1005.10(e)(2) 

The second part of the Bureau’s 

proposed pre-acquisition disclosure 

regime would require that, before 

acquiring a prepaid account, consumers 

would always receive a stand-alone 

‘‘long form’’ disclosure that would set 

forth all of a prepaid account product’s 

fees and their qualifying conditions, 

except for accounts that consumers 

acquire in retail stores or orally by 

telephone. For prepaid accounts 

consumers acquire in retail stores, 

financial institutions could disclose a 

URL and telephone number on the short 

form that a consumer would use to 

access the content of the long form 

disclosure prior to acquisition, but they 

would not have to provide a stand-alone 

long form disclosure prior to the 

consumer’s acquisition of the prepaid 

account. For prepaid accounts acquired 

orally by telephone, financial 

institutions could inform a consumer 

that they can access the long form by 

telephone or online, but would not have 

to provide the long form disclosure 

before acquisition unless a consumer 

requests it.247

This proposal would mean that 

consumers would receive or have access 

to the short form and long form 

disclosures in all prepaid account 

acquisition scenarios. Thus, consumers 

acquiring prepaid accounts in the form 

of a payroll card account, a government 

benefit account, at a bank branch, at a 

retail store, or on a Web site, for 

example, would always have the 

opportunity to review the short form 

and long form disclosures before 

acquiring a prepaid account. The 

Bureau believes it is important for 

consumers to have access to both of 

these disclosures in all acquisition 

scenarios because they serve different 

but complementary goals. First, the 

Bureau believes that by prominently 

displaying important fees with limited 

explanatory text, the short form will 

increase the likelihood consumers 

notice the disclosure of these key fees 

and are able to use the disclosure to 

inform their acquisition choice. The 

short form would present the key fees of 

a prepaid account in a simplified format 

rather than requiring a consumer to 

navigate an exhaustive list of fees and 

their qualifications for each product in 

order to identify those that are most 

relevant. The Bureau also believes that 

the short form’s design, and in 

particular the emphasized top-line 

portion of the disclosure, will 

prominently present key fees, and create 

a visual hierarchy of information that 

will more effectively draw consumer’s 

attention to a prepaid account product’s 

key terms. The Bureau also believes this 

visual hierarchy on the short form will 

increase the likelihood that consumers 

will engage with the disclosure. 

Research has shown that such 

engagement, or the formation of the 

intent to use the disclosure, is an 

important first step to ensure that 

consumers utilize and understand any 

disclosure.248 The Bureau believes that, 

in many cases, consumers spend little 

time reviewing fee disclosures when 

shopping for prepaid accounts, and it is 

therefore important that any disclosure 

quickly draw consumers’ attention to 

the most important information 

regarding that particular account with 

minimal clutter on the form. 

The Bureau also believes that by 

standardizing most components of the 

short form, consumers will receive 

consistent, key fee information about 

prepaid account products regardless of 

how or where they shop for or obtain 

prepaid accounts. For example, under 

this proposal, a consumer who takes a 

package containing a prepaid account 

access device off of a J-hook in a retail 

store would see a short form listing the 

same types of fees in the static portion 

of the short form included on the 

exterior of the packaging material as the 

fee types included in the static portion 

of the short form for an entirely different 

prepaid account product a consumer 

would see when shopping online. 

Similarly, consumers receiving payroll 

card accounts at their place of 

employment would receive a short form 

disclosure containing the same fees in 

the static portion of the short form 

before agreeing to receive wages via the 

payroll card account. The Bureau 

believes that standardizing preacquisition disclosures across all 

possible acquisition channels will make 

it easier for consumers to compare 

different types of prepaid account 

products. 

As discussed below in the section-bysection analysis of proposed 

§ 1005.18(b)(2)(i)(B)(8), however, the 

Bureau is also proposing to include an 

incidence-based portion on the short 

form disclosure to highlight the most 

commonly charged fees that are not 

otherwise captured in the form. In part, 

the Bureau has proposed to include this 

incidence-based portion on the short 

form to address concerns that providers 

could simply change their fee structures 

to make their products appear less 

expensive relative to other products. 

The Bureau acknowledges that this 

portion of the short form would not be 

standardized across different prepaid 

account products due to the different 

fees financial institutions would be 

required to disclose on the incidencebased portion of the short form. 249 The 

Bureau believes, however, that having 

identical fee types listed in the static 

portion of the short form will be 


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250As discussed in greater detail below, the 

Bureau is proposing § 1005.18(b)(1)(ii) and (b)(iii) to 

require that for prepaid accounts consumers acquire 

in retail stores or orally by telephone, long form 

disclosures would only need to be made accessible, 

but not necessarily provided, pre-acquisition 

(although they must be provided after acquisition 

with the terms and conditions as part of the initial 

disclosures). 

251The FTC’s Energy Labeling Rule shows 

consumers how much it might cost to run an 

appliance each year based on how much energy it 

uses, and makes it easier for shoppers to compare 

the energy use among similar models. See Fed. 

Trade Comm’n, EnergyGuide Labeling: FAQs for 

Appliance Manufacturers (May 2013), available at 

http://www.business.ftc.gov/documents/bus-82- 

energyguide-labels-faqs. 

252See, e.g., 2014 Pew Study, at 13. 

sufficiently consistent so as to facilitate 

consumer comparison shopping, even if 

the incidence-based portion of the form 

introduces some variance. At the same 

time, the incidence-based portion of the 

short form disclosure will ensure that 

consumers are made aware of any other 

significant fees relating to a particular 

prepaid account product. 

The Bureau also recognizes that 

providing only a subset of fee 

information about a prepaid account on 

the short form might not give all 

consumers the information they need to 

make their acquisition decisions. Thus, 

the Bureau is proposing also to require 

provision pre-acquisition of the long 

form disclosure, which would set forth 

all of a prepaid account’s fees to a 

consumer and the conditions under 

which those fees could be imposed. The 

Bureau expects that consumers seeking 

to learn about more fees than those 

listed on the short form will utilize the 

long form. The proposed long form also 

would provide detailed explanations to 

consumers about conditions that may 

cause fees to vary, such as the impact of 

crossing a threshold number of 

transactions or receiving direct deposits 

into the prepaid account. Such 

explanations would not be permitted on 

the short form in order to preserve its 

simplicity, but may be relevant to some 

consumers’ acquisition decisions. See 

proposed § 1005.18(b)(2)(i)(C).250

The Bureau does not believe 

consumers would necessarily benefit 

from receiving only this long form 

disclosure before acquiring a prepaid 

account. In the Bureau’s testing, for 

example, many participants reported 

feeling overwhelmed by the amount of 

information included on a prototype 

long form and they struggled to compare 

two long form disclosures, even those 

that listed identical fee types. The 

Bureau believes that the potential size 

and complexity of the long form might 

overwhelm and lead consumers to 

disregard the disclosure and also not 

use it to comparison shop across 

products or even to evaluate a single 

product. As discussed above, the short 

form, on the other hand, will be in a 

simpler format and its static portion, the 

Bureau believes, will facilitate 

comprehension and comparison 

shopping. Insofar as the Bureau does 

recognize that the subset of fee 

information on the short form may be 

incomplete for some consumers, the 

Bureau believes that providing both the 

short form and long form disclosures 

would strike the right balance between 

giving consumers key information about 

a prepaid account to aid understanding 

and comparison shopping, while also 

providing them with the opportunity to 

review all of a prepaid account’s fee 

information pre-acquisition. 

The Bureau also recognizes that in 

certain acquisition scenarios, it is less 

likely that a consumer would engage in 

comparison shopping. For example, 

when the consumer receives disclosures 

for a payroll card account, it may be 

more difficult for that consumer to 

comparison shop. Even in this situation, 

though, the Bureau believes that 

consumers would benefit from receiving 

the short form and long form disclosures 

prior to acquiring the payroll card 

account because the disclosures will 

facilitate the consumer’s understanding 

of the account’s terms and may allow for 

subsequent comparisons to be made. 

The Bureau understands that many 

prepaid account providers currently 

provide disclosures that include many 

(if not all) of their prepaid account’s 

fees, and therefore the Bureau does not 

believe that this aspect of the proposal 

introduces a significant new burden, as 

discussed in greater detail below in the 

Section 1022 Analysis. As discussed 

below, however, the Bureau does 

recognize that there are different forms 

of disclosures that could apply to 

prepaid account pre-acquisition 

disclosures and that burden may vary. 

Alternative Approaches Considered by 

the Bureau 

The Bureau has considered a variety 

of approaches to pre-acquisition 

disclosures, including those suggested 

by commenters to the Prepaid ANPR 

and others who have opined to the 

Bureau and in other publications about 

prepaid account disclosures. 

‘‘All-in’’ disclosure. Among the 

alternatives the Bureau has considered 

is disclosure of a single monthly cost for 

using a prepaid account. Proponents 

commented that such a disclosure is 

appealing because it would provide a 

quick and understandable reference 

point and, as compared to a disclosure 

listing several different numbers with 

line items for each fee type, could also 

allow for easier comparisons among 

prepaid account products. Proponents 

have suggested that this figure could be 

conceptually similar to the ‘‘Energy 

Star’’ cost disclosure regime the FTC has 

implemented for appliances,251 and 

would present the average amount paid 

by users of that particular prepaid 

account product over a designated time 

period (such as monthly) or the output 

of a formula intended to replicate 

typical consumers’ use of prepaid 

accounts. 

While the Bureau believes that this 

‘‘all-in’’ disclosure could potentially 

have several benefits, it declines to 

propose such an approach at this time 

for several reasons. First, the Bureau is 

concerned that it may not be possible to 

develop a single formula to reflect 

accurately how most consumers 

typically use a prepaid account. A 

single formula might include several fee 

types, such as ATM withdrawal fees, 

any periodic maintenance fees, and cash 

reload fees, and weight them based on 

how often a consumer might incur those 

fees during a month to determine the 

approximate cost to all consumers of 

that prepaid account product. The 

Bureau’s testing, along with other 

studies, has identified, however, that 

there is no single, typical use case for all 

prepaid accounts.252 Thus, it would be 

difficult to determine which fee types 

should be included in such a formula 

and how often such fees might be 

incurred. 

Second and relatedly, a prepaid 

account that might have a higher cost 

under a formula adopted by the Bureau 

may actually be less costly for certain 

consumers, depending on how they use 

the card. For example, a formula might 

factor in several ATM withdrawal fees 

each month, but for consumers not 

using the prepaid account for ATM 

withdrawals, the disclosure of that 

single number could be confusing or 

misleading, and potentially cause a 

consumer to acquire a prepaid account 

with a lower all-in cost according to the 

prescribed formula, but that will cost 

the particular consumer more. Although 

multiple usage formulas might rectify 

this to some degree, the Bureau believes 

that disclosing more than one such 

number on a single form could 

compound consumer confusion. 

The Bureau also is concerned that an 

all-in number that presents the average 

amount paid by users of that particular 

prepaid account product over a 

designated time period would also be 


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253For example, when testing a concept that 

presented a fee amount next to a graphic 

representing the range of the maximum and 

minimum fees that other providers might charge for 

the same service, the Bureau found that the vast 

majority of testing participants did not understand 

this graphic or how it might apply to their own 

prepaid card usage. 

254See ICF Report, at App. C, 2A. As listed in the 

prototype, an ‘‘Add and withdraw money’’ category, 

for example, would list the various ways the 

consumer could withdraw money from a prepaid 

account, such as through a withdrawal from an 

automated teller machine. 

255For example, a ‘‘Maintenance’’ category might 

include only one periodic fee, such as a monthly 

fee. 

confusing because consumers would 

likely struggle to interpret how such a 

summary statistic would apply to their 

own prepaid account usage.253 In 

addition, historical data does not exist 

for new products and may be inaccurate 

for products that have changed fees or 

features. For these reasons, the Bureau 

has concluded, at this time, that an allin disclosure would be of limited utility, 

and could perhaps even be misleading 

to consumers, but the Bureau might 

reconsider the utility of this approach in 

the future. 

Category headings. The Bureau also 

considered a short form disclosure that 

would include category headings based 

on the function for which a consumer 

would utilize the service associated 

with each fee, a format that many 

prepaid account providers have already 

adopted, in lieu of the top-line fee 

format on the short form that the Bureau 

is proposing.254 The Bureau declines to 

propose this ‘‘categories’’ approach for 

several reasons. First, the Bureau 

believes that category headers take up 

needed space on the form that may limit 

disclosure of other, more important 

information about the prepaid accounts, 

particularly given that some categories 

might include only one fee.255 Second, 

the Bureau believes it would be difficult 

on the same short form to include both 

its proposed top-line concept and to 

divide fees into categories. Though 

space constraints are only an issue for 

accounts sold in retail stores (due to 

packaging material size constraints), the 

Bureau is proposing that a short form 

with the same format and content would 

be disclosed in all acquisition scenarios, 

and thus, it is important that the short 

form’s design can be implemented in all 

of these scenarios. Finally, during 

consumer testing, the Bureau did not 

find that participants’ comprehension of 

fees and their purpose improved when 

a form included categories; indeed, most 

participants understood most fees 

without such a label. Although the 

Bureau is not proposing to include 

category headings in the proposed short 

form, it is proposing that the long form 

disclosure—which would have more 

space and detail—would include such 

headings to facilitate navigation of the 

larger amount of information that the 

Bureau anticipates will be included on 

that form. See proposed 

§ 1005.18(b)(4)(i)(B). 

The Bureau seeks comment on all of 

these alternatives and its proposed 

approach. In particular, the Bureau 

seeks comment on the utility of 

including category headings as part of 

the short form, in lieu of the top-line, 

and on incorporating an ‘‘all-in’’ 

summary fee concept into prepaid 

account disclosures. The Bureau also 

seeks comment on whether it should 

consider other disclosure alternatives 

and why such alternatives would be 

more appropriate than the Bureau’s 

proposed pre-acquisition disclosure 

regime. Finally, the Bureau seeks 

comment on whether any preacquisition disclosure regime that 

requires consumers to receive forms 

disclosing fee information before 

acquiring a prepaid account is 

necessary. 

To implement its proposed preacquisition disclosure regime, the 

Bureau is proposing timing, content, 

form and other requirements for prepaid 

account disclosures. The following 

discussion sets forth these proposed 

requirements in detail. 

18(b)(1) Timing of Disclosures 

18(b)(1)(i) General 

As discussed above, § 1005.7(b) of 

Regulation E currently requires financial 

institutions to provide certain initial 

disclosures when a consumer contracts 

for an electronic fund transfer service or 

before the first electronic fund transfer 

is made involving a consumer’s account. 

The Bureau is proposing in revised 

§ 1005.18(b)(1)(i) that, in addition to 

these initial disclosures that are usually 

provided in an account’s terms and 

conditions document, a financial 

institution must also provide a 

consumer with certain fee-related 

disclosures before a consumer acquires 

a prepaid account. Specifically, the 

Bureau is proposing that except when a 

consumer acquires a prepaid account in 

a retail store or orally by telephone, as 

described in proposed § 1005.18(b)(1)(ii) 

or (iii), a financial institution must 

provide a short form and a long form 

disclosure required by proposed 

§ 1005.18(b)(2)(i) and (ii) before a 

consumer acquires a prepaid account. 

The Bureau believes consumers in all 

acquisition scenarios would benefit 

from receiving these additional, preacquisition disclosures prior to 

contracting for an electronic fund 

transfer service or before the first 

electronic fund transfer is made 

involving the account, at which point 

they would receive the initial 

disclosures that Regulation E already 

requires. 

The Bureau believes disclosures that 

provide fee information prior to a 

consumer’s acquisition of a prepaid 

account (rather than at the time of 

contracting for an electronic fund 

transfer service, which may be later) are 

necessary and beneficial to consumers 

for several reasons. First, the Bureau 

believes a consumer should receive 

clear disclosures about prepaid accounts 

before acquiring them. Based on its 

outreach, the Bureau understands that 

some financial institutions may already 

provide limited disclosures to 

consumers prior to acquisition, and that 

some financial institutions may not 

disclose the fees that consumers may 

find relevant to their acquisition 

decision until the account is purchased 

(or otherwise acquired), the packaging 

material is opened, and a consumer 

reviews the enclosed terms and 

conditions document. For example, one 

prepaid product currently sold in retail 

stores imposes an inactivity fee after 

ninety days of no transactions, but this 

fee is not disclosed on an outwardfacing external surface of the prepaid 

account access device’s packaging 

material that is visible before purchase. 

Further, the Bureau believes that some 

employees acquiring payroll card 

accounts may receive information about 

the accounts in a manner that makes it 

difficult for an employee to comprehend 

the accounts’ key fees. For example, 

employees might receive terms and 

conditions documents regarding payroll 

card accounts at the same time they 

receive other benefits-related 

paperwork, making the fees difficult for 

employees to comprehend while sorting 

through other important and timesensitive paperwork. Similarly, certain 

providers of prepaid accounts online 

may present disclosures on their Web 

sites in a way that makes it difficult for 

consumers to have the chance to review 

them prior to acquisition. 

Additionally, the Bureau believes that 

pre-acquisition disclosures can also 

decrease the ability of financial 

institutions to obscure key fees. Many 

participants in the Bureau’s consumer 

testing reported incurring fees that they 

did not become aware of until after they 

purchased their prepaid account. 

Several participants also admitted to 

having difficulty understanding the 

disclosures they received with their 

current prepaid accounts and were very 

unsure as to whether key fees had been 


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77152 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

256Fumiko Hayashi & Emily Cuddy, Fed. Reserve 

Bank of Kansas City, General Purpose Reloadable 

Prepaid Cards: Penetration, Use, Fees and Fraud 

Risks at 33–35 (Working Paper No. RWP 14–01, 

2014), available at https://www.kansascityfed.org/

publicat/reswkpap/pdf/rwp14-01.pdf.enter/

publications/discussion-papers/2012/D-2012- 

August-Prepaid.pdf. 

257A 2012 study by the Federal Reserve Bank of 

Philadelphia indicates that the average life span of 

GPR cards tends to be between 3 and 6 months. See 

2012 FRB Philadelphia Study, at 18. 

disclosed before they acquired the 

accounts. 

Second, as some commenters to the 

Prepaid ANPR emphasized, in order to 

comparison shop among products, it is 

helpful for consumers to be able to 

review disclosures setting forth key 

terms in like ways before choosing a 

product. As noted earlier, the Bureau 

recognizes that consumers offered 

prepaid products by third parties like 

employers or educational institutions 

may be unable to easily comparison 

shop. For example, at the time students 

are offered a student card from their 

university, such as when registering for 

school, they might be unable to compare 

that card with other products. The 

Bureau believes, however, that even in 

this scenario, students will benefit from 

receiving the short form and the long 

form disclosure so that they can better 

understand the product’s terms before 

deciding to accept it. Additionally, the 

Bureau believes that both of these 

disclosures may inform the way in 

which these consumers decide to use 

the product once they have acquired it 

and enable them to, at a convenient 

time, compare it with any other 

products. 

Third, the Bureau believes that 

consumers could potentially use their 

prepaid account for an extended period 

of time and perhaps incur substantial 

fees over that time. For example, during 

the Bureau’s consumer testing, 

participants indicated that they tend to 

use a given prepaid account product, 

even one they do not like, at least until 

they spend the entirety of the initial 

load amount, which could be as much 

as $500. Others reported reloading the 

account, using it for as long as one or 

two years after purchase, and often 

arranging to receive direct deposit of 

wages or benefits into the account. 

Thus, the Bureau believes that whatever 

disclosure information a consumer uses 

when selecting a prepaid account could 

have a significant, and potentially longterm, impact, especially if a consumer 

chooses to receive direct deposit into a 

prepaid account. Current research 

supports this belief. Specifically, one 

study indicates that prepaid accounts 

receiving direct deposit of government 

benefits might have life spans of as long 

as three years, and consumers who 

receive non-government direct deposit 

on their accounts use them on average 

for longer than one year.256 Though 

other, older research estimates the 

average life span of some prepaid 

accounts may be on average less than 

six months, the Bureau believes that 

even this period of time is significant if 

consumers load most or all of their 

funds into their prepaid accounts.257

Regulation E, however, currently only 

provides for initial disclosures to be 

delivered at the time a consumer 

contracts for an electronic fund transfer 

service or before the first electronic fund 

transfer is made involving a consumer’s 

account. The Bureau believes that, in 

the prepaid account context, this might 

sometimes be too late. With prepaid 

accounts, consumers often contract for 

an electronic fund transfer when 

acquiring the prepaid account and 

completing an initial load. The Bureau 

therefore is concerned that consumers 

may receive the fee-related, initial 

disclosures required by § 1005.7(b) 

(which proposed § 1005.18(f) would 

modify for prepaid accounts) that are 

typically provided within the prepaid 

account’s terms and conditions 

document too late to utilize them to 

decide on the right prepaid account 

product for their needs and to 

comparison shop among various 

prepaid account products. 

The Bureau is therefore proposing 

§ 1005.18(b)(1)(i), which would require 

a financial institution, in most cases, to 

provide the short and long form 

disclosures described in proposed 

§ 1005.18(b)(2)(i) and (ii) before a 

consumer acquires a prepaid account. 

As noted above, this aspect of the 

proposal is authorized under EFTA 

sections 904(a) and (c), 905(a), and 

Dodd-Frank sections 1032(a). The 

Bureau seeks comments on all aspects of 

its proposal to mandate pre-acquisition 

disclosures. In particular, the Bureau 

solicits feedback on whether preacquisition disclosures are necessary or 

if the fee information provided pursuant 

to existing § 1005.7(b) (as modified by 

proposed § 1005.18(f)) at the time a 

consumer contracts for the prepaid 

account is sufficient to inform 

consumers about the account’s terms 

and conditions. 

The Bureau is also proposing to add 

comment 18(b)(1)(i)–1, which would 

provide examples of what would and 

would not qualify as having provided 

disclosures pre-acquisition. The first 

example would clarify how preacquisition disclosures work in a bank 

branch context. Specifically, proposed 

comment 18(b)(1)(i)–1.i would explain 

that when a consumer inquires about 

obtaining a prepaid account at a branch 

location of a bank, then receives the 

printed short form and long form 

disclosures related to the prepaid 

account product, and after receiving the 

disclosures, agrees to open a prepaid 

account with the bank, a consumer 

would have received the short form and 

long form disclosures pre-acquisition. 

Another proposed example would 

address payroll card accounts. 

Specifically, proposed comment 

18(b)(1)(i)–1.ii would explain that if a 

consumer learns that he or she can 

receive wages via a payroll card 

account, at which time a consumer 

receives the short form and long form 

disclosure to review, and a consumer 

agrees to receive wages via a payroll 

card account, a consumer would have 

received the short form and long form 

disclosures pre-acquisition. Proposed 

comment 18(b)(1)(i)–1.ii would further 

clarify that if a consumer receives the 

payroll card or other device at the end 

of the first pay period, at which time a 

consumer also receives the short form 

and long form disclosure to review for 

the first time, these disclosures were 

provided to a consumer postacquisition, and thus not provided in 

compliance with proposed 

§ 1005.18(b)(1)(i). 

Proposed comment 18(b)(1)(i)–2 

would provide further explanation 

regarding circumstances when short 

form and long form disclosures would 

be considered to have been delivered 

after a consumer acquires a prepaid 

account, and thus in violation of the 

timing requirement in proposed 

§ 1005.18(b)(1)(i). Specifically, proposed 

comment 18(b)(1)(i)–2 would explain 

that when the short form and long form 

disclosures required under proposed 

§ 1005.18(b)(2)(i) and (ii) are presented 

after a consumer has initiated a 

purchase for a prepaid account on a 

financial institution’s Web site, but 

before a consumer provides any 

personal identifying information and 

agrees to accept the prepaid account, 

such disclosures would be made preacquisition in accordance with 

proposed § 1005.18(b)(1)(i). Proposed 

comment 18(b)(1)(i)–2 would also 

explain that the short form and long 

form disclosures that are provided 

electronically when a consumer 

acquires a prepaid account on a 

financial institution’s Web site are 

considered to be given after a consumer 

acquires a prepaid account if a 

consumer can easily bypass the 

disclosures before acquiring a prepaid 

account. Proposed comment 18(b)(1)(i)– 


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2 would also clarify that a financial 

institution can present the short form 

and long form disclosures on the same 

Web page to fulfill the requirements of 

proposed § 1005.18(b)(1)(i), and that a 

financial institution could also present 

the short form disclosure on a Web page 

and include a hyperlink directly to the 

long form disclosure on that same Web 

page, but, if it does so, a consumer must 

not have to review any unrelated pages 

before viewing the long form disclosure. 

The Bureau nevertheless seeks comment 

on whether additional guidance is 

necessary regarding how electronic 

disclosures can be provided in 

compliance with the pre-acquisition 

timing requirement in proposed 

§ 1005.18(b)(1)(i). 

Some consumer advocacy groups that 

responded to the Prepaid ANPR 

suggested that the Bureau also require 

that financial institutions confirm that 

consumers have read disclosures 

provided online. The Bureau believes 

that such a requirement is infeasible. 

Nevertheless, the Bureau seeks 

comment on whether technology exists 

that could be implemented by all 

potentially covered entities and that 

would permit them to confirm a 

consumer has read online disclosures, 

or if providing guidance that a 

consumer should not be able to easily 

bypass the pre-acquisition disclosures 

would ensure that consumers have 

sufficient opportunity to review 

disclosures provided electronically. 

18(b)(1)(ii) Disclosures for Prepaid 

Accounts Acquired in Retail Stores 

The Bureau is proposing an 

adjustment to its proposed general preacquisition timing requirement where 

consumers acquire prepaid accounts in 

retail stores. Proposed § 1005.18(b)(1)(ii) 

would provide that financial 

institutions would have to provide a 

written version of the short form 

disclosure before a consumer acquires a 

prepaid account in person in a retail 

store. But it would permit financial 

institutions to delay providing the long 

form disclosure until after the consumer 

acquires a prepaid account as long as 

certain conditions are met. Those 

conditions are described in proposed 

§ 1005.18(b)(1)(ii)(A) through (C). 

The Bureau believes that in many 

cases it is not feasible for financial 

institutions that offer prepaid accounts 

in retail stores to provide printed long 

form disclosures prior to acquisition. 

For example, retail stores may require 

financial institutions to use packaging 

material with specific dimensions that 

accommodate standard J-hook display 

racks. The Bureau understands that the 

dimensions of a typical J-hook display 

used today for prepaid accounts may 

limit a prepaid account access device’s 

packaging material to no larger than 4 

inches by 5.25 inches. In addition, the 

length of the hooks on which a prepaid 

account’s packaging material is 

displayed is finite and can 

accommodate only a limited number of 

packages depending on each package’s 

thickness. 

Due to these apparent size and space 

limitations, the Bureau believes that 

many financial institutions would not 

be able to present both the short and 

long form disclosures required by 

§ 1005.18(b)(2)(i) and (ii) on the 

packaging before a consumer acquires a 

prepaid account in a retail store, 

without overhauling the packaging’s 

design or otherwise adjusting the 

relevant retail space. For example, more 

disclosures could require longer, wider 

or thicker packaging material than that 

currently used. The Bureau believes that 

such packaging adjustments would 

impose a significant burden and likely 

decrease the number of prepaid account 

products that could be sold at one time 

in retail stores. In turn, this could 

increase the cost of prepaid account 

products and limit comparison 

shopping (if the retail store maintains 

the same overall space for the display 

and sale of all prepaid account 

products). 

Nevertheless, the Bureau believes it is 

important that consumers be provided 

an opportunity to review both the short 

form and long form disclosures before 

acquisition. Thus, proposed 

§ 1005.18(b)(1)(ii) would require that in 

retail stores, a financial institution 

could provide the long form disclosure 

after a consumer acquires a prepaid 

account in person in a retail store, as 

long as the three conditions discussed 

below are met. The Bureau believes 

these conditions will ensure a consumer 

receives a written, short form disclosure 

that includes methods for accessing the 

long form disclosure by telephone or via 

a Web site. 

Proposed § 1005.18(b)(1)(ii)(A) would 

set forth the first condition: that the 

access device for the prepaid account 

available for sale in a retail store must 

be inside of a packaging material. This 

condition would apply even if the 

product, when sold, is only a temporary 

access device. As noted above, J-hooks 

place limitations on the size and volume 

of packaging material that can be used 

to market prepaid accounts. If a 

financial institution does not use such 

packaging material because, for 

example, a customer service 

representative is responsible for 

distributing prepaid accounts to 

consumers, then the Bureau does not 

believe that space constraints would 

prevent a financial institution from 

providing both the short and long form 

disclosure pre-acquisition. The Bureau 

considered requiring that in order to 

qualify for the retail store exemption, 

the packaging material should also be 

directly accessible to a consumer. Under 

such a requirement, a financial 

institution would not qualify for the 

retail store exemption if the prepaid 

account access devices were inside of 

packaging material, but such packaging 

material was stored behind glass or a 

counter, and a consumer would have to 

request to see a package from a customer 

service representative in order to review 

the disclosures. The Bureau decided 

against proposing this requirement. The 

Bureau believes that retailers that do not 

make packaging material directly 

accessible to consumers may have 

justifiable reasons for doing so, such as 

security concerns, yet still face space 

constraints that make pre-acquisition 

delivery of both proposed forms 

difficult. Nevertheless the Bureau seeks 

comment on whether retailers that use 

packaging material, but do not make it 

directly accessible to consumers, 

actually do face space constraints that 

justify allowing them to disclose the 

long form post-acquisition. 

Proposed § 1005.18(b)(1)(ii)(B) would 

set forth the second condition: the short 

form disclosures required by proposed 

§ 1005.18(b)(2)(i) must be provided on 

or be visible through an outward-facing, 

external surface of a prepaid account 

access device’s packaging material in 

the tabular format described in 

proposed § 1005.18(b)(3)(iii). The 

Bureau recognizes that fulfilling this 

condition could mean that some 

financial institutions that offer prepaid 

accounts in retail stores and want to 

comply with proposed 

§ 1005.18(b)(1)(ii) may have to change 

their packaging. The Bureau, however, 

believes that the majority of current 

prepaid account products’ packaging 

material would allow financial 

institutions to include the short form 

content requirements on an external 

surface that is visible to a consumer preacquisition without altering the 

structure of the existing packaging. 

The third condition, set forth in 

proposed § 1005.18(b)(1)(ii)(C), would 

require that a financial institution 

include a telephone number and URL 

on the short form disclosure, as required 

by proposed § 1005.18(b)(2)(i)(B)(11), 

that a consumer can use to access the 

long form disclosure while in a retail 

store. The Bureau believes that even if 

it is not feasible for a consumer to 

receive both the short and long form 

disclosures pre-acquisition in some 


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77154 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

258The Nielsen Company, The Digital Consumer, 

at 5 (Feb. 2014), available at http://

www.nielsen.com/content//corporate/us/en/reportsdownloads/2014%20Reports/the-digital-consumerreport-feb-2014.pdf. In 2012, the Board estimated 

that 35 percent of the U.S. population uses 

smartphones. See Bd. of Governors of the Fed. 

Reserve, Consumers and Mobile Financial Services, 

at 3 n1 (Mar. 2012), available at http://

www.Federalreserve.gov//mobile-device-report201203.pdf (internal citations omitted). 

259See James Lacko & Janis Pappalardo, The 

Failure and Promise of Mandated Consumer 

Mortgage Disclosures: Evidence from Qualitative 

Interviews and a Controlled Experiment with 

Mortgage Borrowers, 100 a.m. Econ. Rev. 516 

(2010); Kleimann Commc’n Group, Know Before 

You Owe: Evolution of the Integrated TILA RESPA 

Disclosures (July 9, 2012). See generally, Eric 

Johnson et al. Can Consumers Make Affordable 

Care Affordable? The Value of Choice Architecture, 

PLOS One, Dec. 2013, at 1, 2. 260 Id. 

retail settings, the consumer should at 

least be able to access the long form 

disclosure by telephone or via a Web 

site, should they want to obtain 

comprehensive fee information. The 

Bureau understands that many 

consumers use mobile devices that can 

access the internet, and the Bureau 

notes that all of the participants in the 

Bureau’s consumer testing reported 

having a smartphone with internet 

access. Indeed, recent polls indicate that 

as many as 65 percent of adults in the 

United States own a smartphone.258 The 

Bureau therefore believes that many 

consumers at least have the ability to 

access a Web site through the URL that 

would be listed on the short form 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(11) when shopping 

for a prepaid account. Several testing 

participants also mentioned, however, 

that even though they have a 

smartphone, they were concerned 

whether all consumers would be able to 

access a Web site when in a retail store 

or whether they would always have 

sufficient reception to access a Web site 

from their smartphone while indoors. 

The Bureau is therefore also proposing 

that when a financial institution is not 

disclosing the long form before a 

consumer acquires a prepaid account, 

the financial institution must also make 

the long form available to a consumer by 

telephone, a method that even 

consumers with mobile devices that are 

not smartphones could use to access the 

long form disclosure’s contents. 

The Bureau recognizes that proposed 

§ 1005.18(b)(ii)(C) assumes that a 

consumer would have a mobile device 

capable of either accessing the internet 

or making calls when shopping in a 

retail store. But it believes that 

providing these two methods will 

increase the likelihood that most 

consumers would be able to access the 

long form disclosure in a retail store. 

The Bureau also acknowledges that it 

might be complicated for financial 

institutions to provide the long form 

disclosure by telephone, whether using 

an interactive voice response system or 

through a customer service agent. 

Further, as discussed in the section-bysection analysis of proposed 

§ 1005.18(b)(1)(iii), it may be harder for 

a consumer to understand the 

information in the long form when 

delivered orally. Nevertheless, the 

Bureau believes that if a consumer takes 

the affirmative step to request additional 

information about a prepaid account by 

telephone when shopping in a retail 

store, it could be more likely that the 

consumer is seeking out specific 

information that is not included on the 

short form, and will therefore be less 

likely to suffer from information 

overload. 

The Bureau further recognizes that 

permitting financial institutions to only 

provide a short form disclosure to a 

consumer pre-acquisition in retail stores 

means that consumers may not see full 

fee information before acquiring a 

prepaid account. It could be due to the 

technical reasons described above or 

due to the fact that consumers lack the 

time or motivation to seek it out. 

Indeed, in the Bureau’s consumer 

testing, some participants had difficulty 

noticing and understanding language 

that listed the methods for accessing the 

long form disclosure on the short form. 

Some participants also reported that 

they would be unlikely to use their 

mobile device to seek out such 

information when shopping because, in 

the past, they spent limited time 

shopping for a prepaid account. 

The Bureau therefore considered 

whether, as some non-partisan research 

and advocacy organizations have 

suggested, it might be better for 

consumers to see all of a prepaid 

account’s fees pre-acquisition for 

prepaid accounts sold in retail stores 

and all other acquisition scenarios to 

avoid putting the burden on consumers 

to seek out additional information. The 

Bureau declines to propose this 

approach for multiple reasons. First, the 

Bureau believes that recent research 

indicates that many consumers have 

difficulty comprehending and utilizing 

extensive amounts of information when 

making decisions about certain financial 

products.259 Second, when consumers 

use a disclosure, recent research 

indicates they might have trouble 

identifying which information is 

relevant to them, prioritizing and 

comprehending the information they 

encounter, or utilizing that information 

to make the best choice for their 

situation.260 The Bureau believes this 

comprehension difficulty could be 

exacerbated in a retail store where 

consumers often make acquisition 

decisions quickly. During its consumer 

testing, the Bureau also learned that 

only a few types of fees drive most 

consumers’ decisions about prepaid 

accounts. The Bureau believes the 

proposed short form disclosure captures 

these fees. Third, when participants in 

the Bureau’s consumer testing saw 

longer lists of fees during testing, they 

frequently cited one of the fees included 

on the short form disclosure as that 

which would most influence their 

decision about which prepaid product 

to acquire. In other words, testing 

participants were not relying on the 

additional information in the long form 

disclosure to make a decision. The 

results suggest that the participants 

would have reached the same decision 

reviewing a short form disclosure. 

Testing participants also spent more 

time comparing two long form 

disclosures when engaging in a 

shopping comparison exercise Such 

time is additional time that the Bureau 

believes consumers are less likely to 

spend when shopping in a retail setting. 

Finally, consumers in testing also 

generally found it more difficult to 

perform side-by-side comparisons of 

two long form disclosures included on 

the inside of prototype packaging 

material versus comparing two short 

form disclosures provided on an outside 

surface of prototype packaging material. 

The Bureau also considered the 

significant cost to industry of providing 

the long form disclosure. As discussed 

above, the packaging adjustments 

including such a disclosure would 

likely require based on the space 

constraints in many retail locations. 

To summarize, the Bureau proposes 

that, in retail stores, financial 

institutions may provide the proposed 

long form disclosure after acquisition, if 

the three conditions in proposed 

§ 1005.18(b)(1)(ii)(A) through (C) are 

satisfied. The Bureau also notes that 

pursuant to proposed § 1005.18(f), all 

consumers, including those shopping in 

retail stores, would get a long form 

disclosure in the terms and conditions 

document that they receive after they 

have acquired a prepaid account. In a 

retail setting, the terms and conditions 

document would likely be provided 

inside the packaging material and 

immediately accessible to a consumer 

post-acquisition. 

Nevertheless, the Bureau seeks 

comment on all aspects of this approach 

to fee disclosures for prepaid accounts 


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261The Bureau also considered requiring that 

financial institutions list an SMS short code on the 

short form disclosure provided in retail stores. See 

section-by-section analysis of proposed 

§ 1005.18(b)(2)(i)(B)(11) for a discussion of this 

alternative. 

sold in retail locations. Specifically, the 

Bureau seeks comment on what 

information consumers should receive 

when shopping for a prepaid account in 

a retail store and how comprehensive 

this information could be, given the 

space constraints imposed by J-hooks. 

The Bureau also seeks comment on 

whether to require disclosure of the long 

form pre-acquisition in retail stores 

instead of permitting financial 

institutions to only make it accessible to 

a consumer. Finally, the Bureau solicits 

comment on whether the two methods 

(Web site or telephone number) that the 

Bureau has proposed to include on the 

short form in retail stores are reliable 

ways for consumers to access the long 

form disclosure when shopping in a 

retail store, and whether there are other 

methods that could be required instead 

of or in addition to those that are 

proposed. The Bureau also seeks 

comment on whether it should require 

that consumers must be able to access 

the telephone number listed after 

regular business hours.261

Proposed comment 1005.18(b)(1)(ii)–1 

would provide guidance on the 

definition of retail store. Specifically, 

proposed comment 1005.18(b)(1)(ii)–1 

would explain that, for purposes of the 

proposed requirements of 

§ 1005.18(b)(1)(ii), a retail store is a 

location where a consumer can obtain a 

prepaid account in person and that is 

operated by an entity other than a 

financial institution or by an agent of 

the financial institution. Proposed 

comment 1005.18(b)(1)(ii)–1 would 

further clarify that a bank or credit 

union branch is not a retail store, but 

that drug stores and grocery stores at 

which a consumer can acquire a prepaid 

account may be retail stores. Proposed 

comment 1005.18(b)(1)(ii)–1 would also 

clarify that a retail store that offers one 

financial institution’s prepaid account 

products exclusively would be 

considered an agent of the financial 

institution, and, thus, both the short 

form and the long form disclosure must 

be provided pre-acquisition pursuant to 

proposed § 1005.18(b)(1)(i) in such 

settings. 

The Bureau believes that if a financial 

institution is the sole provider of 

prepaid account products in a given 

retail store, or is otherwise an agent of 

the financial institution, then it is easier 

for the financial institution to manage 

the distribution of disclosures to a 

consumer, and they might be less 

dependent on the J-hook infrastructure 

to market their products to consumers. 

Thus, the Bureau believes that financial 

institutions with such exclusive 

relationships should have fewer hurdles 

to providing both the short form and 

long form disclosures to a consumer 

before acquisition. Nevertheless, the 

Bureau seeks comment on whether 

agents of the financial institution face 

space constraints in retail stores that 

would make it difficult to provide the 

short form and long form disclosures 

pre-acquisition. 

Proposed comment 1005.18(b)(1)(ii)–2 

would clarify that except when 

providing the long form disclosure postacquisition in accordance with the retail 

store exception set forth in proposed 

§ 1005.18(b)(1)(ii), the short form and 

long form disclosures required by 

proposed § 1005.18(b)(2)(i) and (ii) must 

be provided to a consumer preacquisition in compliance with 

proposed § 1005.18(b)(1)(i). Proposed 

comment 1005.18(b)(1)(ii)–2 would 

further explain that disclosures are 

considered to have been provided postacquisition if they are inside the 

packaging material accompanying a 

prepaid account access device that a 

consumer cannot see or access before 

acquiring the prepaid account, or if it is 

not readily apparent to a consumer that 

he or she has the ability to access the 

disclosures inside of the packaging 

material. Proposed comment 

1005.18(b)(1)(ii)–2 would also provide 

the example that if the packaging 

material is presented in a way that 

consumers would assume they must 

purchase the prepaid account before 

they can open the packaging material, 

the financial institution would be 

deemed to have provided disclosures 

post-acquisition. 

Proposed comment 1005.18(b)(1)(ii)–3 

would explain that a payroll card 

account offered to and accepted by 

consumers working in retail stores 

would not be considered a prepaid 

account acquired in a retail store for 

purposes of proposed § 1005.18(b)(1)(ii), 

and thus, a consumer would have to 

receive the short form and long form 

disclosures pre-acquisition pursuant to 

the timing requirement set forth in 

proposed § 1005.18(b)(1)(i). The Bureau 

does not believe that there are space 

constraints involved in offering payroll 

card accounts to retail store employees. 

Thus, the Bureau believes that retail 

store employees receiving payroll card 

accounts must receive both the short 

form and long form disclosures preacquisition in accordance with 

proposed § 1005.18(b)(1)(i). 

Proposed comment 18(b)(1)(ii)–4 

would clarify that pursuant to proposed 

§ 1005.18(b)(1)(ii)(C), a financial 

institution must make the long form 

accessible to a consumer by telephone 

and by a Web site when not providing 

a printed version of the long form 

disclosure to a consumer prior to 

acquisition of a prepaid account. 

Proposed comment 18(b)(1)(ii)–4 would 

clarify that a financial institution could, 

for example, provide the long form 

disclosure by telephone using an 

interactive voice response system or by 

using a customer service agent. 

18(b)(1)(iii) Disclosures for a Prepaid 

Account Acquired Orally by Telephone 

Similar to its proposed alternative for 

retail stores, the Bureau is also 

proposing, for several reasons, to modify 

the general pre-acquisition disclosure 

requirement in proposed 

§ 1005.18(b)(1)(i) when a consumer 

acquires a prepaid account orally by 

telephone. First, the Bureau believes 

prepaid accounts acquired by telephone 

introduce logistical challenges that 

make it difficult for financial 

institutions to provide both the short 

form and the long form disclosures to all 

consumers. The Bureau also believes 

that it may be more difficult for 

consumers to process information 

disclosed orally and that therefore, 

generally, less fee information should be 

provided when consumers acquire 

prepaid accounts by telephone. The 

Bureau acknowledges that consumers 

are probably less likely to comparison 

shop when acquiring prepaid accounts 

by telephone, but the Bureau believes 

that some consumers might want to 

compare the short form disclosure of 

prepaid account products they are 

considering acquiring orally by 

telephone to short form disclosures for 

other prepaid accounts that they might 

already possess or have available on 

their computer during the telephone 

call. 

The Bureau is therefore proposing 

that before a consumer acquires a 

prepaid account orally by telephone, a 

financial institution must disclose orally 

the short form information that would 

be required by proposed 

§ 1005.18(b)(2)(i). See proposed 

§ 1005.18(b)(1)(iii). The Bureau believes 

that disclosing only limited information 

by telephone will increase the 

likelihood that a consumer will 

understand any information about the 

prepaid account when acquiring it 

orally by telephone. Proposed 

§ 1005.18(b)(1)(iii) would further state 

that a financial institution may provide 

the disclosures required by 

§ 1005.18(b)(2)(ii) after a consumer 

acquires a prepaid account orally by 

telephone if the financial institution 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
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communicates to a consumer orally, 

before a consumer acquires the prepaid 

account, that the information required 

to be disclosed by § 1005.18(b)(2)(ii) is 

available orally by telephone and on a 

Web site. 

The Bureau believes that a financial 

institution should be able to disclose 

information contained in the long form 

orally, by, for example, allowing a 

consumer to ask a customer service 

agent about a fee or by using an 

automated system, but the Bureau 

questions the effectiveness of requiring 

that the full long form disclosure be 

provided orally to every consumer. 

Rather, the Bureau believes that as long 

as consumers are made aware of their 

ability to access the information 

contained in the long form disclosure, 

they will be able to get enough 

information to make an informed 

acquisition decision. Those who wish to 

learn more about the prepaid account 

can do so, and financial institutions 

would not be unduly burdened by 

having to provide the long form 

disclosure to all consumers who acquire 

prepaid accounts by telephone. 

The Bureau recognizes that proposed 

§ 1005.18(b)(1)(ii)(C) would require that 

a financial institution always disclose 

the telephone number and the URL that 

a consumer can use to access in the long 

form disclosure on all short forms when 

qualifying for the retail store exception. 

But, for prepaid accounts acquired 

orally by telephone pursuant to 

proposed § 1005.18(b)(1)(iii), the Bureau 

believes it is sufficient to let a consumer 

know that the long form disclosure is 

available by telephone and through a 

Web site without having to actually 

dictate the telephone number and the 

URL of the Web site, unless a consumer 

requests them. A version of the long 

form, however, would still be required 

to be provided after acquisition in the 

prepaid account’s initial disclosures. 

See proposed § 1005.18(f). 

The Bureau seeks comment on all 

aspects of this part of the proposal. 

Specifically, the Bureau seeks comment 

on whether consumers will benefit from 

hearing the contents of only the short 

form disclosed orally. The Bureau also 

seeks comment on whether financial 

institutions should be required to 

disclose all fees associated with a 

prepaid account orally before 

acquisition instead of having the option 

not to disclose full fee information as 

long as they make consumers aware of 

the methods by which they can access 

the content of the long form disclosure. 

Proposed comment 18(b)(1)(iii)–1 

would explain that, for purposes of 

proposed § 1005.18(b)(1)(iii), a prepaid 

account is considered to have been 

acquired orally by telephone when a 

consumer speaks to a customer service 

agent or communicates with an 

automated system, such as an 

interactive voice response system, to 

provide personal identifying payment 

information to acquire a prepaid 

account, but would clarify that prepaid 

accounts acquired using a mobile device 

without speaking to a customer service 

agent or communicating with an 

automated system are not considered to 

have been acquired orally by telephone. 

The Bureau believes that the proposed 

general pre-acquisition disclosure 

requirement in proposed 

§ 1005.18(b)(1)(i) should be modified 

when a consumer acquires a prepaid 

account orally by telephone. By 

contrast, if a consumer is using a 

smartphone to access a mobile 

application to acquire a prepaid 

account, and is not receiving disclosures 

about the prepaid account orally, the 

Bureau proposes that disclosures could 

be provided electronically pursuant to 

proposed § 1005.18(b)(3)(i)(B) and that a 

consumer still receive both the short 

form and long form disclosures preacquisition. Though a consumer may 

access a mobile application to acquire a 

prepaid account on a mobile phone 

device, the Bureau believes that once a 

consumer has entered the application, 

disclosures can be provided in a similar, 

if not identical, way to how they are 

offered on a Web site. Thus, the Bureau 

believes that in such a scenario the 

logistical challenges justifying an 

alternative requirement for accounts 

acquired orally using the telephone are 

not present. 

Proposed comment 18(b)(1)(iii)–2 

would explain how disclosures 

provided orally can comply with the 

pre-acquisition timing requirement in 

proposed § 1005.18(b)(2)(i). Specifically, 

proposed comment 18(b)(1)(iii)–2 would 

clarify that to comply with the preacquisition requirement set forth in 

proposed § 1005.18(b)(1)(i) for prepaid 

accounts acquired orally by telephone, a 

financial institution may, for example, 

read the short form disclosure required 

under proposed § 1005.18(b)(2)(i) over 

the telephone after a consumer has 

initiated the purchase of a prepaid 

account by calling the financial 

institution, but before a consumer agrees 

to acquire the prepaid account. 

Proposed comment 18(b)(1)(iii)–2 would 

also clarify that although the long form 

disclosure required by proposed 

§ 1005.18(b)(2)(ii) is not required to be 

given pre-acquisition when a consumer 

acquires a prepaid account orally by 

telephone, a financial institution must 

communicate to a consumer that the 

long form is available upon request 

either orally by telephone or on a Web 

site. Finally, the proposed comment 

would clarify that a financial institution 

must provide information on all fees in 

the terms and conditions as required by 

existing § 1005.7(b)(5), as modified by 

proposed § 1005.18(f), before the first 

electronic fund transfer is made from a 

consumer’s prepaid account. 

18(b)(2) Content of Disclosures 

Proposed § 1005.18(b)(2) would set 

forth substantive content requirements 

for the Bureau’s proposed preacquisition disclosure regime. 

Specifically, proposed § 1005.18(b)(2)(i) 

would set forth the information a 

financial institution would have to 

provide on the short form disclosure, 

and proposed § 1005.18(b)(2)(ii) would 

set forth the information a financial 

institution would have to provide on the 

long form disclosure. The proposed 

content for each disclosure is discussed 

in detail below. 

18(b)(2)(i) Short Form Content 

Requirements 

Proposed § 1005.18(b)(2) would set 

forth substantive content requirements 

for the Bureau’s proposed preacquisition disclosure regime. 

Specifically, proposed § 1005.18(b)(2)(i) 

would set forth the information a 

financial institution would have to 

provide on the short form disclosure, 

and proposed § 1005.18(b)(2)(ii) would 

set forth the information a financial 

institution would have to provide on the 

long form disclosure. The proposed 

content for each disclosure is discussed 

in detail below. 

18(b)(2)(i) Short Form Content 

Requirements 

As explained above, the Bureau is 

proposing that financial institutions 

provide a short form disclosure before a 

consumer acquires a prepaid account. 

See proposed § 1005.18(b)(1)(i). 

Proposed § 1005.18(b)(2)(i) would 

require disclosure of specific 

information on the short form about a 

prepaid account, including certain 

notices, fees, and other information, as 

applicable. Specifically, for all prepaid 

accounts, financial institutions would 

be required to disclose, in the static 

portion of the short form, the fee types 

set forth in proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7), even 

if such fees are not charged or if those 

features are not offered in connection 

with a particular prepaid account 

product. A disclosure regarding whether 

a prepaid account might offer an 

overdraft service or another type of 

credit feature to a consumer would also 


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262For prepaid accounts acquired in retail stores 

or orally by telephone, the long form would have 

to be made available to the consumer either 

electronically or by telephone. See section-bysection analysis of proposed § 1005.18(b)(1)(ii) and 

(iii). 

263See the section-by-section analysis of 

proposed § 1005.18(b)(4)(iii). 

be disclosed in the static portion of the 

short form pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(9). In addition, the 

short form would require, in proposed 

§ 1005.18(b)(2)(i)(B)(8), disclosure of up 

to three additional fees most commonly 

incurred by users of a given prepaid 

account product in the prior 12-month 

period. This portion of the disclosure 

would vary across prepaid account 

products. Pursuant to proposed 

§ 1005.18(b)(3)(iii)(A), the short form 

disclosure would be in a form 

substantially similar to the proposed 

Model Forms A–10(a) through (d). 

Depending on the structure of a 

particular prepaid account, however, 

the Bureau understands that the short 

form may not capture all of a particular 

prepaid account’s fees or explain the 

conditions under which a financial 

institution might impose those fees. The 

Bureau’s consumer testing, however, 

indicated that when participants were 

shown prototype short forms, most 

understood that they represented only a 

subset of fee information and that they 

could potentially be charged fees not 

shown on the form. Further, except in 

certain retail stores or with respect to 

accounts acquired orally by telephone, 

under the proposed pre-acquisition 

disclosure regime, a consumer would 

receive a long form disclosure 

simultaneously with the short form and 

therefore have the opportunity to see all 

fees associated with a prepaid account 

and any relevant conditions before 

acquiring a prepaid account.262See 

proposed § 1005.18(b)(1)(i). Further, 

most testing participants did not 

identify any additional fees that they 

would like to see listed in a short form. 

The Bureau therefore believes that the 

proposed short form would contain 

most fees that might be charged in 

connection with a prepaid account, and 

those fees that are most important for a 

consumer to know in advance of 

acquiring a prepaid account. 

The Bureau also recognizes that 

disclosing even this proposed subset of 

fee information on the short form runs 

the same risk of information overload 

that the Bureau believes could occur if 

all fees were disclosed to a consumer 

instead of just a subset of fees. The 

Bureau believes, however, based on its 

consumer testing and other research, 

that incorporating elements of visual 

hierarchy will mitigate these risks. Most 

importantly, the fee types that would be 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (4) in the 

top-line of the short form would use 

font size and other elements to promote 

readability.263 The Bureau is proposing 

to add comment 18(b)(2)(i)–1 to explain 

what a provider should disclose on the 

short form when fees are inapplicable to 

a particular prepaid account product. 

Specifically, proposed comment 

18(b)(2)(i)–1 would explain that the 

disclosures required by proposed 

§ 1005.18(b)(2)(i) must always be 

provided prior to prepaid account 

acquisition, even when a particular 

disclosure is inapplicable to a specific 

prepaid account. The proposed 

comment would also provide an 

example that if a financial institution 

does not charge a fee to a consumer for 

withdrawing money at an ATM in the 

financial institution’s network or an 

affiliated network, which is a type of fee 

that would be required to be disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(3), the financial 

institution should list ‘‘ATM 

withdrawal (in network)’’ on the short 

form disclosure and list ‘‘$0’’ as the fee. 

Proposed comment 18(b)(2)(i)–1 would 

further clarify that if, however, the 

financial institution does not allow a 

consumer to withdraw money from 

ATMs that are in the financial 

institution’s network or from those in an 

affiliated network, the financial 

institution would still have to list ‘‘ATM 

withdrawal (in-network)’’ and ‘‘ATM 

withdrawal (out-of-network)’’ on the 

short form disclosure but instead state 

‘‘not offered’’ or ‘‘N/A.’’ The Bureau 

believes it important that the static 

portion of the short form disclosure 

would list identical account features 

and fee types across all prepaid account 

products, to enable consumers to 

quickly determine and compare the 

potential cost of certain offered features. 

The Bureau is also proposing to adopt 

comment 18(b)(2)(i)–2, to further 

explain how to disclose fees and 

features on the short form disclosure. 

Specifically, the proposed comment 

would explain that no more than two 

fees could be listed for each fee type 

required to be listed by proposed 

§ 1005.18(b)(2)(i)(B)(2), (3) and (5) in the 

short form disclosure, and that only one 

fee could be disclosed for each fee type 

required to be listed by proposed 

§ 1005.18(b)(2)(i)(B)(1), (4), (6), (7) and 

(8). The proposed comment would 

clarify, however, that proposed 

§ 1005.18(b)(2)(i)(B)(8) would require 

the disclosure of up to three additional 

fees. Finally, the proposed comment 

would clarify that for example, if a 

financial institution offers more than 

one method for loading cash into a 

prepaid account, only the fee for the 

method that would charge the highest 

fee would be disclosed, and the 

financial institution could use an 

asterisk or other symbol next to the cash 

reload fee disclosed to indicate that the 

fee may be lower. See section-by-section 

analysis of proposed comment 

18(b)(2)(i)(C)–1. 

As discussed in detail above, the 

Bureau believes that simplicity and 

clarity are important goals of the short 

form disclosure. Insofar as allowing 

complicated explanations and multiple 

different fees to be disclosed for a 

particular feature could disrupt those 

goals, the Bureau proposes that for most 

fees on the short form, a financial 

institution only be permitted to list one 

fee—the highest fee a consumer could 

incur for a particular activity, as 

discussed in more detail below in the 

section-by-section analysis of proposed 

§ 1005.18(b)(2)(i)(C). The Bureau notes 

that these limitations would only apply 

to the short form disclosure; the 

financial institution would have both 

the long form disclosure and any other 

portion of the packaging material or 

Web site to disclose other relevant fees. 

The Bureau also believes there is 

particular value in maintaining 

simplicity on the short form by limiting 

the top-line portion of the form in order 

to encourage consumer engagement 

with the disclosure. Thus, the Bureau is 

proposing to require only four fee types 

in the top-line. For two of those fee 

types—per purchase fees and ATM 

withdrawal fees—the Bureau is also 

proposing to require disclosure of two 

fee values. See proposed comment 

18(b)(2)(i)–2. The Bureau believes that it 

is important to include two per 

purchase fees—a per purchase fee when 

a consumer uses a signature and a per 

purchase fee when a consumer uses a 

PIN—because consumers could 

potentially incur these fees every time 

they use their prepaid accounts, and the 

fee could vary depending on how a 

consumer completes the transaction. 

The Bureau believes including two per 

purchase fees will highlight for 

consumers that the fees for completing 

a transaction using a personal 

identification number versus the fee for 

using a signature could differ. Similarly, 

the Bureau believes that it is important 

to include two ATM withdrawal fees in 

order to highlight that fees for innetwork and out-of-network 

transactions may differ and to signal to 

consumers that the product’s ATM 

network may have an impact on the fee 

incurred, which could lead a consumer 

to seek out more information about the 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77158 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

264Per purchase fees are also proposed to be on 

the top-line of the short form. See proposed 

§ 1005.18(b)(2)(i)(B)(2). 

relevant network. The Bureau notes that 

in its testing, some participants were 

confused about the meaning of an ATM 

network. 

By contrast, the Bureau is proposing 

to allow only one periodic fee and one 

cash reload fee to be listed in the topline of the short form. The Bureau 

acknowledges that both of these fees 

might also vary based, for example, on 

how often a consumer uses a prepaid 

account or the method used to reload 

cash into a prepaid account. Despite this 

possibility for variation, however, the 

Bureau believes consumers will benefit 

more from immediately seeing the two 

ways the per purchase and ATM 

withdrawal fees may vary. 

The Bureau seeks comment on all 

aspects of this part of the proposal. 

Specifically, the Bureau solicits 

feedback on whether mandating 

disclosure of inapplicable features on 

the short form disclosure would be 

unnecessarily confusing to consumers, 

or whether financial institutions will 

find it difficult to explain elsewhere on 

a prepaid account access device’s 

packaging material or on their Web sites 

that certain features may not be 

available. In addition, the Bureau seeks 

comment on whether only providing the 

highest fee on the short form disclosure 

for a given fee type will be misleading 

to consumers, even when financial 

institutions include a symbol, like an 

asterisk, to indicate the fee amount 

could vary. The Bureau also seeks 

comment on the proposed type of and 

number of fees included in the top-line 

portion of the form, as discussed further 

below in the section-by-section analysis 

of proposed § 1005.18(b)(4)(iii). Finally, 

the Bureau also solicits comment on 

whether the cost of purchasing or 

activating a prepaid account should be 

included on the short form disclosure. 

18(b)(2)(i)(A) Payroll Card Account 

Notices 

Pursuant to existing § 1005.10(e)(2), 

no financial institution or other person 

may require a consumer to establish an 

account for receipt of electronic fund 

transfers with a particular institution as 

a condition of employment or receipt of 

a government benefit. See also existing 

comment 10(e)(2)–1 and proposed 

comment 10(e)(2)–2. The Bureau 

believes it is important for consumers to 

realize they have the option of not 

receiving payment of wages via a 

payroll card account, and that receiving 

such notice at the top of the short form 

disclosure will help to ensure 

consumers are aware of this right. Thus, 

the Bureau is proposing that a notice be 

provided at the top of the short form for 

a payroll card account to highlight for 

consumers that they are not required to 

accept a particular payroll card account. 

Specifically, proposed 

§ 1005.18(b)(2)(i)(A) would require that, 

when offering a payroll card account, a 

financial institution must include a 

statement on the short form that a 

consumer does not have to accept the 

payroll card account, and that a 

consumer can ask about other methods 

to get wages or salary from the employer 

instead of receiving them via a payroll 

card account, in a form substantially 

similar to the language set forth in 

Model Form A–10(b). The Bureau is 

proposing a similar notice requirement 

for government benefit accounts. 

Proposed § 1005.18(b)(2)(i)(A) would 

state that for requirements regarding 

what notice to give a consumer when 

offering a government benefit account, 

see proposed § 1005.15(c)(2). 

18(b)(2)(i)(B) Fees and Other 

Information 

18(b)(2)(i)(B)(1) Periodic Fee 

Proposed § 1005.18(b)(2)(i)(B)(1) 

would require disclosure of a periodic 

fee charged for holding a prepaid 

account, assessed on a monthly or other 

periodic basis, using the term ‘‘Monthly 

fee,’’ ‘‘Annual fee,’’ or a substantially 

similar term. This proposed provision is 

intended to capture regular maintenance 

fees that a financial institution levies on 

a consumer solely for having a prepaid 

account for a period of time, whether 

the fee is charged monthly, annually, or 

for some other period of time. A 

financial institution could choose a 

label for this fee that accurately reflects 

the relevant periodic interval. Pursuant 

to the formatting requirements in 

proposed § 1005.18(b)(4), a financial 

institution would be required to 

disclose this fee in the top-line of the 

short form disclosure. 

The Bureau believes that all prepaid 

accounts should disclose such a 

periodic fee, or the absence thereof, for 

several reasons. First, the Bureau’s 

analysis of fee data indicates that many 

prepaid accounts charge a recurring fee, 

typically on a monthly basis. Second, 

the Bureau believes a periodic fee is one 

that consumers will likely pay no matter 

what other fees they incur because it is 

imposed for maintaining the prepaid 

account, unless a financial institution 

offers a way for a consumer to avoid that 

fee (e.g., through the receipt of a regular 

direct deposit or maintaining a certain 

average daily account balance). Those 

prepaid accounts that do not assess a 

periodic fee often charge other fees 

instead, typically per purchase fees.264

The Bureau therefore believes that the 

lack of a periodic fee is also an 

important feature of a prepaid account 

that should be included in the top-line 

to allow consumers to more easily 

identify this trade-off between periodic 

fees and per purchase fees. Third, the 

Bureau believes that the existence of a 

monthly fee (or lack thereof) is typically 

a key factor in a consumer’s decision 

about whether to acquire a particular 

prepaid account. Additionally, in the 

Bureau’s testing, participants frequently 

cited periodic fees as one of the most 

important factors influencing their 

decision about which prepaid account 

product to acquire. 

18(b)(2)(i)(B)(2) Per Purchase Fee 

Proposed § 1005.18(b)(2)(i)(B)(2) 

would require disclosure of two fees for 

making a purchase using a prepaid 

account, both for which when a 

consumer uses a personal identification 

number and when a consumer provides 

a signature, including at point-of-sale 

terminals, by telephone, on a Web site, 

or by any other means, using the term 

‘‘Per purchase fee’’ or a substantially 

similar term, and ‘‘with PIN’’ or ‘‘with 

sig.,’’ or substantially similar terms. 

Although the Bureau understands that 

most prepaid accounts do not charge per 

transaction fees for purchases of goods 

or services from a merchant, some do. 

When charged, the impact of these fees 

could be substantial for consumers who 

make multiple purchases. Often these 

fees are charged when periodic fees are 

not (see proposed 

§ 1005.18(b)(2)(i)(B)(1)), and thus a 

consumer may be choosing between a 

prepaid account that has no monthly fee 

but charges for each purchase and a 

prepaid account that has a monthly fee 

but no per purchase charge. Therefore, 

the Bureau believes it appropriate for all 

prepaid accounts to disclose on the 

short form both whether there is a per 

purchase fee and, if so, the fee for 

making those purchases. The Bureau’s 

model forms (see proposed Model 

Forms A–10(a) through (d)) would 

disclose this amount on the top-line 

portion of the short form. 

The Bureau further recognizes that a 

handful of prepaid accounts charge a 

different per purchase fee depending on 

whether the purchase is processed as a 

signature or PIN transaction. While PIN 

debit transactions require input of the 

accountholder’s PIN code at the time of 

authorization of the transaction, for a 

signature transaction, the accountholder 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77159 

may sign for the transaction but does 

not need to enter his or her PIN code. 

The Bureau is therefore proposing 

model forms for prepaid accounts that 

disclose both fees for these two 

authorization methods. See proposed 

Model Forms A–10(a) through (d). 

Nevertheless, the Bureau seeks 

comment on whether two per purchase 

fees should be disclosed on the short 

form disclosure. The Bureau also 

solicits comment on whether there are 

additional per purchase fees beyond 

using a PIN or a signature that the 

Bureau should consider including in the 

short form disclosure. 

18(b)(2)(i)(B)(3) ATM Withdrawal Fees 

Proposed § 1005.18(b)(2)(i)(B)(3) 

addresses disclosure on the short form 

of ATM fees for withdrawing cash. 

Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(3) would require 

disclosure of two fees for using an ATM 

to initiate a withdrawal of cash in the 

United States from a prepaid account, 

both within and outside of the financial 

institution’s network or a network 

affiliated with the financial institution, 

using the term ‘‘ATM withdrawal fee’’ 

or a substantially similar term, and ‘‘innetwork’’ or ‘‘out-of-network,’’ or 

substantially similar terms. The 

Bureau’s model forms (see proposed 

Model Forms A–10(a) through (d)) 

would disclose these ATM withdrawal 

fees on the top-line portion of the short 

form. 

The Bureau understands that most 

prepaid accounts have ATM fees that 

differ depending on whether the ATM is 

in a network of which the financial 

institution that issued the card is a 

member or an affiliate. Typically, 

prepaid account cards can also be used 

on other ATM networks of which the 

issuing financial institution is not a 

member or an affiliate. Insofar as 

accessing these networks often costs the 

financial institution more, they typically 

charge a higher fee to a consumer for 

using that out-of-network ATM. For 

example, one current prepaid account 

product charges $0 for in-network ATM 

withdrawals and $2 for ATM 

withdrawals that occur out-of-network. 

Given that such potential variances are 

common, the Bureau believes that 

disclosure of fees for both in- and outof-network ATMs withdrawals is 

important. Although the Bureau notes 

that many participants during its 

consumer testing were unfamiliar with 

the difference between ‘‘in-network’’ 

and ‘‘out-of-network,’’ the Bureau 

believes the inclusion of these two fees 

on the top-line of the proposed short 

form would highlight for consumers that 

such fee variations can occur and the 

importance of understanding the ATM 

network associated with a particular 

prepaid account product. 

Nevertheless, the Bureau seeks 

comment on whether disclosure of 

additional information regarding ATM 

withdrawal fees and ATM networks is 

necessary on the short form. 

Specifically, the Bureau solicits 

comment on whether the in- versus outof network distinction makes sense for 

prepaid accounts. The Bureau also 

solicits comment on whether there are 

additional types of ATM withdrawal 

fees (other than foreign ATM 

withdrawal fees, which are discussed 

below) that should be included in the 

short form. For example, the Bureau is 

aware that some financial institutions 

impose different ATM withdrawal fees 

on ATMs that are ‘‘bank-owned.’’ 

Proposed comment 18(b)(2)(i)(B)(3)–1 

would clarify that if the fee imposed on 

the consumer for using an ATM in a 

foreign country to initiate a withdrawal 

of cash is different from the fee charged 

for using an ATM in the United States 

within or outside the financial 

institution’s network or a network 

affiliated with the financial institution, 

a financial institution would not 

disclose the foreign ATM fee pursuant 

to proposed § 1005.18(b)(2)(i)(B)(3), but 

may be required to do so pursuant to 

proposed § 1005.18(b)(2)(i)(B)(8), as part 

of the incidence-based fee disclosure. 

18(b)(2)(i)(B)(4) Cash Reload Fee 

Proposed § 1005.18(b)(2)(i)(B)(4) 

would require disclosure of a fee for 

loading cash into a prepaid account 

using the term ‘‘Cash reload’’ or a 

substantially similar term. Cash reloads 

are one of the primary ways for a 

consumer to add funds to a prepaid 

account. As such, the Bureau believes 

that the existence of a cash reload 

service and the amount of any fee for 

using such a service, if any, is important 

for consumers to know insofar this is a 

key feature of many prepaid accounts. 

Further, the Bureau’s model forms (see 

proposed Model Forms A–10(a) through 

(d)) would disclose the cash reload fee 

on the top-line of the short form 

disclosure as described in the sectionby-section analysis of proposed 

§ 1005.18(b)(4)(i). 

The Bureau also proposes to adopt 

new comment § 1005.18(b)(2)(i)(B)(4)–1, 

which would provide guidance on what 

would be considered a cash reload fee. 

Specifically, the proposed comment 

would explain that the cash reload fee, 

for example, would include the cost of 

adding cash at a point-of-sale terminal, 

or the cost of purchasing an additional 

card or other device on which cash is 

loaded and then transferred into a 

prepaid account, or any other method a 

consumer may use to load cash into a 

prepaid account. This proposed 

comment would also clarify that if a 

financial institution offers more than 

one method for a consumer to load cash 

into the prepaid account, proposed 

§ 1005.18(b)(2)(i)(C) would require that 

it only disclose the highest fee on the 

short form. The Bureau notes that 

consumers may incur additional third 

party fees when loading cash onto a 

card or other access device; these 

expenses are typically not controlled by 

the financial institution or program 

manager and instead are charged by the 

entity selling the cash reload product. 

Such fees would not be incorporated 

into the proposed short form disclosure. 

See proposed comment 

§ 1005.18(b)(2)(i)(C)–2. The Bureau 

notes, however, that, pursuant to 

proposed comment 18(b)(2)(ii)(A)–3, 

fees imposed by third parties acting as 

an agent of the financial institution 

would always have to be disclosed in 

the long form. 

The Bureau considered requiring 

financial institutions to list on the short 

form disclosure both cash reload 

methods discussed in proposed 

comment 18(b)(2)(i)(B)(4)–1: Loads via a 

point-of-sale terminal and loads via an 

additional card or other device. The 

Bureau recognizes that many prepaid 

accounts make both methods available 

to consumers and only allowing 

providers to list the fee for the method 

that imposes the highest fee could 

confuse consumers about which 

methods are available, and inhibit their 

ability to accurately estimate the fees 

they will incur based on the method 

they most commonly utilize. The 

Bureau, however, believes it is 

important to limit the amount of 

information on the short form disclosure 

to maintain its simplicity in order to 

facilitate consumer understanding of the 

information that is included. Further, in 

testing, the Bureau found that 

participants consistently understood a 

disclosure containing a single cash 

reload fee, and therefore the Bureau 

does not believe it is as important to 

include two fees for this fee type. 

Although the Bureau is proposing to 

allow only the highest cash reload fee to 

be disclosed in the short form, however, 

financial institutions would be able to 

use an asterisk or other symbol pursuant 

to proposed § 1005.18(b)(2)(i)(C) 

discussed below (in addition to any 

other part of the packaging material or 

Web site) to indicate when more than 

one method exists for reloading cash 

into a prepaid account. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77160 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

265The Bureau understands that some States bar 

or limit inactivity fees, and nothing in this portion 

of the proposal is meant to preempt any applicable 

State laws. 

266 In testing, several participants mentioned only 

using their prepaid cards occasionally. 

18(b)(2)(i)(B)(5) ATM Balance Inquiry 

Fees 

Directly below the proposed top-line 

disclosure in the short form disclosure, 

the Bureau proposes to include balance 

inquiry fees charged by the financial 

institution for inquiring into the prepaid 

account’s balance at an ATM. 

Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(5) would require 

disclosure of two fees for using an ATM 

to check the balance of a consumer’s 

prepaid account, both within and 

outside of the financial institution’s 

network or a network affiliated with the 

financial institution, using the term 

‘‘ATM balance inquiry’’ or a 

substantially similar term, and ‘‘innetwork’’ or ‘‘out-of-network,’’ or 

substantially similar terms. 

As discussed above regarding 

disclosure of ATM withdrawal fees the 

Bureau believes it is important for 

consumers to know that different fees 

could be imposed when requesting 

balance inquiries at an ATM in a 

financial institution’s network or 

outside of the network. The Bureau, 

however, does believe it is less common 

for consumers to initiate ATM balance 

inquiries transactions compared to 

withdrawals at ATMs, and thus, the 

Bureau is not proposing to include the 

two balance-inquiry fees in the top-line 

of the short form disclosure. 

Nevertheless, the Bureau seeks 

comment on whether consumers incur 

ATM balance inquiry fees frequently 

enough to justify including these fees in 

the top-line of the short form disclosure. 

Proposed comment 18(b)(2)(i)(B)(5)–1 

would clarify that if the fee imposed on 

a consumer for using an ATM in a 

foreign country to check the balance of 

a consumer’s prepaid account is 

different from the fee charged for using 

an ATM within or outside the financial 

institution’s network or a network 

affiliated with the financial institution 

in the United States, a financial 

institution would not disclose the 

foreign ATM balance inquiry fee 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(5), but could be 

required to do so by proposed 

§ 1005.18(b)(2)(i)(B)(8), discussed 

below. 

18(b)(2)(i)(B)(6) Customer Service Fee 

Proposed § 1005.18(b)(2)(i)(B)(6) 

would require disclosure on the short 

form of any fee for calling the financial 

institution or its service provider, 

including an interactive voice response 

system, about a consumer’s prepaid 

accounts using the term ‘‘Customer 

service fee’’ or a substantially similar 

term. The Bureau believes that many 

consumers regularly have issues with 

their prepaid accounts that require 

talking to a customer service agent by 

telephone. The Bureau also believes that 

some providers impose fees for making 

such a call. Additionally, several 

participants in testing reported having 

incurred such customer service fees. For 

these reasons, the Bureau believes that 

the short form disclosure should 

include this fee. This disclosure would 

be required even if the financial 

institution did not charge such a fee. 

See proposed comment 18(b)(2)(i)–1. 

18(b)(2)(i)(B)(7) Inactivity Fee 

Proposed § 1005.18(b)(2)(i)(B)(7) 

would require disclosure of a fee for 

non-use, dormancy, or inactivity on a 

prepaid account, using the term 

‘‘Inactivity fee’’ or a substantially 

similar term, as well as the duration of 

inactivity that triggers a financial 

institution to impose such an inactivity 

fee.265 The Bureau believes that many 

financial institutions charge consumers 

fees when they do not use their prepaid 

account for a specified period of time. 

The Bureau believes disclosure of these 

fees is important insofar as consumers 

sometimes acquire a prepaid account for 

occasional use; such consumers may 

want to know that a particular prepaid 

account product charges fees for 

inactivity.266 Thus, the Bureau is 

proposing that financial institutions 

disclose the existence, duration, and 

amount of inactivity fees, or that no 

such fee will be charged, as part of the 

static portion of the short form 

disclosure. The Bureau notes, however, 

that, as with all the disclosures in the 

short form, the requirement to disclose 

a particular fee type is not an 

endorsement of the practice of imposing 

such a fee. 

The Bureau, however, also believes 

that a lower inactivity fee may correlate 

with a prepaid account product 

imposing a higher monthly periodic fee 

on a consumer. Thus, a consumer who 

uses a prepaid account only 

sporadically, but often enough to not 

reach the dormancy period that would 

trigger the inactivity fee, might actually 

incur higher fees if they shop based on 

the inactivity fee instead of the monthly 

periodic fee. The Bureau considered 

whether the risk of potential confusion 

to a consumer outweighs the benefit of 

including the inactivity fee on the short 

form disclosure, but believes that 

providing consumers with the inactivity 

fee amount and the relevant duration of 

dormancy will allow consumers to make 

an informed choice about which 

prepaid account product is best for their 

usage patterns. 

Proposed comment 18(b)(2)(i)(B)(7)–1 

would clarify that when a financial 

institution is disclosing the inactivity 

fee in the long form disclosure pursuant 

to proposed § 1005.18(b)(2)(ii)(A), a 

financial institution should specify 

whether this inactivity fee is imposed in 

lieu of or in addition to the periodic fee 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1). 

The Bureau seeks comment on all 

aspects of this part of the proposal. 

Specifically, the Bureau seeks comment 

on including the inactivity fee as part of 

the static portion of the short form 

disclosure could confuse consumers, 

and whether it is important to 

communicate the potential relationship 

between inactivity fees and monthly 

periodic fees more clearly on the short 

form disclosure. 

18(b)(2)(i)(B)(8) Incidence-Based Fee 

Disclosures 

In addition to the fee types that all 

financial institutions would have to 

disclose in the static portion of the short 

form pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7), the 

Bureau is proposing that financial 

institutions would also disclose up to 

three additional ‘‘incidence-based’’ fees 

not already disclosed elsewhere on the 

short form that are incurred most 

frequently for that particular prepaid 

account product. If a financial 

institution offers several prepaid 

account products, the incidence-based 

fees analysis would be conducted 

separately for each product, based on 

usage patterns in the prior 12-month 

period. Thus, the incidence-based fees 

provided to a consumer on the short 

form disclosure could vary from one 

product to the next depending on which 

fees consumers incurred most 

frequently for a particular prepaid 

account product. 

The Bureau is proposing this 

disclosure because it is concerned that, 

while the fee types disclosed in the 

static portion of the short form under 

the proposed rule should generally 

include the key fees on most prepaid 

accounts, that list is not comprehensive 

and there could be other fees that 

consumers might incur with some 

frequency. The Bureau is also concerned 

that absent this incidence-based 

disclosure, there is a risk of evasion. For 

example, a financial institution could 

restructure its fee schedule for a prepaid 

account product to make the fees 

disclosed in the static portion of the 


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short form pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7) 

cheaper, knowing they would not be the 

fees that consumers would most 

frequently pay. The Bureau believes that 

requiring financial institutions to 

disclose other fees that are frequently 

paid by consumers will limit the ability 

of financial institutions to evade 

disclosing relevant fee information 

upfront on the short form disclosure. 

Additionally, the Bureau believes that 

the incidence-based portion of the short 

form, though it does mandate a specific 

metric to determine which additional 

fees may be listed, would also provide 

some flexibility to industry participants 

to disclose three more fee types that 

might be particular to their prepaid 

account product and are imposed for 

features that could be appealing to 

consumers. 

Accordingly, the Bureau is proposing 

§ 1005.18(b)(2)(i)(B)(8), which would 

establish a three-part provision to 

determine which incidence-based fees a 

financial institution must include on its 

short form disclosures. First, proposed 

§ 1005.18(b)(2)(i)(B)(8)(I) would require, 

except as provided in proposed 

§ 1005.18(b)(2)(i)(B)(8)(II) or (III), 

disclosure of up to three fees, other than 

any of those disclosed pursuant to 

proposed § 1005.18(b)(2)(i)(B)(1) 

through (7), that were incurred most 

frequently in the prior 12-month period 

by consumers of that particular prepaid 

account product. 

Thus, for existing prepaid account 

products, proposed 

§ 1005.18(b)(2)(i)(B)(8)(I) would require 

that at the same time each year, a 

financial institution assess whether the 

incidence-based fees disclosed pursuant 

to proposed § 1005.18(b)(2)(i)(B)(8)(I) 

were the most frequently incurred fees 

in the prior 12-month period, in 

accordance with the timing 

requirements of proposed § 1005.18(h). 

Proposed § 1005.18(b)(2)(i)(B)(8)(I) 

would further require that the financial 

institution would then have to, if 

necessary and within 90 days, revise the 

incidence-based fees on disclosures 

provided in written or electronic form 

pursuant to proposed § 1005.18(b)(1)(i). 

Disclosures provided on the packaging 

material of prepaid account access 

devices, for example, in retail stores 

pursuant to proposed § 1005.18(b)(1)(ii), 

or in other locations, must be revised 

when the financial institution is 

printing new packaging material for its 

prepaid account access devices, in 

accordance with the timing 

requirements in proposed § 1005.18(h). 

Proposed § 1005.18(b)(2)(i)(B)(8)(I) 

would also require that all disclosures 

provided pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8)(I) and created 

after a financial institution makes an 

incidence-based fee assessment and 

determines changes are necessary, 

would have to include such changes in 

accordance with the timing 

requirements in proposed § 1005.18(h). 

This final requirement in proposed 

§ 1005.18(b)(2)(i)(B)(8)(I) would apply to 

all disclosures, whether in written or 

electronic form, or on the packaging 

material of a prepaid account product 

sold in a retail store. 

The Bureau believes that it is 

important for the incidence-based fee 

disclosure to list a prepaid account 

product’s most commonly incurred fees. 

The Bureau, however, recognizes that 

financial institutions would need time 

to update disclosures upon assessing 

whether any changes to the incidencebased fee disclosure are needed, 

although it expects such changes to be 

infrequent. The Bureau believes such 

updates will be easier for disclosures 

provided in electronic form or in 

written form outside of a retail setting. 

Thus, the Bureau is proposing that 

financial institutions would have to 

make written and electronic updates 

within 90 days to ensure that consumers 

receive up-to-date incidence-based fee 

disclosures. The Bureau, however, 

recognizes that it could be more 

complicated and time-consuming for 

financial institutions to make updates to 

packages used to market prepaid 

accounts in retail stores, and is therefore 

proposing that financial institutions 

would be able to implement updates on 

packaging material whenever they are 

printing new stock during normal 

inventory cycles. The Bureau 

acknowledges that this proposal could 

result in some disclosures for the same 

prepaid account product (i.e., electronic 

disclosures provided online or printed 

disclosures provided in person without 

the use of packaging) having different 

incidence-based fee disclosures on the 

short forms provided on retail store 

packaging material. The Bureau, 

however, does not believe that this 

discrepancy will significantly impact a 

consumer’s decision regarding which 

prepaid account product to acquire 

since consumers will most likely 

compare the disclosures for two distinct 

products, and not consider disclosures 

for the same prepaid account product 

found in different acquisition channels. 

The Bureau also recognizes that 

allowing financial institutions to 

continue to use packaging with out-ofdate incidence-based fee disclosure in 

retail stores could reduce the 

effectiveness of this disclosure. The 

Bureau, however, believes that imposing 

a cut-off date after which sale or 

distribution of out-of-date retail 

packages would be prohibited could be 

overly burdensome. Nevertheless, the 

Bureau seeks comment about whether 

not including such a cut-off date would 

negatively impact consumers in a 

significant way. 

Though the Bureau is not proposing 

specific package update requirements 

for the incidence-based fee disclosure, 

the Bureau notes, however, that 

financial institutions generally must 

ensure all other fee types and amounts 

disclosed pre-acquisition, whether on 

retail packaging, online, or through 

other means, are accurate at the time 

such disclosures are provided. The 

Bureau, therefore, does not believe that 

a general disclosure update requirement 

is necessary for non-incidence-based fee 

disclosures provided before a consumer 

acquires a prepaid account, as a 

financial institution must continue to 

honor whatever fee schedule it provides 

a consumer. 

The Bureau is also proposing to adopt 

several comments to provide additional 

guidance on incidence-based fee 

disclosures. First, proposed comment 

18(b)(2)(i)(B)(8)–1 would clarify how 

many additional fees a financial 

institution must disclose pursuant to 

proposed § 1005.18(b)(2)(i)(B)(8)(I) and 

when disclosure of fewer than three 

incidence-based fees would be 

permitted. Specifically, the proposed 

comment would explain that if a 

prepaid account product only has one, 

two or three fees not already disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7), 

proposed § 1005.18(b)(2)(i)(B)(8) would 

require disclosure of these fees 

assuming it was incurred by a consumer 

at least once during the prior 12-month 

period. Proposed comment 

18(b)(2)(i)(B)(8)–1 would also clarify 

that, conversely, if a prepaid account 

has four fees not already disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7), 

proposed § 1005.18(b)(2)(i)(B)(8)(I) 

would require disclosure of the three 

fees most frequently incurred. Finally, 

the proposed comment would clarify 

that if the disclosures made pursuant to 

proposed § 1005.18(b)(2)(i)(B)(1) 

through (7) capture a prepaid account 

product’s entire fee schedule, a financial 

institution has no obligation to disclose 

additional information on the short form 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8)(I). 

The Bureau also proposes to add 

comment 18(b)(2)(i)(B)(8)–2, which 

would clarify how to determine which 

fees were incurred most frequently in 

the prior 12-month period. Specifically, 

the proposed comment would explain 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77162 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

267See section-by-section analysis of 

§ 1005.18(b)(3)(iii)(B) and comment 18(b)(3)(iii)(B)– 

1 for a more detailed discussion of how the Bureau 

defines multiple service plans for prepaid account 

products under the proposed pre-acquisition 

disclosure regime. 

that incidence should be considered on 

a total basis across all consumers using 

a particular prepaid account product. 

The proposed comment would further 

clarify that, for example, if a given 

consumer incurred one fee type ten 

times during the prior 12-month period, 

all ten instances of that individual 

consumer’s paying such a fee would be 

factored into the total incidence 

calculation for that fee type. The 

proposed comment would also clarify 

that if a financial institution offers more 

than one prepaid account product, it 

would have to consider a consumers’ fee 

incidence for each product separately 

and not consolidate the fee incidence 

across all of its prepaid account 

products. Finally, the proposed 

comment would clarify that the price for 

purchasing or activating a prepaid 

account could be an incidence-based fee 

for purposes of proposed 

§ 1005.18(b)(2)(i)(B)(8). 

Proposed comment 

18(b)(2)(i)(B)(8)(I)–3 would provide 

guidance on the relationship between 

proposed § 1005.18(b)(2)(i)(B)(8)(I) and 

the proposed effective date regime in 

proposed § 1005.18(h). Specifically, the 

proposed comment would explain that 

§ 1005.18(h)(2) further requires a 

financial institution to make its first 

incidence-based fee assessment in time 

to ensure that all prepaid accounts and 

related packaging material, access 

devices, and physical other materials, 

that are offered, sold, or otherwise made 

available to consumers in connection 

with a prepaid account include the 

incidence-based disclosure within 12 

months. The proposed comment would 

also clarify that if a financial institution 

creates new disclosures within nine 

months of the effective date, those 

disclosures would need to include the 

appropriate incidence-based fee 

disclosure in accordance with proposed 

§ 1005.18(h)(1). Proposed comment 

18(b)(2)(i)(B)(8)(I)–4 would explain how 

to disclose incidence-based fees for 

those prepaid account products that 

give consumers the opportunity to 

choose among multiple service plans 

with different fee schedules.267

Specifically, the proposed comment 

would explain that when disclosing 

multiple service plans on a short form 

disclosure as permitted by proposed 

§ 1005.18(b)(3)(iii)(B) (discussed below), 

a financial institution must consider the 

frequency with which fees are incurred 

from all of those plans as a whole to 

determine which three additional fees to 

disclose pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8)(I). The Bureau 

recognizes that it is possible the most 

commonly incurred fees among all of 

the multiple service plans could also be 

one of the fees that varies in amount 

depending on the service plan selected 

by a consumer. But the Bureau believes 

it is unlikely because the short form will 

capture most fees charged by most 

prepaid account providers, and the 

multiple service plans, when available, 

will only have those plans fee schedules 

vary based on a couple of fee types— 

typically, the periodic fee and the per 

purchase fees, both of which are already 

required to be disclosed for each service 

plan. Thus, the Bureau believes it is 

unlikely that one of the remaining fees 

that could qualify for the incidencebased fee requirement would vary 

across service plans. The Bureau, 

however, seeks comment on whether it 

is actually the case that most prepaid 

account products offering multiple 

service plans only vary based on a 

couple of fee types. If, however, the 

financial institution is disclosing the fee 

schedule for only the service plan in 

which a consumer is enrolled by default 

upon acquiring the prepaid account, the 

proposed comment would further 

clarify that it would consider only the 

fee incidence for that service plan . The 

proposed comment would also reference 

that proposed comment 18(b)(3)(iii)(B)– 

1 provides guidance on what would 

constitute multiple service plans. 

Proposed comment 18(b)(2)(i)(B)(8)(I)–5 

would explain that proposed 

§ 1005.18(b)(2)(i)(B)(8)(I) would not 

require that financial institutions 

immediately destroy existing inventory 

in retail stores or elsewhere in the 

distribution channel, to the extent the 

disclosures on such packaging materials 

are otherwise accurate, to comply with 

proposed § 1005.18(b)(2)(i)(B)(8)(I). The 

proposed comment would further 

clarify that for example, if a financial 

institution determines that an 

incidence-based fee listed on a short 

form disclosure in a retail store is no 

longer one of the most commonly 

incurred fees and makes the appropriate 

change when printing new disclosures, 

any packages in retail stores that contain 

the previous incidence-based fee 

disclosure could still be sold and the 

financial institution would comply with 

proposed § 1005.18(b)(2)(i)(B)(8)(I). 

18(b)(2)(i)(B)(8)(II). Recognizing that 

new prepaid products have no prior fee 

data history, the Bureau is also 

proposing additional requirements to 

address such circumstances. Thus, 

proposed § 1005.18(b)(2)(i)(B)(8)(II) 

would require that, if a particular 

prepaid account product was not offered 

by the financial institution during the 

prior 12-month period, the financial 

institution would have to disclose up to 

three fees other than any of those fees 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7) that 

it reasonably anticipates will be 

incurred by consumers most frequently 

during the next 12-month period. 

Proposed § 1005.18(b)(2)(i)(B)(8)(II) 

would also provide that the incidencebased fee disclosures for newly-created 

prepaid account products would have to 

be included on all disclosures created 

for the prepaid account product, 

whether the disclosure is written, 

electronic, or on the packaging material 

of a prepaid account product sold in a 

retail store, in accordance with the 

timing requirements in proposed 

§ 1005.18(h). Although financial 

institutions do not have actual fee data 

for new prepaid account products, the 

Bureau believes that they nonetheless 

would have a reasonable expectation as 

to which fees will be incurred most 

frequently. Thus, proposed 

§ 1005.18(b)(2)(i)(B)(8)(II) would require 

institutions, for those prepaid account 

products without prior fee data, to 

estimate in advance the fees that should 

be disclosed in the incidence-based 

portion of the short form disclosure. 

The Bureau proposes to add 

commentary and provide examples 

explaining how to apply proposed 

§ 1005.18(b)(2)(i)(B)(8)(II) in situations 

where a financial institution has 

inadequate data regarding a prepaid 

account’s fee history. Specifically, 

proposed comment 18(b)(2)(i)(B)(8)(II)–1 

would explain that the provider should 

use available data to reasonably 

anticipate what fees should be 

disclosed. The proposed comment 

would also provide guidance about 

what is considered a new prepaid 

account product. Specifically, the 

proposed comment would clarify that, 

for example, if a financial institution 

changes the name of its prepaid account 

product and develops a new marketing 

and distribution plan but does not alter 

the prepaid account’s fee schedule, this 

would be considered a new prepaid 

account product for purposes of 

proposed § 1005.18(b)(2)(i)(B)(8)(II); 

however, insofar as the fee schedule 

remains unchanged, and the financial 

institution reasonably anticipates that 

the fees it previously disclosed pursuant 

to proposed § 1005.18(b)(2)(i)(B)(8)(I) 

would remain unchanged, the financial 

institution should continue to disclose 

those fees for an additional 12-month 

period. 


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268The Bureau notes, however, that this fee, 

when applicable, would be listed in the long form 

disclosure pursuant to proposed 

§ 1005.18(b)(2)(ii)(A). 

1005.18(b)(2)(i)(B)(8)(III). The Bureau 

is also proposing to add additional 

requirements for when a particular 

prepaid account product’s fee schedule 

changes. Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(8)(III) would 

require that if a financial institution 

changes an existing prepaid account 

product’s fee schedule at any point after 

assessing its incidence-based fee 

disclosure pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8)(I), it would have 

to determine whether, after making such 

changes, it reasonably anticipates that 

the existing incidence-based fee 

disclosure would represent the most 

commonly incurred fees for the 

remainder of the current 12-month 

period. If the financial institution 

reasonably anticipates that the current 

incidence-based fee disclosure would 

not represent the most commonly 

incurred fees for the remainder of the 

current 12-month period, it would have 

to update the incidence-based fee 

disclosure within 90 days for 

disclosures provided in written or 

electronic form, in accordance with the 

timing requirements in proposed 

§ 1005.18(h). 

Proposed § 1005.18(b)(2)(i)(B)(8)(III) 

would also state that disclosures 

provided on a prepaid account 

product’s packaging material, for 

example, in retail stores pursuant to 

proposed § 1005.18(b)(1)(ii), or in other 

locations, must be revised when the 

financial institutions is printing new 

packaging material, in accordance with 

the timing requirements of proposed 

§ 1005.18(h). Finally, proposed 

§ 1005.18(b)(2)(i)(B)(8)(III) would also 

state that all disclosures provided 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8)(III) and created 

after a financial institution makes an 

incidence-based fee assessment and 

determines changes are necessary must 

include such changes, in accordance 

with the timing requirements of 

proposed § 1005.18(h). Proposed 

comment 18(b)(2)(i)(B)(8)(III)–1 would 

also provide several examples of 

demonstrate how different changes to an 

existing prepaid account product could 

impact the incidence-based fee 

disclosure. Specifically, the proposed 

comment would explain that, for 

example, if a financial institution 

changes its card replacement fee from 

$3.00 to $4.00 in May after already 

assessing in January whether the 

incidence-based fees need to be updated 

for the current 12-month period, this 

change in the fee schedule would 

subject the prepaid account product to 

proposed § 1005.18(b)(2)(i)(B)(8)(III). 

The proposed comment would further 

explain that, in this example, the 

financial institution would assess 

whether it reasonably anticipates that 

the existing incidence-based fee 

disclosure still lists what will be the 

most commonly incurred fees from May 

until the following January when the 

financial institution would conduct its 

next, annual incidence-based fees 

assessment. 

The Bureau notes that its proposed 

model forms do not isolate or identify 

these incidence-based fees in a way that 

distinguishes them from the other fees 

disclosed under proposed 

§ 1005.18(b)(2)(i)(B)(5)–(7) that are not 

required to be in the top-line. Thus, a 

consumer comparing two different 

prepaid account products may see some 

types of fees that are the same (the seven 

standardized fees disclosed pursuant to 

proposed § 1005.18(b)(2)(i)(B)(1)–(7)) 

and may see some that differ (the three 

incidence-based fees disclosed pursuant 

to proposed § 1005.18(b)(2)(i)(B)(8)). 

During its consumer testing, the Bureau 

tested language identifying the 

incidence-based fees as such, but this 

language was often ignored or 

misunderstood by participants. 

Nevertheless, the Bureau recognizes that 

some variation on the short form fee 

disclosure could lead to confusion, and 

thus the Bureau seeks comment on 

whether the model forms should more 

clearly indicate to a consumer the 

meaning of the incidence-based fees. 

The Bureau also recognizes that the 

proposed procedure for determining and 

disclosing incidence-based fees could be 

complicated in some instances, 

particularly for new prepaid accounts or 

those with revised fee schedules. 

Further, the Bureau acknowledges that 

basing the incidence-based fees 

determination on fee incidence might 

not make sense for all prepaid products. 

Thus, the Bureau seeks comment on all 

aspects of this incidence-based fees 

proposal. Specifically, the Bureau 

solicits feedback on whether other 

measures, such as fee revenue, would be 

better measures of the most important 

remaining fees to disclose to consumers 

considering a prepaid account. 

Relatedly, the Bureau seeks comment on 

whether there should be a de minimis 

threshold below which changes to the 

incidence ranking would not require 

form revisions, and if so, what that 

threshold should be. Such comments 

would be most useful if aided by data 

supporting the suggested threshold. The 

Bureau also seeks comment on how 

often financial institutions should be 

required to update the incidence-based 

fees disclosures, whether financial 

institutions should have to all conduct 

their incidence-based fee assessment at 

the same time in the 12-month period, 

and whether the timing requirements for 

updates to electronic and written 

disclosures versus those provided on 

retail packaging should be different. 

Additionally, under the current 

proposal, a financial institution would 

have to consider the cost of purchasing 

or activating the prepaid account as a 

fee when determining its incidencebased fee disclosure, but the Bureau is 

not otherwise mandating its disclosure 

in the short form disclosure.268 The 

Bureau also seeks comment on whether 

the cost to purchase the account, as a 

one-time fee, should be excluded from 

the incidence-based fee disclosure or 

whether it should be mandated as part 

of the static portion of the short form. 

The Bureau also solicits comment on 

whether there are alternate approaches 

for disclosing key fees not captured by 

the standardized portion of the short 

form that recognize how products may 

vary and that would prevent evasion of 

the short form’s requirements. 

18(b)(2)(i)(B)(9) Overdraft Services and 

Other Credit Features 

The Bureau is proposing that the short 

form disclosure would also have to 

include a statement indicating whether 

the prepaid account product could offer 

a credit feature to a consumer. 

Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(9) would require a 

statement on the short form that creditrelated fees may apply, in a form 

substantially similar to proposed Model 

Form A–10(c), if, at any point, a credit 

plan that would be a credit card account 

under Regulation Z, 12 CFR part 1026 

may be offered in connection with the 

prepaid account. Proposed 

§ 1005.18(b)(2)(i)(B)(9) would also state 

that such a credit plan could be 

accessed by a credit card under 

Regulation Z, 12 CFR 1026.2(a)(15)(i), 

that also is an access device that 

accesses the prepaid account, or the 

credit plan could be accessed by an 

account number that is a credit card 

under Regulation Z, where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor 

offering the plan. Finally, proposed 

§ 1005.18(b)(2)(i)(B)(9) would state that 

if neither of these two types of credit 

plans would be offered in connection 

with the prepaid account at any point, 

a financial institution would have to 

disclose on the short form a statement 

that no overdraft or credit-related fees 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77164 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

269 2014 Pew Study, at 1. 

270For a more detailed discussion of the Bureau’s 

approach to credit features offered on prepaid 

accounts, see the introduction to the TILA 

discussion. 

would be charged, in a form 

substantially similar to proposed Model 

Form A–10(d) in Appendix A. 

In the Bureau’s consumer testing, 

many participants expressed a desire to 

avoid using any financial products that 

offer overdraft. Further, the 2014 Pew 

Survey indicates that many consumers 

turn to prepaid cards specifically to 

avoid incurring any overdraft 

charges.269 The Bureau therefore 

believes that if a financial institution 

may offer a credit feature, then a 

consumer should be on notice of this 

possibility before acquiring the prepaid 

account. The Bureau believes that 

placing such notice on the short form 

would allow a consumer to decide 

whether they want to acquire a product 

that may offer credit, or whether they 

would prefer a product that would not 

offer credit, which, when applicable 

would also be disclosed in a statement 

on the short form disclosure. Without 

such a notice, the Bureau believes that 

consumers may not have adequate 

information to decide which prepaid 

product is best for them. The Bureau 

recognizes, however, that receiving 

notice about credit features on the short 

form disclosure might be confusing to 

consumers, since the Bureau is 

proposing to prohibit financial 

institutions from offering credit features 

to prepaid account holders until they 

have held an account for at least thirty 

days, and not all account holders would 

qualify for such credit features.270 See 

proposed §§ 1005.18(g) and 1026.12(h). 

The Bureau, however, believes that the 

importance of alerting all consumers as 

to whether a prepaid account product 

could offer credit features outweighs 

any risk of confusion. The Bureau 

nevertheless seeks comment on all 

aspects of this part of the proposal, and, 

in particular, whether including notice 

of credit features on the short form 

disclosure is the proper approach. 

Proposed comment (b)(2)(i)(B)(9)–1 

would explain that the statement 

indicating whether a prepaid account 

product offers credit plans to a 

consumer would have to be provided on 

all short form disclosures, regardless of 

whether some consumers would be 

solicited to enroll in such a plan, if such 

a plan could be offered. 

The Bureau solicits comment on all 

aspects of the requirement to include a 

statement on the availability of credit 

features, including whether such 

statements should be required to be 

disclosed on the short form, and what 

statements would be most helpful for 

consumers in deciding between 

products that offer credit features and 

those that do not. 

18(b)(2)(i)(B)(10) Statement Regarding 

Other Fees 

In addition to disclosure of specific 

fee types and a credit feature, the short 

form would also require, in proposed 

§ 1005.18(b)(2)(i)(B)(10) disclosure of 

certain information regarding additional 

fees that a financial institution could 

impose on a prepaid account that are 

not captured in the short form. 

Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(10) would require 

financial institutions to include on the 

short form a statement regarding the 

number of fees other than those listed in 

the short form pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (8) that 

are listed on the long form disclosure 

pursuant to proposed 

§ 1005.18(b)(2)(ii)(A), in a form 

substantially similar to the clause set 

forth in appendix A–10(a) through (d). 

The Bureau believes that because the 

short form may only include a subset of 

a prepaid account’s fees, it would be 

important for consumers to understand 

when more fees might apply. As noted 

earlier, many participants in the 

Bureau’s consumer testing reported 

finding out about fees only after they 

incur them. The Bureau believes that 

including a statement on the short form 

disclosure indicating exactly how many 

additional fees could apply to encourage 

consumers to seek out more information 

about a prepaid account before 

acquisition. 

The Bureau recognizes, however, that 

this statement might suggest any other 

fees that apply are punitive when in fact 

such fees might be charged for services 

a consumer could find beneficial, and 

that might not be offered on competing 

cards. Nevertheless, the Bureau solicits 

comment on whether including this 

type of statement on the short form 

would be useful to consumers or if, 

instead, it might interfere with their 

ability to make an informed choice 

among prepaid accounts. 

Unlike the incidence-based fees, the 

Bureau does not believe it is necessary 

to propose provisions about updating 

the statement regarding other fees. 

Pursuant to proposed § 1005.18(f), a 

financial institution would have to 

include the long form disclosure in the 

terms and conditions provided as part of 

a prepaid account’s terms and 

conditions. Thus, any updates that are 

made to the fees disclosed in the long 

form would require an overhaul of all of 

the disclosures for a given prepaid 

account product, which the Bureau 

believes is unlikely to occur. The 

Bureau also seeks comment, however, 

on whether guidance around updating 

this statement is necessary. 

Proposed comment 18(b)(2)(i)(B)(10)– 

1 would provide examples of how to 

comply with proposed 

§ 1005.18(b)(2)(i)(B)(10). Specifically, 

the proposed comment would clarify 

that if a financial institution charges a 

fee for issuing a consumer a 

replacement card, but this fee is not 

among the top three fees its consumers 

incurred most frequently during the 

prior 12-month period and therefore 

would not be disclosed pursuant to 

proposed § 1005.18(b)(2)(i)(B)(8), and if 

this would be the only fee the financial 

institution would not be required to 

disclose elsewhere on the short form, 

then the financial institution would 

include a statement on the short form 

disclosure that it may charge one other 

fee not otherwise listed, in a form 

substantially similar to the language set 

forth in the Model Forms in proposed 

appendix A–10(a) through (d) of this 

part. The proposed comment would also 

provide an example that if a financial 

institution does not charge any fees 

other than those required to be 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(1) through (8), the 

financial institution may, but is not 

required to, include a statement on the 

short form disclosure that it does not 

charge any other fees not listed on the 

short form disclosure. 

Proposed comment 18(b)(2)(i)(B)(10)– 

2 would provide guidance about how to 

count the total number of fees to 

disclose pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(10). Specifically, 

the proposed comment would clarify 

that if the fee a financial institution 

imposes might vary, even if the 

variation is based on a consumer’s 

choice of how to utilize a particular 

service, the financial institution must 

count each variation of the fee that 

might be imposed as a separate fee. The 

proposed comment would further 

explain that for example, if a financial 

institution imposes one fee to issue a 

replacement card to the consumer using 

standard mail service, but charges a 

different (and perhaps higher) fee if the 

consumer requests expedited delivery of 

the replacement card, and neither of 

these fees are incurred frequently 

enough to be disclosed as an incidencebased fee pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(8), then the 

financial institution would still count 

each of these fees separately when 

determining the total number of fees to 

disclose pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(10). Even if a fee 


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271An SMS short code is a group of numbers one 

can send as a text message using a mobile phone 

and receive a text message in response. 

could be waived under certain 

conditions, the proposed comment 

clarifies that it would still be counted to 

comply with proposed 

§ 1005.18(b)(2)(i)(B)(10). 

Nevertheless the Bureau seeks 

comment on whether this guidance is 

sufficient to enable compliance with 

§ 1005.18(b)(2)(i)(B)(10). The Bureau 

also solicits comment on whether its 

proposed approach to addressing fee 

amount variations when counting the 

number of other fees could actually be 

misleading to the consumer. 

18(b)(2)(i)(B)(11) Telephone Number 

and Web site 

Proposed § 1005.18(b)(2)(i)(B)(11) 

would require disclosure, in a form 

substantially similar to the language set 

forth in the Model Forms in proposed 

appendix A–10(c) and (d), of a 

telephone number and the unique URL 

of a Web site that a consumer may enter 

to access the long form disclosure 

required under proposed 

§ 1005.18(b)(2)(ii). Proposed 

§ 1005.18(b)(2)(i)(B)(11) would also state 

that this disclosure would be required 

only when a financial institution 

chooses not to provide a written form of 

the disclosures required by proposed 

§ 1005.18(b)(2)(ii) before a consumer 

acquires a prepaid account at a retail 

store as described in proposed 

§ 1005.18(b)(1)(ii). The Bureau believes 

that using either of these methods, a 

consumer should be able to access 

information about the fees listed in the 

long form disclosure, and any 

conditions on the applicability of those 

fees, as described in the section-bysection analysis of proposed 

§ 1005.18(b)(2)(ii)(A). As discussed 

above, the Bureau believes that if a 

consumer is not receiving the long form 

disclosure before acquisition in a retail 

store, it is important that they are still 

able to access the information. The 

Bureau also believes it is important that 

the URL of the Web site be unique to 

ensure that a consumer can directly 

access the same type of stand-alone long 

form that could be required to be 

provided pursuant to proposed 

§ 1005.18(b)(1)(i) in written or electronic 

form before a consumer acquires a 

prepaid account. 

Proposed comment 18(b)(2)(i)(B)(11)– 

1 would provide further details about 

the telephone number that would have 

to be included on the short form when 

a financial institution does not provide 

the long form disclosure before a 

consumer acquires a prepaid account. 

Specifically, proposed comment 

18(b)(2)(i)(B)(11)–1 would state that a 

financial institution must make the long 

form disclosure described in proposed 

§ 1005.18(b)(2)(ii) accessible to a 

consumer orally via a telephone number 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(11) when a 

financial institution chooses not to 

provide a written form of these 

disclosures before a consumer acquires 

a prepaid account, as described in 

proposed § 1005.18(b)(2)(i)(B)(11). The 

proposed comment would further 

clarify that for example, a financial 

institution could use a customer service 

agent or an interactive voice response 

system, to provide this disclosure. 

Proposed comment 18(b)(2)(i)(B)(11)–1 

would also explain that a consumer 

must not incur a fee to call this 

telephone number before acquiring a 

prepaid account. The proposed 

comment would further clarify that the 

telephone number disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(11) could be the 

same as the customer service number for 

which a financial institution impose a 

fee on a consumer to use for other 

purposes, but a consumer could not 

incur any customer service or other 

transaction fees when calling this 

number to access the information set 

forth in proposed § 1005.18(b)(2)(ii) 

before acquiring a prepaid account in 

retail store. 

The Bureau considered requiring that 

this number be toll-free, but ultimately 

decided that having a toll-free number 

is less important to consumers, most of 

whom use mobile phones and do not 

incur additional fees for making long 

distance calls, and such a requirement 

could impose a burden on smaller 

prepaid account providers because they 

would perhaps have to maintain a 

separate toll-free line just for their 

prepaid account products. The Bureau 

notes that some card networks may 

require financial institutions to 

maintain toll-free lines, and therefore 

numbers disclosed in such cases will 

likely be toll-free. 

Proposed comment 18(b)(2)(i)(B)(11)– 

2 would clarify that 

§ 1005.18(b)(2)(i)(B)(11) requires 

disclosure of a unique URL that must 

take consumers to the Web page where 

disclosures described in 

§ 1005.18(b)(2)(ii) may be viewed when 

a financial institution chooses not to 

provide a written form of those 

disclosures before a consumer acquires 

a prepaid account, as described in 

proposed § 1005.18(b)(1)(ii). The 

proposed comment would further 

clarify that an entered URL that requires 

a consumer to navigate various other 

Web pages before viewing the long form 

disclosure would not comply with 

proposed § 1005.18(b)(2)(i)(B)(11). The 

Bureau believes that consumers make 

acquisition decisions in retail stores 

relatively quickly—often while 

standing—and should not have to 

navigate different links to access the 

Web page that contains the long form 

disclosure. The Bureau has also 

considered requiring financial 

institutions to use shortened URLs on 

the short form disclosure provided in 

retail stores to decrease the amount of 

time required to access the long form 

disclosure. The Bureau seeks comment 

on whether such a requirement 

regarding the URL is necessary. 

The Bureau also considered whether 

to propose to require financial 

institutions to disclose an SMS short 

code, which might be easier to type than 

a URL, that consumers could text to 

receive the URL that links directly to the 

long form disclosure.271 The Bureau, 

however, decided against including this 

method for several reasons. First, 

sending a text message using an SMS 

short code would still require that 

consumers have a mobile phone that is 

capable of sending text messages and 

that a consumer receives adequate 

internet reception when in a retail store. 

Thus, the Bureau does not believe that 

an SMS short code would broaden the 

spectrum of consumers who could 

access the long form disclosure when in 

a retail store, and it could impose an 

additional cost on consumers who incur 

fees from their mobile carriers for 

receiving text messages. Further, the 

Bureau did not believe that an SMS 

short code would save a consumer who 

wants to access the long form disclosure 

an appreciable amount of time. The 

Bureau also believed that there could be 

security concerns involved with offering 

disclosures via SMS. The Bureau has 

also considered, but is not requiring, 

that a quick response (QR) code be 

included in the short form. Some 

Prepaid ANPR commenters suggested 

QR codes as another method for 

accessing information. Although 

potentially useful, a QR code would 

require a substantial amount of space on 

the small short form and, the Bureau 

believes, QR code adoption remains 

low. 

The Bureau seeks comment on its 

proposal to disclose a telephone number 

and the unique URL of a Web site on the 

short form disclosure when the long 

form disclosure is not provided preacquisition in retail stores, and whether 

there are other methods the Bureau 

should consider disclosing on the short 

form. The Bureau also seeks comment 

on whether providing a SMS code or QR 

code on the short form would increase 


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272 73 FR 67155, 67157 (Nov. 13, 2008). 

273See Study of Prepaid Account Agreements, at 

27–28 and tbl. 13. In addition, the Bureau has 

observed that some GPR card providers disclose the 

existence of pass-through deposit insurance 

coverage or that the issuing bank is an FDIC-insured 

institution on their retail packaging, often quite 

prominently. The Bureau’s Study of Prepaid 

Account Agreements, however, did not examine 

pass-through insurance statements made on GPR 

cards’ retail packaging. Likewise, the Study did not 

examine pass-through insurance statements made 

on prepaid programs’ other marketing materials or 

on their Web sites. See id. 274See ICF Report, at 10. 275The Bureau notes, however, that despite 

believing that FDIC insurance could ‘‘protect’’ 

funds held in a prepaid account, no testing 

participants mentioned FDIC insurance when asked 

to interpret the statement ‘‘Register your card to 

protect your money,’’ which would be disclosed 

pursuant to proposed § 1005.18(b)(2)(i)(B)(12). See 

ICF Report, at 5. 

the number of consumers who would be 

willing or able to access the long form 

disclosure pre-acquisition in a retail 

store. 

18(b)(2)(i)(B)(12) Statement Regarding 

Registration 

The Bureau is also proposing that a 

statement regarding the importance of 

registering the prepaid account with the 

financial institution be included on the 

short form disclosure. Specifically, 

proposed § 1005.18(b)(2)(i)(B)(12) would 

require a statement that communicates 

to a consumer that a prepaid account 

must be registered with a financial 

institution or service provider in order 

for the funds loaded onto the account to 

be protected, in a form substantially 

similar to the clause included on 

proposed Model Forms A–10(a) through 

(d). 

As discussed in the section-by-section 

analysis of proposed § 1005.18(e)(3), 

registration typically means that a 

consumer provides identifying 

information such as name, address, date 

of birth, and Social Security Number or 

other government-issued identification 

number so that the financial institution 

can identify the cardholder and verify 

the cardholder’s identity. The Bureau is 

proposing to add this statement because 

many consumer protections set forth in 

this proposal would not take effect until 

a consumer registers an account. For 

example, under proposed 

§ 1005.18(e)(3), a consumer would not 

be entitled to error resolution rights or 

protection from unauthorized 

transactions until after registering the 

prepaid account. The Bureau believes 

that this is an important protection 

insofar as unregistered prepaid accounts 

are like cash—once lost, funds may be 

difficult or impossible to protect or 

replace because the financial institution 

may not know who is the rightful 

cardholder. 

The Bureau, however, recognizes that 

in some acquisition scenarios, for 

example, government benefit accounts, 

payroll card accounts, or cards used to 

disburse financial aid to students, this 

type of statement might be less useful 

because consumers must register with 

the government agency, employer, or 

institution of higher education, in order 

to acquire the account. The Bureau 

therefore solicits comment on whether 

the short form disclosure provided to 

consumers pre-acquisition should 

always include this statement. 

18(b)(2)(i)(B)(13) Statement Regarding 

FDIC (or NCUSIF) Insurance 

The Bureau is proposing to address 

pass-through deposit (and share) 

insurance in proposed 

§ 1005.18(b)(2)(i)(B)(13). As discussed 

above, the FDIC, among other things, 

protects funds placed by depositors in 

insured banks and savings associations; 

the NCUA provides a similar role for 

funds places in credit unions. As 

explained in the FDIC’s 2008 General 

Counsel Opinion No. 8, the FDIC’s 

deposit insurance coverage will ‘‘pass 

through’’ the custodian to the actual 

underlying owners of the deposits in the 

event of failure of an insured institution, 

provided certain specific criteria are 

met.272

In response to the Prepaid ANPR, 

many consumer advocacy group 

commenters suggested that the Bureau 

require that pass-through deposit (or 

share) insurance cover all funds loaded 

into prepaid accounts, while many 

industry group commenters suggested 

that the Bureau propose clear disclosure 

of whether a prepaid product carries 

FDIC insurance or not. 

The Bureau believes it is not always 

easy to determine or explain whether 

FDIC or NCUSIF pass-through deposit 

or share insurance would apply to a 

particular prepaid account. Thus, as is 

discussed below, the Bureau is 

proposing disclosure be made regarding 

FDIC or NCUSIF insurance in only 

limited situations. In the Bureau’s Study 

of Prepaid Account Agreements, the 

Bureau found that 65.85 percent of all 

account agreements reviewed stated that 

cardholder funds were protected by 

FDIC deposit (or NCUSIF share) 

insurance (this includes agreements that 

explained insurance coverage depends 

on card registration and/or that it only 

applies to funds held by a bank or credit 

union in a pooled account associated 

with the program). Of the remaining 

agreements, 17.23 percent implied that 

the program was FDIC or NCUSIF 

insured by stating that the issuer is an 

FDIC or NCUSIF-insured institution, but 

that did not address FDIC or NCUSIF 

insurance coverage for the program. A 

small number of agreements, 6.15 

percent of those reviewed, did not 

address FDIC or NCUSIF insurance 

coverage for the program. For the latter 

two categories of programs, it is possible 

that such programs are in fact set up to 

be eligible for pass-through deposit (or 

share) insurance, but it was not possible 

to tell from reviewing the program’s 

account agreement. Finally, 10.77 

percent of agreements explicitly stated 

that the program was not insured.273

In its consumer testing, the Bureau 

observed that some participants 

misunderstood the scope of the 

protections FDIC pass-through deposit 

insurance actually provides for prepaid 

accounts. During the consumer focus 

groups, for example, participants were 

asked if they had heard of FDIC deposit 

insurance and how it related to their 

GPR cards. Nearly all participants said 

they had heard of FDIC deposit 

insurance, and many consumers 

believed the funds on their GPR cards 

were FDIC-insured.274 When consumers 

were asked to explain what it meant that 

their GPR card had FDIC deposit 

insurance, most made vague references 

to their funds being ‘‘protected.’’ Upon 

further probing, however, the majority 

of participants incorrectly thought FDIC 

deposit insurance would protect their 

funds in the event of fraudulent charges 

or a stolen card.275 A few believed a 

problem of that nature would be 

resolved faster if the prepaid card had 

FDIC deposit insurance than if it did 

not. Some participants stated that FDIC 

insured money in banks; they reasoned 

that because their card was most likely 

connected to a bank, the money on their 

cards was therefore protected from fraud 

by the FDIC, although others disagreed. 

Very few participants understood FDIC 

insurance correctly in that it applies to 

the insolvency of the bank that holds 

the underlying funds and not to the 

funds on a prepaid card itself in the case 

of an unauthorized transaction on the 

account. 

In light of the results of the Bureau’s 

Study of Prepaid Account Agreements 

indicating that many products meeting 

the proposed definition of prepaid 

account already provide pass-through 

deposit insurance coverage and 

consumers’ misunderstandings about 

what protections pass-through deposit 

insurance actually affords, the Bureau 

has decided not to propose any 

requirements related to the affirmative 

existence of pass-through deposit 

insurance. The Bureau is proposing, 

however, that financial institutions 

would have to disclose a statement on 

the short form if a prepaid account is 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77167 

not set up to be eligible for FDIC (or 

NCUSIF) pass-through deposit (or share) 

insurance. Specifically, proposed 

§ 1005.18(b)(2)(i)(B)(13) would require 

that if a prepaid account product is not 

set up to be eligible for FDIC deposit or 

NCUSIF share insurance, a financial 

institution would have to include a 

statement on the short form disclosure 

that FDIC deposit insurance or NCUSIF 

share insurance, as appropriate, does 

not protect funds loaded into the 

prepaid account, in a form substantially 

similar to the clause set forth in Model 

Forms A–10(c) and (d). 

The Bureau seeks comment on all 

aspects of this part of the proposal. 

Specifically, the Bureau solicits 

comment on whether the existence—or 

lack thereof—of pass-through deposit 

(or share) insurance should be disclosed 

on retail packaging, online disclosures, 

or in any other medium, as many 

consumer advocacy group comments to 

the Prepaid ANPR suggested. The 

Bureau has also observed that financial 

institutions currently use varied 

language to describe FDIC (or NCUSIF) 

insurance. The Bureau therefore solicits 

comment on whether specific language 

should be used to describe pass-through 

deposit (or share) insurance, and if so, 

what that language should be. The 

Bureau also solicits comment on 

whether there is a simple way that this, 

and other conditions on the 

applicability FDIC pass-through 

insurance described above, can be 

disclosed, particularly in retail stores 

given the limited space available on 

card packaging material. Finally, the 

Bureau solicits comment on whether 

non-banks that issue prepaid accounts 

could apply the proposed statement 

regarding FDIC or NCUSIF insurance to 

their products, or whether the Bureau 

should propose an alternative 

requirement regarding the disclosure of 

the availability of FDIC or NCUSIF 

insurance for non-banks that issue 

prepaid accounts. 

18(b)(2)(i)(B)(14) CFPB Web Site 

Proposed § 1005.18(b)(2)(i)(B)(14) 

would require disclosure of the URL of 

the Web site of the Consumer Financial 

Protection Bureau in a form that is 

substantially similar to the clauses set 

forth in appendix A–10(a) of this part. 

The Bureau intends to develop 

resources on its Web site that would, 

among other things, provide basic 

information to consumers about prepaid 

accounts, the benefits and risks of using 

them, how to use the proposed 

disclosures, and a URL to the Bureau’s 

complaint portal for prepaid products. 

18(b)(2)(i)(C) Disclosing Variable Fees 

Proposed § 1005.18(b)(2)(i)(C) would 

set forth how, within the confines of the 

proposed short form disclosure, 

financial institutions could disclose fees 

that may vary. As noted above, in many 

instances, prepaid accounts may have 

certain fees that vary depending on how 

a consumer uses the account. For 

example, monthly periodic fees are, for 

some prepaid account products, waived 

when a consumer receives direct 

deposit or when the monthly balance 

exceeds a certain amount. In some 

instances, these conditional situations 

could become complicated and difficult 

to explain on a short form disclosure, 

particularly for multiple fees. The 

Bureau believes that allowing multiple, 

complex disclaimers on a single form 

would be complicated and make 

comprehension and comparisons more 

difficult. 

Thus, the Bureau is proposing 

§ 1005.18(b)(2)(i)(C), which would 

provide that if the amount of the fee that 

a financial institution imposes for each 

of the fee types disclosed pursuant to 

proposed § 1005.18(b)(2)(i)(B) could 

vary, a financial institution would have 

to disclose the highest fee it could 

impose on a consumer for utilizing the 

service associated with the fee, along 

with a symbol, such as an asterisk, to 

indicate that a lower fee might apply, 

and include text explaining that the fee 

could be lower, in a form substantially 

similar to the clause set forth in the 

Model Forms A–10(a) through (d) in 

appendix A. Proposed 

§ 1005.18(b)(2)(i)(C) would also state 

that a financial institution would have 

to use the same symbol and text for all 

fees that could be lower, but could use 

any other part of the prepaid account 

product’s packaging material or Web 

site to provide more detail about how a 

specific fee type may be lower. 

Proposed § 1005.18(b)(2)(i)(C) would 

further state that a financial institution 

must not disclose any third party fees 

imposed in connection with any of the 

fees disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(1) through (8). To 

the extent third party fees apply or fees 

could be lower, the Bureau is not 

proposing to allow that information to 

be conveyed on the short form beyond 

allowing the financial institution to use 

a symbol to indicate when this is the 

case. 

Proposed comment 18(b)(2)(i)(C)–1 

would provide examples of how to 

disclose variable fees on the short form 

in compliance with proposed 

§ 1005.18(b)(2)(i)(C). Specifically, the 

proposed comment would explain that, 

for example, if a financial institution 

charges a monthly fee of $4.95, but the 

financial institution waives this fee if a 

consumer receives direct deposit 

payments into the prepaid account, the 

financial institution would list a 

monthly fee of $4.95 on the short form 

disclosure with an asterisk (or other 

symbol) next to the dollar amount that 

refers to a statement that explains the 

fee may be lower. The proposed 

comment would also clarify that another 

example might be if a financial 

institution charges a cash reload fee of 

$3.95 at reload networks that are not 

agents of the financial institution but 

would waive this fee if a consumer 

loads money at a point-of-sale terminal 

operated by a retailer that is an agent of 

the financial institution. In this 

example, the financial institution would 

disclose a cash reload fee of $3.95 on 

the short form disclosure pursuant to 

proposed § 1005.18(b)(2)(i)(C) with an 

asterisk (or other symbol) next to the 

dollar amount that refers to the same 

statement that the fee may be lower. The 

proposed comment would further 

clarify that proposed 

§ 1005.18(b)(2)(i)(C) does not permit a 

financial institution explain the 

conditions under which a fee may be 

lower, but a financial institution could 

use any other part of the prepaid 

account product’s packaging material or 

may use its Web site to disclose that 

information, and that information 

would also be required to be disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(ii)(A). Proposed 

comment 18(b)(2)(i)(C)–2 would explain 

that third parties could include service 

providers and other entities, regardless 

of whether the entity is an agent of the 

financial institution. The Bureau 

believes that regardless of whether a 

third party has a relationship with the 

financial institution, no additional fees 

should be disclosed on the short form. 

The Bureau recognizes that its 

proposed approach to the disclosure of 

variable fees on the short form could 

potentially obscure some complexity in 

a prepaid account’s fee structure. The 

Bureau, however, proposes to require 

that this information be disclosed on the 

long form (see proposed 

§ 1005.18(b)(2)(ii)(A)) and to permit its 

disclosure outside the confines of the 

short form to mitigate any risk of 

confusion. See comment 18(b)(2)(i)(C)– 

1. Thus, the Bureau believes that its 

proposed short form disclosure—and 

the requirement to disclose the highest 

fee with an indication that the fee may 

be lower in certain circumstances— 

would allow consumers to know the 

maximum they will pay for that fee type 

while indicating to consumers when 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77168 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

276Pursuant to existing § 1005.7(b)(5), as 

modified by proposed § 1005.18(f), a version of the 

long form must also be provided in the terms and 

conditions for prepaid accounts at the time the 

consumer contracts for an electronic funds transfer 

or before the first electronic funds transfer is made 

involving the consumer’s account. See section-bysection analysis of proposed § 1005.18(f). 

they could qualify for a lower fee. The 

Bureau, however, recognizes the 

compromises it has made, and it seeks 

comment on whether there are other 

ways that variability should be 

addressed. The Bureau also solicits 

feedback on whether it should mandate 

or permit the disclosure of third party 

fees on the short form. Also, the Bureau 

seeks comment on whether financial 

institutions should be allowed to use 

more than one type of symbol to explain 

variability of fees listed in the short 

form. Additionally, the Bureau also 

seeks comment on whether a de 

minimis exception should be allowed 

that would permit financial institutions 

to disclose a different fee if it is close 

in value to the highest fee. 

18(b)(2)(ii) Long Form Content 

Requirements 

In addition to the short form, the 

proposed rule would require financial 

institutions to provide a long form 

disclosure pre-acquisition. Pursuant to 

proposed § 1005.18(b)(3)(iii)(A), in most 

cases, the contents of the long form 

disclosure discussed below would have 

to be in a form substantially similar to 

proposed Sample Form A–10(e). 

18(b)(2)(ii)(A) Fees 

Proposed § 1005.18(b)(2)(ii)(A) would 

require the disclosure in the long form 

of all fees that may be imposed by the 

financial institution in connection with 

a prepaid account. For each fee type, the 

financial institution would have to 

disclose the amount of the fee, the 

conditions, if any, under which the fee 

may be imposed, waived, or reduced, 

including, to the extent known, any 

third party fee amounts that may apply. 

Proposed § 1005.18(b)(2)(ii)(A) would 

also require that if such third party fees 

may apply but the amount of those fees 

are not known, a financial institution 

would have to instead include a 

statement indicating that third party 

fees may apply without specifying the 

fee amount, and that a fee imposed by 

a third party who acts as an agent of the 

financial institution for purposes of the 

prepaid account would always be 

disclosed. 

As noted above, this part of the 

proposal is authorized under EFTA 

sections 904(a) and (c), 905(a), and 

Dodd-Frank Act sections 1032(a). The 

Bureau believes that pre-acquisition 

disclosures of all fees for prepaid 

accounts will, consistent with EFTA 

section 902 and Dodd-Frank section 

1032(a), assist consumers’ 

understanding of the terms and 

conditions of their prepaid accounts, 

and ensure that the features of the 

prepaid accounts are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the account. The Bureau 

believes that this disclosure would, in 

many ways, be similar to what many 

financial institutions disclose today 

regarding prepaid accounts’ fee 

structures in the terms and condition 

documents, but the content of the long 

form in proposed § 1005.18(b)(2)(ii)(A) 

would be provided to a consumer as a 

stand-alone document before a 

consumer acquires a prepaid account.276

Proposed § 1005.18(b)(2)(ii)(A) would 

also state that a financial institution 

could not utilize any symbols, such as 

asterisks, to explain the conditions 

under which any fee may be imposed. 

The Bureau believes it is important that 

consumers can easily follow the 

information in the long form, and that, 

when financial institutions do not face 

space constraints like on the short form, 

text should be used to explain any 

information about fees, instead of 

relying on a consumer first to notice 

symbols and then associate them with 

text in a footnote, for example. See 

proposed comment 18(b)(2)(ii)(A)–2. 

The Bureau also proposes to add 

commentary to explain the format of the 

long form disclosure. Specifically, 

proposed comment 18(b)(2)(ii)(A)–1 

would explain that for example, if a 

financial institution charges a cash 

reload fee, the financial institution must 

list the amount of the cash reload fee 

and also specify any circumstances 

under which a consumer could qualify 

for a lower fee. The proposed comment 

would further explain that relevant 

conditions to disclose in the long form 

disclosure could also include, for 

example, if there is a limit on the 

amount of cash a consumer may load 

into the prepaid account in a transaction 

or during a particular time period. 

Proposed comment 18(b)(2)(ii)(A)–2, 

would explain that a financial 

institution may, at its option, choose to 

disclose pursuant to proposed 

§ 1005.18(b)(2)(ii)(A), any service or 

feature it provides or offers even if it 

does not charge a fee for that service or 

feature. 

The proposed comment would clarify 

that, for example, a financial institution 

may choose to list ‘‘online bill pay 

service’’ and indicate that the fee is 

‘‘$0’’ or ‘‘free’’ when the financial 

institution does not charge consumers a 

fee for that service or feature. Proposed 

comment 18(b)(2)(ii)(A)–2 would further 

clarify that by contrast, where a service 

or feature is available without a fee for 

an introductory period, but where a fee 

may be imposed at the conclusion of the 

introductory period for that service or 

feature, the financial institution could 

not indicate that the fee is ‘‘$0.’’ The 

proposed comment would clarify that 

the financial institution would instead 

have to list the main fee and explain in 

the separate explanatory column how 

the fee could be lower during the 

introductory period, what that 

alternative fee would be, and when it 

will be imposed. The proposed 

comment would provide further 

guidance that similarly, if a consumer 

would have to enroll in an additional 

service to avoid incurring a fee for 

another service, neither of those services 

would disclose a charge of, ‘‘$0,’’ but, 

instead, would list each fee amount 

imposed if the consumer does not 

enroll. The proposed comment would 

also provide an example that if the 

monthly fee is waived once a consumer 

receives direct deposit payments into 

the prepaid account, the monthly fee 

imposed upon a consumer if they do not 

receive direct deposit would be 

disclosed in the long form, and an 

explanation regarding how receiving 

direct deposit might lower the fee 

would have to be included in the 

explanatory column in the long form. A 

financial institution’s ability to disclose 

any fees of its choosing in the long form 

disclosure (as long as the fee amounts 

disclosed are accurate) is different from 

the disclosures required on the short 

form (see proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7) and 

proposed comment 18(b)(2)(i)–1), which 

must always be included, even when 

inapplicable to a particular prepaid 

account product, and a financial 

institution cannot choose to disclose 

more fee information than what is 

required. 

Proposed comment 18(b)(2)(ii)(A)–3 

would provide guidance on the 

disclosure of third party fees in the long 

form disclosure. Specifically, the 

proposed comment would explain that 

proposed § 1005.18(b)(2)(ii)(A) generally 

requires the disclosure, to the extent 

known, of any third party fee amounts 

that may apply. Proposed comment 

18(b)(2)(ii)(A)–3 would further explain 

that, for example, a financial institution 

that offers balance updates to a 

consumer via text message would 

disclose that mobile phone carrier data 

charges could apply for each text 

message a consumer receives. The 


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proposed comment would also clarify 

that proposed § 1005.18(b)(2)(ii)(A) 

requires that a financial institution must 

always disclose in the long form any 

fees imposed by a third party who is 

acting as an agent of the financial 

institution for purposes of the prepaid 

account product. The proposed 

comment would also provide an 

example that any fees that the provider 

of a cash reload service who has a 

relationship with the financial 

institution may impose would be 

disclosed in the long form. 

18(b)(2)(ii)(B) Overdraft Services and 

Other Credit Features 

Proposed § 1005.18(b)(2)(ii)(B) would 

require the financial institution to 

include in the long form the disclosures 

described in § 1026.60(a), (b) and (c) of 

Regulation Z (12 CFR part 1026) if at 

any point, a credit plan that would be 

a credit card account under Regulation 

Z, 12 CFR part 1026 may be offered in 

connection with the prepaid account. 

Proposed § 1005.18(b)(2)(ii)(B) would 

further state that such a credit plan 

could be accessed by a credit card under 

Regulation Z, 12 CFR 1026.2(a)(15)(i), 

that also is an access device that 

accesses the prepaid account, or a credit 

plan could be accessed by an account 

number that is a credit card under 

Regulation Z where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor offering the 

plan. 

The Bureau recognizes that 

Regulation Z does not require these 

disclosures to be provided until a 

consumer is actually solicited for the 

credit plan. The Bureau, however, 

believes it is important for consumers 

who are considering whether to acquire 

a prepaid account to know not only if 

a credit plan could be offered at any 

point, as required to be disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(9), but also what 

the possible cost of such a plan might 

be. Because of the space constraints on 

the short form, as discussed above, the 

Bureau believes it is appropriate for a 

consumer to receive as part of the long 

form disclosure more complete 

information about any credit plan that 

could be offered to them, even if they 

would not be solicited for such a plan 

until at least thirty days after registering 

a particular prepaid account. See 

proposed § 1005.18(g) and 1026.12(h). 

Proposed comment 18(b)(2)(ii)(B)–1 

would clarify that the disclosures 

described in § 1026.60(a), (b) and (c) of 

Regulation Z (12 CFR part 1026) would 

have to appear in the form required 

under 12 CFR 1026.60(a), (b) and (c), 

and, to the extent possible, on the same 

printed page or Web page as the rest of 

the information required to be listed 

pursuant to proposed § 1005.18(b)(2)(ii). 

The Bureau recognizes that depending 

on the number of fees included in the 

long form disclosure, it might not be 

possible to include both disclosures on 

the same printed page. The Bureau 

believes, however, that to the extent it 

would be possible to include these 

disclosures on the same printed page or 

Web page, doing so would make it 

easier for the consumer to review the 

disclosures. 

18(b)(2)(ii)(C) Telephone Number, Web 

Site and Mailing Address 

Proposed § 1005.18(b)(2)(ii)(C) would 

require disclosure of the name, 

telephone number, Web site, and 

mailing address of the person or office 

that a consumer could contact to learn 

about the terms and conditions of the 

prepaid account, to obtain prepaid 

account balance information, to request 

a written copy of transaction history 

pursuant to proposed § 1005.18(c)(1)(iii) 

if the financial institution does not 

provide a periodic statement pursuant 

to existing § 1005.9(b) or to notify the 

person or office when a consumer 

believes that an unauthorized electronic 

fund transfer has occurred as required 

by existing § 1005.7(b)(2) or proposed 

§ 1005.18(d)(1)(ii). 

18(b)(2)(ii)(D) Statement Regarding FDIC 

(or NCUSIF) Insurance 

Proposed § 1005.18(b)(2)(ii)(D) would 

require that the long form also include 

the disclosure required under proposed 

§ 1005.18(b)(2)(i)(B)(13) regarding FDIC 

(or NCUSIF), pass-through deposit (or 

share) insurance, when appropriate. 

This statement would be the same as the 

statement included on the short form 

pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(13). For more 

details, see section-by-section analysis 

of proposed § 1005.18(b)(2)(i)(B)(13). 

18(b)(2)(ii)(E) CFPB Web Site and 

Telephone Number 

Proposed § 1005.18(b)(2)(ii)(D) would 

require disclosure of the URL of the 

Web site of the Consumer Financial 

Protection Bureau, and a telephone 

number a consumer could contact and 

the URL a consumer could visit to 

submit a complaint related to a prepaid 

account. As discussed in the section-bysection analysis of proposed 

§ 1005.18(b)(2)(i)(B)(14), the Bureau 

intends to develop resources on its Web 

site that would, among other things, 

provide basic information to consumers 

about prepaid accounts, the benefits and 

risks of using them, and how to use the 

proposed disclosures. The Bureau also 

believes that consumers would benefit 

from seeing the Consumer Financial 

Protection Bureau’s Web site and 

telephone number that they can use to 

submit a complaint about a prepaid 

account. 

The Bureau seeks comment on all 

aspects of the proposed contents of the 

long form disclosure. In particular, the 

Bureau seeks comment on whether it 

should propose more specific content 

requirements for the long form 

disclosure, or whether some of the 

information the Bureau proposes to 

include on the long form is unnecessary. 

18(b)(3) Form of Pre-Acquisition 

Disclosures 

Proposed § 1005.18(b)(3) would set 

forth the requirements for how the short 

form and long form disclosures must be 

presented. Specifically, proposed 

§ 1005.18(b)(3)(i) sets forth general 

requirements for written, electronic, and 

oral disclosures. Proposed 

§ 1005.18(b)(3)(ii) would provide 

requirements regarding whether these 

disclosures would have to be in a 

retainable form. Proposed 

§ 1005.18(b)(3)(iii) would set forth 

parameters for the tabular form in which 

the disclosures would have to be 

presented, including specific 

requirements for short forms presenting 

multiple service plans. 

18(b)(3)(i) General 

Except when such disclosures are 

provided electronically or orally, as 

described in proposed 

§ 1005.18(b)(3)(iii)(B) and (C), proposed 

§ 1005.18(b)(3)(i)(A) would provide that 

short form and long form disclosures 

required by proposed § 1005.18(b)(2)(i) 

and (ii) generally must be disclosed in 

writing. The Bureau believes that 

consumers can best review the terms of 

a prepaid account before acquisition 

when seeing these disclosures in written 

form. As is discussed above, however, 

the Bureau recognizes that in certain 

situations it is not practicable to provide 

written disclosures. For example, when 

a consumer acquires a prepaid account 

on the internet, the Bureau believes that 

a financial institution cannot easily 

provide written (non-electronic) 

disclosures to a consumer preacquisition. 

Currently, Regulation E permits 

disclosures to be provided in electronic 

form, subject to compliance with 

consumer consent and other applicable 

provisions of the Electronic Signatures 

in Global and National Commerce Act 

(E-Sign Act) (15 U.S.C 7001, et seq.). 

§ 1005.4(a)(1). The E-Sign Act generally 

allows the use of electronic records to 


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277See § 1005.4(a)(1). 

satisfy any statute, regulation, or rule of 

law requiring that such information be 

provided in writing, if a consumer has 

affirmatively consented to such use and 

has not withdrawn such consent, and if 

certain format of delivery requirements 

are met. Before receiving such consent, 

the E-Sign Act requires that financial 

institutions make clear to a consumer 

that they have the option of receiving 

records in paper form, to specify 

whether a consumer’s consent applies to 

a specific transaction or throughout the 

duration of their relationship with the 

financial institution, and to inform a 

consumer of how he or she might 

withdraw consent and update 

information needed to contact them 

electronically, among other 

requirements. The E-Sign Act also 

requires financial institutions to retain 

record of any disclosures that have been 

provided to a consumer electronically 

so that a consumer can access them 

later. 

When the Bureau issued regulations 

on remittance transfers, the Bureau 

altered Regulation E’s general 

requirement for remittance that provides 

electronic disclosures are permissible as 

long as they comply with the E-Sign 

Act. The Bureau mandated that certain 

disclosures could be provided 

electronically, in retainable form, 

without having to comply with the ESign Act if the sender electronically 

requests the remittance transfer provider 

to send the remittance transfer. See 

§ 1005.31(a)(2). 

The Bureau is proposing to modify 

the general Regulation E electronic 

disclosure requirement for prepaid 

accounts in proposed 

§ 1005.18(b)(3)(i)(B), which would 

require that a financial institution 

would have to provide the short form 

and long form disclosure required by 

proposed § 1005.18(b)(2)(i) and (ii) in 

electronic form when a consumer 

acquires a prepaid account through the 

Internet, including via a mobile 

application. Proposed 

§ 1005.18(b)(3)(i)(B) would also state 

that disclosures required by proposed 

§ 1005.18(b)(2)(i) and (ii) would have to 

be provided electronically in a manner 

which is reasonably expected to be 

accessible in light of how a consumer is 

acquiring the prepaid account. In 

addition, proposed § 1005.18(b)(3)(i)(B) 

would provide that the electronic 

disclosures required by 

§ 1005.18(b)(2)(i) and (ii) would not 

need to meet the consumer consent and 

other applicable provisions of the ESign Act. 

As in the remittances pre-purchase 

disclosure context, the Bureau believes 

altering the general Regulation E 

requirement for prepaid accounts is 

necessary to ensure consumers that 

receive relevant disclosure information 

at the appropriate time. The Bureau 

believes that during the pre-acquisition 

time period for prepaid accounts it is 

important for consumers who decide to 

go online to acquire a prepaid account 

to see the relevant disclosures for that 

prepaid account product in electronic 

form. The Bureau believes that 

consumers will often decide whether to 

acquire a particular prepaid account 

after doing significant research online, 

and that if they are not able to see 

disclosures on the products’ Web sites, 

they cannot make an informed 

acquisition decision. As discussed 

above, Regulation E’s current general ESign provision allows financial 

institutions to provide disclosures 

electronically at their discretion; 277

however, the Bureau believes that, for 

Internet acquisitions of prepaid 

products, a mandate of electronic 

disclosures on Web sites is more 

appropriate. 

The general Regulation E E-Sign 

provision also requires that financial 

institutions comply with E-Sign consent 

provisions when providing disclosures 

electronically. The Bureau is not 

proposing to require such compliance 

for prepaid accounts that are acquired 

through the Internet. Instead, the Bureau 

is proposing § 1005.18(b)(3)(i)(B), which 

would state that electronic disclosures 

of the short form and long forms for 

prepaid accounts acquired through the 

Internet would only have to be provided 

electronically in a manner which is 

reasonably expected to be accessible in 

light of how a consumer acquired the 

prepaid account. For example, if a 

consumer has acquired a prepaid 

account through a Web site, it is 

reasonable to expect that a consumer 

would be able to view electronic 

disclosures on a Web site and no E-Sign 

consent would be necessary. The 

Bureau notes, however, that this 

alternative E-Sign requirement applies 

only to the pre-acquisition disclosure of 

the short form and long form disclosures 

for prepaid accounts acquired over the 

Internet and does not alter the 

application of the general E-Sign 

provision in Regulation E to prepaid 

account after acquisition, or for any 

other type of account. 

The Bureau also proposes to add 

comment 18(b)(3)(i)(B)–1 which would 

explain how to disclose the short and 

long forms electronically. Specifically, 

the proposed comment would explain 

that a financial institution may, at its 

option, provide the short and long form 

disclosures on the same Web page or 

two different Web pages as long as the 

disclosures are provided in accordance 

with the pre-acquisition disclosure 

requirements in proposed 

§ 1005.18(b)(1)(i). The Bureau 

recognizes, as several consumer 

advocacy group commenters to the 

Prepaid ANPR stated, that disclosures 

provided electronically on Web sites 

may be difficult for consumers to find 

because they are sometimes buried 

several pages deep or require some form 

of registration or logging on to access. 

To mitigate the risk of consumers 

having trouble locating electronic 

disclosures on a Web site, the Bureau 

generally believes that disclosures 

provided on a Web site should be easy 

to locate, whether they are provided on 

the same Web page, or on two separate 

pages. See proposed comment 18(b)(1)– 

2. 

Proposed comment 18(b)(3)(i)(B)–2 

would provide guidance around the lack 

of an E-sign requirement for prepaid 

account pre-acquisition disclosures. 

Specifically, the proposed comment 

would clarify that if, for example, a 

consumer is acquiring a prepaid account 

using a financial institution’s Web site, 

it would be reasonable to expect that a 

consumer would be able to access preacquisition disclosures provided on a 

similar Web site. 

Proposed § 1005.18(b)(3)(i)(B) would 

also require that disclosures provided to 

a consumer through a Web site as 

described in proposed § 1005.18 

(b)(2)(i)(B)(11) would have to be made 

in an electronic form using machinereadable text that is accessible via both 

Web browsers and screen readers. 

Proposed comment 18(b)(3)(i)(B)–3 

would clarify that a disclosure would 

not comply with this requirement if it 

was not provided in a textual format 

that can be read automatically by an 

Internet search engines or other 

computer systems. This textual format 

could include, for example, JSON, XML, 

or a similar format. 

18(b)(3)(i)(C) Oral Disclosures 

The Bureau is also proposing 

§ 1005.18(b)(3)(i)(C), which would state 

that disclosures required by proposed 

§ 1005.18(b)(2)(i) would have to be 

provided orally when a consumer 

acquires a prepaid account orally by 

telephone as described in proposed 

§ 1005.18(b)(3)(iii). Proposed 

§ 1005.18(b)(3)(i)(C) would also state 

that disclosures provided to a consumer 

through the telephone number 

described in proposed 

§ 1005.18(b)(2)(i)(B)(11) also would have 

to be made orally. The Bureau believes 

that when a consumer acquires a 


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278The Bureau notes that the explanatory text 

used in the model long form disclosure is meant 

only to serve as an example, as the Bureau is 

proposing only formatting requirements for the long 

form disclosure, and not specific language. 

prepaid account orally by telephone or 

when a consumer requests to hear the 

long form disclosure in a retail store by 

calling the telephone number disclosed 

on the short form pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(11), it is not 

practicable for a financial institution to 

provide these disclosures in written 

form and therefore oral disclosures 

could be provided. 

18(b)(3)(ii) Retainable Form 

Proposed § 1005.18(b)(3)(ii) would 

require that disclosures required by 

proposed § 1005.18(b)(2)(i) and (ii) be 

provided in a retainable form except for 

disclosures provided to a consumer 

through the telephone number 

described in proposed 

§ 1005.18(b)(2)(i)(B)(11) or disclosure 

provided orally pursuant to proposed 

§ 1005.18(b)(1)(iii). The Bureau notes, 

however, that Regulation E does have 

general recordkeeping requirements. See 

§ 1005.13(b). After having acquired a 

prepaid account orally, a consumer 

would receive the long form disclosure 

in the full terms and conditions 

accompanying the prepaid account 

inside its packaging. See proposed 

§ 1005.18(f). Further, the long form 

disclosure would also presumably be 

available on the financial institution’s 

Web site as part of the full prepaid 

account agreement that would be 

required to be posted pursuant to 

proposed § 1005.19, discussed below, 

should a consumer want to review it 

post-acquisition. Thus, the Bureau does 

not believe it is necessary for the 

disclosures provided to a consumer for 

a prepaid account acquired orally by 

telephone or the long form disclosure 

that a consumer may access by 

telephone pre-acquisition in a retail 

store to be retainable, and the Bureau 

does not believe it is practicable to 

provide retainable forms of oral 

disclosures. The Bureau does, however, 

believe that providing a retainable 

format of written and electronic 

disclosures is feasible in all other 

contexts. Proposed comment 

18(b)(3)(ii)–1 would explain that a 

financial institution may satisfy the 

requirement to provide electronic 

disclosures in a retainable form if it 

provides disclosures on its Web site in 

a format that would be capable of being 

printed, saved or emailed to a 

consumer. 

18(b)(3)(iii) Tabular Format 

18(b)(3)(iii)(A) General 

The Bureau is also proposing, in 

proposed § 1005.18(b)(3)(iii)(A), tabular 

form requirements that would be used 

to present the short and long form 

disclosures. Currently, the Bureau 

believes that most financial institutions 

use some sort of table format to disclose 

prepaid account fees in their terms and 

conditions documents, although each 

institution selects different fees to 

highlight and presents them in different 

orders. Financial institutions also 

implement a variety of formats to 

present fee information on packaging 

material in retail stores. Thus, the 

burden is on consumers to identify the 

fees that are most important to them in 

the various tabular formats to determine 

the best product for their needs. 

During consumer testing, however, 

the Bureau found that few participants 

researched prepaid accounts before 

acquisition, particularly in retail stores. 

The Bureau believes that at least part of 

the reason that consumers do not do 

much comparison shopping is that 

doing so is not straightforward. In a 

retail store, prepaid accounts are often 

displayed behind counters, close to 

check-out lanes at ends of aisles and in 

other areas that can often be crowded or 

difficult to access, which can limit 

careful review of a product’s terms. The 

Bureau believes that financial 

institutions are more likely to present 

fee information in a clearer and more 

complete format for prepaid account 

products offered online, but, as 

mentioned above, the format used to 

display this information varies, making 

comparisons harder. Although some 

variation is inevitable because each 

financial institution offers different 

services in connection with its prepaid 

accounts, the Bureau nevertheless 

believes that requiring use of a 

standardized form to disclose fee 

information can minimize some 

variation by maintaining a consistent 

format and, in the case of the short form, 

also keeping many of the fee types that 

are listed constant. 

The Bureau therefore is proposing 

that, except as provided in proposed 

§ 1005.18(b)(3)(iii)(B), short form 

disclosures required by proposed 

§ 1005.18(b)(2)(i) that are provided in 

writing or electronically shall be in the 

form of a table substantially similar to 

proposed Model Forms A–10(a) through 

(d), as applicable. Long form disclosures 

required by proposed 

§ 1005.18(b)(2)(ii)(A) through (E) that 

are provided in writing or electronically 

would have to be in a form of a table 

substantially similar to proposed 

Sample Form A–10(e).278 The Bureau is 

proposing a sample form for the long 

form disclosure instead of a model form, 

as is proposed for the short form 

disclosure, because the Bureau believes 

the long form disclosures could vary 

depending on the number of fees 

included in the form and the extent of 

relevant conditions that would have to 

be disclosed in connection with each 

fee. Nevertheless the Bureau solicits 

comment on whether it should provide 

a model form for the long form 

disclosure. 

18(b)(3)(iii)(B) Disclosures for Prepaid 

Account Products Offering Multiple 

Service Plans 

As an exception to proposed 

§ 1005.18(b)(3)(iii)(A) (which applies to 

products with a single fee schedule), 

proposed § 1005.18(b)(3)(iii)(B) would 

set forth tabular form requirements for 

prepaid products offering multiple 

service plans. Specifically, proposed 

§ 1005.18(b)(3)(iii)(B)(1) would state that 

when a financial institution offers 

multiple service plans for a particular 

prepaid account product and each plan 

has a different fee schedule, the 

information required by proposed 

§ 1005.18(b)(2)(i)(B)(1) through (7) could 

be provided for each service plan in the 

form of a table substantially similar to 

the proposed Model Form A–10(f), and 

must include descriptions of each 

service plan included in the table using 

the terms, ‘‘Pay-as-you-go plan,’’ 

‘‘Monthly plan,’’ ‘‘Annual plan,’’ or 

substantially similar terms. Proposed 

§ 1005.18(b)(3)(iii)(B)(1) would further 

state when disclosing multiple service 

plans on one short form, the information 

required by proposed 

§ 1005.18(b)(2)(i)(B)(8) must only be 

disclosed once in the table. 

Alternatively, proposed 

§ 1005.18(b)(3)(iii)(B)(1) would permit a 

financial institution to disclose just the 

information required by proposed 

§ 1005.18(b)(2)(i) for only the service 

plan in which a consumer is enrolled 

automatically by default upon acquiring 

the prepaid account, in the form of a 

table substantially similar to proposed 

Model Form A–10(c) or (d). Finally, 

proposed § 1005.18(b)(3)(iii)(B)(1) 

would state that regardless of whether a 

financial institution discloses all service 

plans on one form or chooses only to 

disclose the service plan in which a 

consumer is automatically enrolled by 

default, the disclosures required by 

proposed § 1005.18(b)(2)(i)(B)(9) 

through (14) would only have to be 

disclosed once. 

As discussed above, the Bureau 

believes that it is important for short 

and long form disclosures to have a 

standardized format in order to facilitate 

consumers’ comparison of multiple 


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products and their ability to understand 

key fee and service information about a 

prepaid product. The Bureau also 

recognizes, however, that financial 

institutions offering multiple service 

plans on one prepaid account need 

flexibility to disclose information about 

multiple plans to a consumer. The 

Bureau therefore is proposing that 

financial institutions may use one short 

form table that discloses the information 

required by proposed § 1005.18(b)(2)(i) 

for each of the service plans to highlight 

for a consumer that such plans exist. At 

its option, a financial institution could 

also choose to only disclose the service 

plan in which a consumer is enrolled 

upon acquiring the prepaid account 

using the tabular format described in 

proposed § 1005.18(b)(3)(iii)(A) and 

note elsewhere on the packaging 

material or on its Web site the other 

service plans it offers. The Bureau 

believes that these options will give 

financial institutions the flexibility to 

accommodate disclosure of multiple 

service plans, while also maintaining 

the simplicity of the short and long form 

table designs to facilitate consumers’ 

comparison shopping. In consumer 

testing, some participants were 

confused by short forms that included 

multiple service plans similar to the one 

proposed in Model Form A–10(f). The 

Bureau therefore also considered 

proposing that financial institutions 

must disclose each service plan in a 

separate short form table instead of 

allowing financial institutions to 

disclose all of the plans on one short 

form. Some testing participants also 

were unsure of which service plan 

applied upon purchase when seeing 

multiple service plans on one short 

form, an issue that the Bureau believes 

may be resolved if a financial institution 

only discloses the fee schedule for the 

plan that applies upon a consumer’s 

acquisition of the account. The Bureau 

thus seeks comment on the best way to 

accommodate prepaid accounts 

products offering multiple service plans 

on the short form disclosure while 

providing accurate and sufficient 

information to consumers. 

The Bureau also acknowledges that 

only disclosing the service plan in 

which a consumer is automatically 

enrolled by default upon acquiring the 

prepaid account could potentially 

conflict with the Bureau’s proposed 

requirement in proposed 

§ 1005.18(b)(2)(i)(C) that financial 

institutions would have to disclose the 

most expensive fee for each fee type 

required to be disclosed in the short 

form. For example, a ‘‘pay-as-you-go’’ 

plan in which a consumer is enrolled 

upon acquisition might not impose a 

periodic fee, and thus, could disclose 

‘‘$0’’ in the top-line of the short form 

where the periodic fee disclosure would 

be required. Under such a plan, if a 

consumer were to opt into a monthly 

plan, however, they could be charged a 

periodic fee higher than $0. The Bureau 

therefore also seeks comment on 

whether the disclosure of only the 

default plan on the short form would be 

clear or if the Bureau should require 

that financial institutions always 

disclose multiple service plans on the 

short form. 

Proposed § 1005.18(b)(3)(iii)(B)(2) 

would state that the information 

required to be disclosed in the long form 

by proposed § 1005.18(b)(2)(ii) must be 

presented for all service plans in the 

form of a table substantially similar to 

proposed Sample Form A–10(g). The 

Bureau believes the long form 

disclosure should include all fee 

information about a prepaid account 

product, and therefore it should contain 

the fee schedule for every possible 

service plan. 

Additionally, the Bureau proposes to 

add comment 18(b)(3)(iii)(B)–1 which 

would provide additional guidance on 

its proposed definition of multiple 

service plans. Specifically, proposed 

comment 18(b)(3)(iii)(B) would state 

that the multiple service plan disclosure 

provisions in proposed 

§ 1005.18(b)(3)(iii)(B) apply when a 

financial institution offers more than 

one service plan for a particular prepaid 

account product, and each plan has a 

different fee schedule. For example, a 

financial institution might offer a 

prepaid account product with one 

service plan where a consumer pays no 

periodic fee but instead pays a fee for 

each transaction, and another plan that 

includes a monthly fee but no per 

transaction fee. The proposed comment 

would also state that a financial 

institution could also offer a prepaid 

account product with one service plan 

for consumers who utilize another one 

of a financial institution’s non-prepaid 

services (e.g., a mobile phone service) 

and a different plan for consumers who 

only utilize a financial institution’s 

prepaid account products. Each of these 

plans would be considered a ‘‘service 

plan’’ for purposes of proposed 

§ 1005.18(b)(3)(iii). 

18(b)(4) Specific Formatting 

Requirements 

18(b)(4)(i) Grouping 

18(b)(4)(i)(A) Short Form Disclosures 

Proposed § 1005.18(b)(4)(i)(A) would 

contain several formatting requirements 

for the short form disclosure. First, 

proposed § 1005.18(b)(4)(i)(A) would 

state that the information required by 

proposed § 1005.18(b)(2)(i)(A) or 

proposed § 1005.15(c)(2), when 

applicable, would have to be grouped 

together. Proposed § 1005.18(b)(4)(i)(A) 

would further state that the information 

required by proposed 

§ 1005.18(b)(2)(i)(B)(1) through (4) 

would have to be generally grouped 

together and appear in the order of the 

Model Forms in appendix A–10(a) 

through (d) of this part. As discussed 

above, the Bureau believes that grouping 

the fees required to be disclosed by 

proposed § 1005.18(b)(2)(i)(B)(1) 

through (4) in the top-line will more 

effectively direct consumers’ attention 

to these fees, which the Bureau believes 

are the most important fees. The Bureau 

also believes that, when it is applicable, 

the payroll card account or government 

benefit account notice banner should 

appear at the top of the short form to 

ensure consumers understand that they 

do not have to accept such an account. 

Finally, proposed § 1005.18(b)(4)(i)(A) 

would further state that the information 

required by proposed 

§ 1005.18(b)(2)(i)(B)(5) through (9) 

would have to be generally grouped 

together and appear in the order of the 

Model Forms in appendix A–10(a) 

through (d). The Bureau also proposes, 

in proposed § 1005.18(b)(4)(i)(A), that 

the textual information required by 

proposed § 1005.18(b)(2)(i)(B)(10) 

through (14) must be grouped together 

on the short form disclosure and in the 

order they appear in proposed Model 

Forms A–10(c) and (d). The Bureau 

recognizes that some consumers may 

focus only on fee information and not 

review textual information. Indeed, in 

testing, many consumers did not notice 

some of the textual information 

included on model forms until the 

facilitator pointed it out to them. The 

Bureau therefore seeks comment on 

whether there is a better way to group 

the textual information on the short 

form disclosure to increase the 

likelihood that consumers will read it. 

The Bureau further proposes in 

§ 1005.18(b)(4)(i)(A) that the URL of the 

Web site disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(11) would not be 

permitted to exceed twenty-two 

characters, and that it must be 

meaningfully named. By meaningfully 

named, the Bureau means a URL that 

uses real words or phrases, particularly 

those related to the actual prepaid 

account product. The Bureau believes 

twenty-two characters is the maximum 

length of a URL that can fit legibly on 

a short form disclosure that would fit on 

most existing retail packaging material. 


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The Bureau believes these parameters 

will ensure that a consumer can easily 

enter the URL of the Web site listed on 

the short form into a mobile device 

when shopping in a retail store in order 

to access the long form. Using a 

meaningfully named URL will also 

ensure that it is easy for a consumer to 

understand, which the Bureau believes 

will increase the likelihood that a 

consumer would utilize the URL to seek 

out more information about a prepaid 

account product. 

Nevertheless the Bureau seeks 

comment on all aspects of this part of 

the proposal. Specifically, the Bureau 

solicits comment on whether a 

requirement that the URL be 

meaningfully named could make it more 

challenging for financial institutions to 

use shortened URLs or other 

mechanisms on the short form to 

facilitate accessibility of the long form 

in retail locations. 

18(b)(4)(i)(B) Long Form Disclosures 

The Bureau proposes in 

§ 1005.18(b)(4)(i)(B) that all fees that 

may be imposed by the financial 

institution in connection with a prepaid 

account that proposed 

§ 1005.18(b)(2)(ii)(A) would require to 

be disclosed in the long form must be 

generally grouped together and 

organized by categories of function for 

which a consumer would utilize the 

service associated with each fee. The 

Bureau believes that disclosing fees in 

categories will aid consumers’ 

navigation of the long form disclosure, 

which would include all of a prepaid 

account’s fees and could be much longer 

than the short form disclosure. Proposed 

§ 1005.18(b)(4)(i)(B) would also require 

that text describing the conditions 

under which a fee could be imposed 

would have to appear in the table 

directly to the right of the numeric fee 

amount disclosed. The Bureau also 

proposes, in § 1005.18(b)(4)(i)(B), that 

the telephone number, Web site and 

mailing address, the statement regarding 

FDIC insurance, if applicable, and the 

CFPB Web site and telephone number, 

as required to be disclosed by proposed 

§ 1005.18(b)(2)(ii)(C) through (E) must 

be generally grouped together. Proposed 

§ 1005.18(b)(4)(i)(B) would also require 

that the information required by 

§ 1005.18(b)(2)(ii)(B) would have to be 

generally grouped together. 

18(b)(4)(i)(C) Multiple Service Plan 

Disclosures 

The Bureau proposes in 

§ 1005.18(b)(4)(i)(C) that when a 

financial institution provides 

disclosures in compliance with 

proposed § 1005.18(b)(3)(iii)(B)(1) and 

discloses the fee schedules of multiple 

service plans together on one short 

form, the fees required to be listed 

pursuant proposed § 1005.18 

(b)(2)(i)(B)(1) through (7) that vary 

among service plans must be generally 

grouped together, the fees that are the 

same across all service plans must be 

grouped together, as set forth in 

proposed appendix A–10(f). Proposed 

§ 1005.18(b)(4)(i)(C) would further state 

that if the periodic fee varies between 

service plans, the financial institution 

must use the term ‘‘plan fee,’’ or a 

substantially similar term when 

disclosing the periodic fee for each 

service plan. The Bureau believes that, 

when a financial institution chooses to 

disclose multiple service plans together 

on one short form, it is most useful for 

a consumer to see all the fees that vary 

among plans grouped together to more 

easily compare the different plans. The 

Bureau seeks comment on whether this 

grouping distinction for short forms that 

include multiple service plans makes 

sense. 

Proposed § 1005.18(b)(4)(i)(C) would 

also state that the incidence-based fees 

disclosed pursuant to proposed 

§ 1005.18 (b)(2)(i)(B)(8) must be grouped 

with the fees that are the same across all 

service plans as set forth in proposed 

Model Form A–10(f). The Bureau 

believes that since a financial institution 

would have to consider total incidence 

across all plans when determining its 

incidence-based fee disclosure to 

comply with proposed 

§ 1005.18(b)(2)(i)(B)(8), it makes sense 

that these fees would be grouped with 

the fees that are the same across all 

service plans. See proposed comment 

18(b)(2)(i)(B)(8)–1. 

18(b)(4)(ii) Prominence and Size 

Proposed § 1005.18(b)(4)(iii) would 

set forth the prominence and size 

requirements for the short form and long 

form disclosures. Generally, the Bureau 

believes that the information provided 

to consumers in the short and long form 

disclosure should appear in a large 

enough font size to ensure that 

consumers can easily read the 

information. Further, in its testing, the 

Bureau found that some participants 

had to use reading glasses or otherwise 

struggled to read existing prepaid 

account disclosures. Also, many 

participants reported a preference for 

larger font sizes to facilitate their ability 

both to read and to understand 

disclosures. Thus, as discussed below, 

the Bureau has proposed minimum font 

size requirements for both the short 

form and long form disclosures in order 

to ensure that consumers can easily read 

the disclosures. In addition, the Bureau 

believes that the relative font sizes of 

the disclosures made on the short form 

should ensure that consumers’ attention 

is quickly drawn to the most important 

information about a prepaid account. As 

described in more detail below, the 

Bureau is therefore also proposing 

certain minimum font sizes for the short 

form disclosure requirements described 

in proposed § 1005.18(b)(2)(i) in 

addition to the requirement that the topline fees (i.e., periodic fee, per purchase 

fees, ATM withdrawal fees, and cash 

reload fee) appear more prominently 

than all of the other information 

included on the short form to create a 

visual hierarchy of information. 

Proposed § 1005.18(b)(4)(ii)(A) would 

require that all text used to disclose the 

information pursuant to proposed 

§ 1005.18(b)(2) must be in a single, easyto-read type face. Proposed 

§ 1005.18(b)(4)(ii)(A) would also state 

that all text included in the tables that 

would be required to be disclosed by 

proposed § 1005.18(b)(3)(iii) would have 

to be all black or one color type and 

printed on a white or other neutral 

contrasting background whenever 

practical. The Bureau believes that 

contrasting colors for the text and the 

background of the short form and long 

form disclosures will make it easier for 

consumers to read the disclosure. The 

Bureau believes that using a black color 

for the text and a white color for the 

background of the form is the most clear 

presentation, but the Bureau also 

recognizes that other similarly dark 

colors for text with a neutral 

background color could just as clearly 

present the information. For example, 

when including the payroll card 

account notice banner at the top of the 

short form, a financial institution could 

use a grey background if the background 

of the rest of the short form is white. 

The Bureau believes this type of 

distinction would make it easier for a 

consumer to see that banner. 

Proposed § 1005.18(b)(4)(ii)(B)(1) 

would require that the information 

required to be disclosed by proposed 

§ 1005.18(b)(2)(i)(A) and proposed 

§ 1005.15(c)(2) for the payroll card 

account or government benefit account 

notices banners would have to appear in 

a minimum eight-point font or the 

corresponding pixel size and appear in 

no larger a font than what is used for the 

information required to be disclosed by 

proposed § 1005.18(b)(2)(i)(B)(1) 

through (4) in the top-line portion of the 

short form. Proposed 

§ 1005.18(b)(4)(ii)(B)(2) would require 

that the top-line fees required to be 

disclosed by proposed 

§ 1005.18(b)(2)(i)(B)(1) through (4) be 

more prominent than the other parts of 


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the disclosure required by proposed 

§ 1005.18(b)(2)(i) and appear in a 

minimum 11 point font or the 

corresponding pixel size. 

As discussed above, the Bureau 

believes that consumers commonly 

incur these top-line fees when a 

financial institution imposes charges for 

these services. In the Bureau’s consumer 

testing, participants reported that these 

fee disclosures were the most important 

to them. As discussed in the section-bysection analysis of proposed 

§ 1005.18(b)(2)(i)(B)(1) through (4), the 

Bureau recognizes that a financial 

institution may not charge a fee for all 

of these services. For example, a 

financial institution might not charge 

any per purchase fees when it imposes 

a monthly fee. The Bureau, however, 

still believes that such fees should be 

disclosed in a more prominent and 

larger font size than other information 

on the short form disclosure in order to 

draw consumers’ attention to this 

information before acquiring a prepaid 

account. In proposed Model Form A– 

10(f), the amounts of these fees appear 

in bold to make them more prominent 

than the other information on the short 

form. The Bureau is also proposing 

pixel sizes because it acknowledges that 

font sizes could vary when applied in 

electronic contexts. Though the font 

sizes may differ, the relative sizes of the 

components of the short form would 

have to remain consistent to maintain 

the visual hierarchy of information 

included in the form. 

Additionally, the Bureau proposes in 

§ 1005.18(b)(4)(ii)(B)(2) that the fee 

disclosures required by proposed 

§ 1005.18(b)(2)(i)(B)(5) through (9), 

namely, the ATM balance inquiry fees, 

inactivity fee, and incidence-based fees, 

must appear in a minimum eight-point 

font or the corresponding pixel size and 

appear in no larger a font than what is 

used to disclose the information 

required by proposed 

§ 1005.18(b)(2)(i)(B)(1) through (4). As 

discussed earlier, while the Bureau 

believes that these fees are important for 

a consumer to know pre-acquisition, the 

Bureau believes that these fees are less 

likely to drive most consumers’ 

acquisition decisions when shopping 

among prepaid accounts and thus 

should be disclosed using a smaller font 

size. 

Proposed § 1005.18(b)(4)(ii)(B)(2) 

would also require that the textual 

information disclosed on the short form 

pursuant to proposed 

§ 1005.18(b)(2)(ii)(10) through (14) must 

appear in a minimum seven-point font 

or corresponding pixel size and must 

appear in no larger a font than what is 

used to disclose the ATM balance 

inquiry fees, inactivity fee, and 

incidence-based fees that would have to 

be disclosed by proposed 

§ 1005.18(b)(2)(i)(B)(5) through (9). 

The Bureau notes that the proposed 

minimum font sizes are likely also the 

maximum sizes that could be used on 

the short form to ensure that it will still 

fit on most packaging material currently 

used in retail locations. In other 

acquisition scenarios, however, when 

space constraints are not as much of an 

issue, the Bureau expects that financial 

institutions would use larger versions of 

the short form. For example, when 

distributing disclosures for payroll card 

accounts in printed form, financial 

institutions could use 8.5 by 11 inch 

pieces of paper to present a larger 

version of the short form, as long as the 

form maintains the visual hierarchy of 

having the information on the short 

form gradually decrease in size from top 

to bottom. The Bureau further proposes 

in § 1005.18(b)(4)(ii)(B)(2) that the 

statement disclosed pursuant to 

proposed § 1005.18(b)(2)(i)(B)(10), and 

the telephone number and URL 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(11) must be more 

prominent than the information 

disclosed pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(12) through (14) 

and proposed § 1005.18(b)(2)(i)(C). The 

Bureau believes that it is particularly 

important for a consumer to see this 

information on the short form, and that 

making it more prominent than the 

other textual language on the short form 

could help to draw consumers’ attention 

to these disclosures. 

Proposed § 1005.18(b)(4)(ii)(B)(2) 

would also state that text used to 

distinguish each of the two fees that are 

required to be disclosed by proposed 

§ 1005.18(b)(2)(i)(B)(2), (3) and (5), or to 

explain the duration of inactivity that 

triggers a financial institution to impose 

an inactivity fee pursuant to proposed 

§ 1005.18(b)(2)(i)(B)(7) would have to 

appear in at least six-point font or 

corresponding pixel size and appear in 

no larger a font than what is used for 

information required to be disclosed by 

§ 1005.18(b)(2)(i)(B)(9) through (12). The 

Bureau believes that this descriptive 

information is less important than the 

actual fee information and therefore 

should be in a smaller font or pixel size. 

Finally, proposed 

§ 1005.18(b)(4)(ii)(B)(3) would require 

that the explanatory text disclosed 

pursuant to proposed 

§ 1005.18(b)(2)(i)(C) when any of the 

fees included on the short form could 

vary would have to be in a minimum 

seven-point font and appear in no larger 

the font than what is used to disclose 

the fees not in the top-line as required 

by proposed § 1005.18(b)(2)(i)(B)(5) 

through (8). The Bureau believes that 

this explanatory text should be in the 

same font size as the rest of the textual 

information included on the short form. 

The Bureau is proposing 

§ 1005.18(b)(4)(ii)(C) to require that the 

fees and other information required to 

be disclosed in the long form by 

proposed § 1005.18(b)(2)(ii) would have 

to appear in at least eight-point font or 

the corresponding pixel size. The 

Bureau believes that the long form, 

which will list all of a prepaid account’s 

fees, need only appear in a font that is 

clear enough for consumers to read. The 

Bureau does not believe any part of the 

long form should be more prominent 

than another part. Thus, the Bureau is 

not proposing any rules regarding the 

relative font size of information 

disclosed in the long form. 

The Bureau is proposing in 

§ 1005.18(b)(4)(ii)(D) that when 

providing disclosures in compliance 

with proposed § 1005.18(b)(3)(iii)(B)(1) 

and disclosing the fee schedules of 

multiple service plans together on one 

form, disclosures required by proposed 

§ 1005.18(b)(2)(i)(B)(1) through (9) must 

appear in a minimum seven-point font 

or the corresponding pixel size. 

Proposed § 1005.18(b)(4)(ii)(D) would 

also require the disclosures required by 

proposed § 1005.18(b)(2)(i)(B)(10) 

through (14) to appear in the font sizes 

set forth in proposed 

§ 1005.18(b)(4)(ii)(B)(2). 

18(b)(5) Segregation 

Proposed § 1005.18(b)(5) would 

explain that disclosures required under 

this section that are provided in writing 

or electronically would have to be 

segregated from everything else and 

could contain only information that is 

directly related to the disclosures 

required under this section. The Bureau 

believes it is important that only the 

information it would require to be 

disclosed be included on the short form 

and long form disclosures. As noted, 

financial institutions (or whatever entity 

is responsible for marketing the prepaid 

account) could use the remainder of a 

prepaid account’s packaging material or 

Web site to disclose other information to 

a consumer, but the Bureau believes it 

is important to limit the amount of 

information permitted in its required 

disclosures to protect the integrity of 

forms’ design. 

18(b)(6) Prepaid Accounts Acquired in 

Foreign Languages 

Regulation E generally permits, but 

does not require, that disclosures be 

made in a language other than English, 

provided that where foreign language 


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279The periodic statement must include 

transaction information for each EFT, the account 

number, the amount of any fees assessed, the 

beginning and ending account balance, the financial 

institution’s address and telephone number for 

inquiries, and a telephone number for 

preauthorized transfers. § 1005.9(b). 

disclosures are provided the disclosures 

are made available in English upon a 

consumer’s request. See § 1005.4(a)(2). 

When it issued regulations on 

remittance transfers, the Bureau altered 

Regulation E’s general requirement for 

foreign language disclosures to require 

disclosures be made in English in 

addition to a foreign language if that 

foreign language is used principally by 

the remittance transfer provider to 

advertise, solicit, or market remittance 

transfer services at the office in which 

the sender conducts a transaction or 

asserts an error. (§ 1005.31(g)(1)(i)). The 

Bureau amended Regulation E in this 

way pursuant to a statutory mandate in 

Section 1073 of the Dodd-Frank Act. 

The Bureau proposes also to modify 

the general Regulation E foreign 

language requirement for prepaid 

accounts such that proposed 

§ 1005.18(b)(6) would require that if a 

financial institution principally uses a 

foreign language on prepaid account 

packaging material, by telephone, in 

person, or on the Web site a consumer 

utilizes to acquire a prepaid account, 

the short form and long form disclosures 

made pursuant to proposed 

§ 1005.18(b)(2)(i) and (ii) would have to 

be provided in that same foreign 

language. A financial institution would 

also have to provide the long form 

required to be disclosed by proposed 

§ 1005.18(b)(2)(ii) in English upon a 

consumer’s request and on any part of 

the Web site where it provides the long 

form disclosure in a foreign language. 

As noted above, this proposal is made 

pursuant to the Bureau’s authority 

under EFTA sections 904(a) and (c), 

905(a), and Dodd-Frank Act section 

1032(a). The Bureau notes that this 

proposed approach to foreign language 

disclosures applies only to prepaid 

accounts and would not alter the 

application of the general Regulation E 

provision for any other type of account. 

The Bureau believes that if a financial 

institution is primarily using a foreign 

language on the interface that a 

consumer sees or uses to initiate the 

process of acquiring a prepaid account, 

consumers should receive preacquisition disclosures in that foreign 

language to ensure that they are able to 

understand them. The Bureau also 

believes that such a consumer might 

benefit from receiving the long form 

disclosure in both the foreign language 

and English in case a consumer is 

comfortable speaking the language, but 

may only read English, or if a family 

member who speaks English assists a 

consumer with managing their prepaid 

account. 

The Bureau recognizes, however, that 

requiring financial institutions to 

provide short form disclosures in two 

languages could be burdensome. The 

Bureau therefore seeks comment on 

whether it is feasible for financial 

institutions in all acquisition scenarios 

to provide the long form disclosure in 

English in addition to in the foreign 

language in which the account is 

marketed, and whether financial 

institutions typically already provide 

disclosures in both languages. The 

Bureau also solicits comment on 

whether financial institutions should 

also provide the short form disclosure in 

English in all cases. Proposed comment 

18(b)(6)–1 would provide several 

examples as to when financial 

institutions would have to provide the 

short form and long form disclosures in 

a foreign language. Specifically, the 

proposed comment would clarify that if, 

for example, a financial institution uses 

mostly Spanish on the packaging 

material of a prepaid account sold in a 

retail store, even though a few words 

appear in English, then the short form 

and, if accessed by the consumer, long 

form disclosure provided to a consumer 

must also be in Spanish. Proposed 

comment 18(b)(6)–1 would also clarify 

that if the homepage of the Web site a 

consumer visits to acquire a prepaid 

account is mostly in Spanish, the short 

form and long form disclosure a 

consumer receives pre-acquisition must 

also be in Spanish. Additionally, the 

proposed comment would clarify that a 

consumer who calls a telephone number 

to acquire a prepaid account and either 

speaks to a customer service agent in 

Spanish or interacts with an IVR system 

in Spanish must also receive the short 

form and long form information in 

Spanish in accordance with proposed 

§ 1005.18(b)(2)(ii). Finally, the proposed 

comment would clarify that if a 

consumer speaks with a customer 

service agent in a foreign language in a 

bank or credit union branch location, 

this would be considered ‘‘in person,’’ 

and a consumer would have to receive 

the short form and long form disclosures 

in that foreign language to comply with 

proposed § 1005.18(b)(6). 

18(b)(7) Disclosures on Prepaid Account 

Access Devices 

Proposed § 1005.18(b)(7) would 

require that certain disclosures be made 

on the actual prepaid account access 

device itself. Specifically, the Bureau 

proposes that financial institutions must 

disclose the name of the financial 

institution, the URL of a Web site, and 

a telephone number that a consumer can 

use to access information about a 

prepaid account. Proposed 

§ 1005.18(b)(7) would also state that if a 

financial institution does not provide a 

physical access device in connection 

with a prepaid account, the Bureau is 

proposing that the disclosure must 

appear at the URL or other entry point 

a consumer must visit to access the 

prepaid account electronically. The 

Bureau further proposes that disclosure 

made on an accompanying document, 

such as a terms and conditions 

document, on packaging material 

surrounding an access device, or on a 

sticker or other label affixed to an access 

device would not constitute a disclosure 

on the access device. Proposed 

comment 18(b)(7)–1 would clarify that a 

consumer might use this information 

disclosed on the access device to 

contact a financial institution with a 

question about a prepaid account’s 

terms and conditions, or to report when 

an unauthorized transaction has 

occurred involving a prepaid account. 

The Bureau believes it is important 

for a consumer to be able to access fee 

information, as well as check an 

account’s balance, and have a means for 

reporting unauthorized transactions, 

even after a consumer has acquired a 

prepaid account. Disclosing telephone 

numbers on an access device will allow 

consumers to access this information if 

they are not in the location where they 

have retained the disclosures or are not 

able to access disclosures via the 

internet. 

18(c) Access to Prepaid Account 

Information 

EFTA section 906(c) requires that a 

financial institution provide each 

consumer with a periodic statement for 

each account of such consumer that may 

be accessed by means of an electronic 

fund transfer. Section 1005.9(b), which 

implements EFTA section 906(c), 

generally requires a periodic statement 

for each monthly cycle in which an 

electronic fund transfer occurred or, if 

there are no such transfers, a periodic 

statement at least quarterly.279 Financial 

institutions must deliver periodic 

statements in writing and in a form that 

the consumer can keep, unless consent 

is received for electronic delivery or 

unless Regulation E provides otherwise. 

See §§ 1005.4(a)(1) and 1005.9(b). 

In the Payroll Card Rule, the Board 

modified the periodic statement 

requirement for payroll card accounts 

similar to what it had done previously 

for government benefit accounts under 

§ 1005.15. Pursuant to existing 


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280See Study of Prepaid Account Agreements, at 

18 tbl. 5. 

281See id. at 19 tbl. 6. 

282See id. at 21 tbl. 8. 

283Programs reviewed by CFSI included ‘‘cards 

issued by the largest program managers in the 

marketplace, as well as a selection of smaller 

program managers that have particularly innovative 

cards.’’ Ctr. for Fin. Services Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

6 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. 

284 Id. at 12. The CFSI study did not note, 

however, whether any prepaid programs might 

charge fees for these methods of accessing account 

information. 

285 Id. at 13. 

286 2014 Pew Study, at 19–20. 

§ 1005.18(b), financial institutions can 

provide periodic statements that comply 

with the general provisions in 

Regulation E, or alternatively, the 

institution must make available to the 

consumer: (1) The account balance, 

through a readily available telephone 

line; (2) an electronic history of account 

transactions that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)); 

and (3) a written history of account 

transactions that is provided promptly 

in response to an oral or written request 

and that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)). 

The Bureau is proposing new 

§ 1005.18(c)(1) and (2) to apply 

Regulation E’s periodic statement 

requirement to prepaid accounts, and an 

alternative that would allow financial 

institutions to instead provide access to 

account balance by telephone, at least 

18 months of transaction history online, 

and at least 18 months written 

transaction history upon request. 

Proposed § 1005.18(c)(3) would require 

financial institutions to disclose all fees 

assessed against the account, in any 

electronic or written account histories 

and periodic statements. In addition, the 

Bureau proposes in § 1005.18(c)(4) to 

require financial institutions to disclose, 

in any electronic or written account 

histories and periodic statements, 

monthly and annual summary total of 

the amount of all fees imposed on a 

prepaid account, and the total amounts 

of deposits to and debits from a prepaid 

account. 

As discussed below in the section-bysection analysis of proposed 

§ 1005.18(c)(1), (3), and (4), to further 

the purposes of EFTA to provide a 

framework to establish the rights, 

liabilities, and responsibilities of 

prepaid account consumers, the Bureau 

believes it is necessary and proper to 

exercise its authority under EFTA 

section 904(c) to propose an exception 

to the periodic statement requirements 

of EFTA section 906(c) and to modify 

the periodic statement requirements of 

EFTA section 906(c) to require inclusion 

of all fees charged and a summary total 

of both monthly and annual fees. These 

proposed revisions will assist 

consumers’ understanding of their 

prepaid account activity. In addition, 

the Bureau is also using its disclosure 

authority pursuant to the Dodd-Frank 

Act section 1032(a) because the Bureau 

believes that disclosure of fee and 

account activity summaries ensures that 

the features of prepaid accounts, over 

the term of the product or service, are 

fully, accurately, and effectively 

disclosed to consumers in a manner that 

permits consumers to understand the 

costs, benefits, and risks associated with 

prepaid accounts. 

18(c)(1) Periodic Statement Alternative 

As discussed above, financial 

institutions that issue payroll cards can 

provide periodic statements that comply 

with the general provisions in 

Regulation E, or alternatively, the 

institution must make available to the 

consumer: (1) The account balance, 

through a readily available telephone 

line; (2) an electronic history of account 

transactions that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)); 

and (3) a written history of account 

transactions that is provided promptly 

in response to an oral or written request 

and that covers at least 60 days 

(including all the information required 

in periodic statements by § 1005.9(b)). 

See existing § 1005.18(b). 

Relatedly, the FMS Rule requires a 

prepaid card receiving a Federal 

payment (such as Social Security 

benefits, Federal tax refunds, or Federal 

government wages) to satisfy several 

conditions, including that the card 

issuer must comply with all of the 

requirements of, and provide the 

cardholder with all of the consumer 

protections that apply to, a payroll card 

account under Regulation E. See 31 CFR 

210.5(b)(5). By virtue of the FMS Rule, 

the Bureau believes that a majority of 

prepaid account programs are presently 

complying with Regulation E’s periodic 

statement alternative for payroll card 

accounts. Indeed, in its Study of Prepaid 

Account Agreements, the Bureau found 

that almost all prepaid account 

agreements reviewed (including 99.03 

percent of agreements reviewed for GPR 

card programs) provide electronic 

access to account information; 280 a 

majority of programs reviewed 

(including 73.91 percent of agreements 

for GPR card programs) explicitly 

provide that transactional history is 

available for at least 60 days (which is 

consistent with the payroll card account 

alternative in existing § 1005.18(b)); 281

and most programs reviewed (including 

88.41 percent of agreements for GPR 

card programs) make clear that paper 

statements or paper account histories 

are available upon request.282

This is consistent with what other 

studies of the prepaid industry have 

found. For example, the Center for 

Financial Services Innovation (CFSI) 

found in its review of 18 GPR card 

programs,283 representing an estimated 

90 percent of the GPR card marketplace, 

that all card programs reviewed allowed 

cardholders to obtain balance 

information online, by calling customer 

service, by text message, or via mobile 

app or mobile-enabled Web site. CFSI 

found that eleven out of fifteen cards for 

which information was available 

(representing about 60 percent of the 

market sampled) provided at least two 

years of transactional data online, three 

provided one year of data, and one card 

provided six months of data.284 CFSI 

also found that fifteen cards 

(representing approximately 75 percent 

of the market sampled) allowed 

cardholders to make one-time requests 

for paper statements, and nine cards 

(about 40 percent of the market 

sampled) allowed cardholders to receive 

ongoing monthly statements, typically 

for a fee ranging between $1 and $3.285

In a recent review of 66 GPR card 

programs, the Pew Charitable Trusts 

found that 45 cards (68 percent) 

disclosed a paper statement fee ranging 

from 99 cents to $10, with a median fee 

of $2.95; seven cards (11 percent) 

disclosed that paper statements were 

free, and 14 cards (21 percent) did not 

disclose any fee (or lack thereof) for 

paper statements. Pew also found that 

65 cards (98 percent) disclosed that 

transaction information is provided 

online for free.286

In its Prepaid ANPR, the Bureau 

sought comment on whether it was 

appropriate to modify Regulation E’s 

general requirements for prepaid cards 

and, as an example, asked whether it 

was necessary to extend the requirement 

to provide periodic paper statements to 

prepaid cards. In response, most 

industry and trade association 

commenters recommended that the 

Bureau extend to prepaid cards the 

Payroll Card Rule’s alternative method 

of complying with Regulation E’s 

periodic statement requirement. Many 

of these commenters argued that paper 

statements are not a viable alternative 

for prepaid cards and that electronic 

access to account information—as 


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287As explained above in the section-by-section 

analysis of proposed § 1005.18(b)(3)(i), the E-Sign 

Act generally allows the use of electronic records 

to satisfy any statute, regulation, or rule of law 

requiring that such information be provided in 

writing, if a consumer has affirmatively consented 

to such use and has not withdrawn such consent, 

and certain format of delivery requirements are met. 288See 71 FR 51437, 51443 (Aug. 30, 2006). 

provided under the Payroll Card Rule— 

is more consistent with current 

consumer needs and expectations. They 

explained that consumers have shown 

little interest in receiving paper 

statements for prepaid accounts and that 

consumers prefer to have access to 

current and historical account 

information online. In addition, 

information contained on a monthly 

paper statement may be considered by 

consumers to be ‘‘stale’’ by the time it 

arrives. These commenters also cited the 

fact that prepaid card users are often 

transient which results in paper 

statements often being returned as 

undeliverable. Finally, industry 

commenters expressed concern that a 

paper statement requirement would be 

cost prohibitive and would ultimately 

result in fee increases. 

Consumer groups’ comments 

regarding whether the Bureau should 

require written periodic statements were 

mixed. Some groups urged that paper 

statements be provided by default for all 

prepaid accounts unless the consumer 

explicitly opts out. One group argued 

this was necessary because, based on its 

research, many cards do not provide 

account history information sufficient to 

determine whether an unauthorized 

transaction occurred. Several groups 

argued that prepaid accounts should be 

exempt from the paper statement 

requirement only if they offer no credit 

or overdraft features and the underlying 

funds are held in an account with 

deposit insurance. Other groups 

suggested that it is appropriate to forego 

paper statements for prepaid accounts 

so long as consumers are able to receive 

ad hoc paper statements upon request. 

The Bureau conducted additional 

outreach to industry regarding the usage 

of written statements by consumers and 

the cost to financial institutions of 

providing such statements. Based on 

this outreach, the Bureau believes that 

there may be significant costs in 

providing monthly paper statements for 

all prepaid accounts. Beyond the costs 

of printing and mailing statements, the 

Bureau also understands, based on 

industry outreach, that there could be a 

high incidence of returned mail due to 

the transient nature of some prepaid 

account users if paper periodic 

statements were required for all prepaid 

accounts. Further, in its focus groups 

and consumer testing, the Bureau asked 

participants if they were satisfied with 

the information they have about their 

account and whether they would value 

a monthly electronic or paper statement. 

The Bureau notes that almost no 

participants said that they would want 

to receive a monthly paper statement 

that they had not requested. Instead, 

almost all participants stated that free 

access to account information online 

and by telephone provided by prepaid 

issuers and program managers largely 

met their needs. 

Based on its analysis, the Bureau is 

proposing to extend to prepaid accounts 

the Payroll Card Rule’s alternative to 

providing periodic statements (existing 

§ 1005.18(c)(1)), with certain 

modifications that would be applicable 

to payroll card accounts as well as to 

prepaid accounts, as described below. 

The Bureau believes that the methods of 

access to account information in the 

Payroll Card Rule generally strike the 

appropriate balance between providing 

consumers the transactional history they 

need without unnecessarily burdening 

financial institutions. The Bureau 

believes that requiring written monthly 

statements to all prepaid card 

consumers could increase cost and 

burden. Thus, the Bureau is proposing 

to extend the Payroll Card Rule’s 

provisions regarding access to account 

information to prepaid accounts, with 

certain modifications as described 

below. As noted above, this proposed 

revision is authorized under EFTA 

section 904(c) and section 1032(a) of the 

Dodd-Frank Act. As with the Payroll 

Card Rule, financial institutions would 

generally be able to provide traditional 

periodic statements for prepaid 

accounts, whether in paper form or 

electronically with E-Sign consent,287 in 

lieu of the alternative in § 1005.18(c)(1) 

discussed below, but consistent with 

proposed § 1005.18(c)(3) and (4) below. 

18(c)(1)(i) 

As discussed above, a financial 

institution need not furnish periodic 

statements pursuant to § 1005.9(b) if it 

instead follows the periodic statement 

alternative for payroll card accounts. 

See existing § 1005.18(b)(1). The first 

part of that alternative, 

§ 1005.18(b)(1)(i), currently requires a 

financial institution to provide access to 

the consumer’s account balance through 

a readily available telephone line. The 

Bureau is proposing to extend this 

requirement in § 1005.18(b)(1)(i), 

renumbered as § 1005.18(c)(1)(i), to all 

prepaid accounts. The Bureau reminds 

financial institutions that, when 

providing balance information by 

telephone as part of the alternative to 

the § 1005.9(b) periodic statement 

requirement, neither they nor their 

service providers would be permitted to 

charge consumers for accessing this 

information required to be provided 

pursuant to proposed § 1005.18(c)(1)(i). 

As the Board explained in the 

supplementary information to the 

Payroll Card Rule, a readily available 

telephone line for providing balance 

information must be a local or toll-free 

telephone line that, at a minimum, is 

available during standard business 

hours. The Board noted that it expected 

that, in most cases, institutions would 

provide 24-hour access to balance 

information through an automated line, 

which would ensure that consumers 

could access balance information at 

their convenience. Because the Board 

believed that it might be operationally 

difficult for some institutions to provide 

information about 60 days’ worth of 

transactions through a telephone 

system, the Payroll Card Rule did not 

require institutions to provide 

information about specific transactions 

by telephone.288 For substantially 

similar reasons, the Bureau believes it is 

appropriate to propose extending 

existing § 1005.18(b)(1)(i), renumbered 

as new § 1005.18(c)(1)(i), to all prepaid 

accounts. 

As discussed above in the section-bysection analysis of proposed 

§ 1005.15(d)(1)(i), the periodic statement 

alternative for government benefit 

accounts (both currently and as 

proposed) requires access to balance 

information through a readily available 

telephone line as well as at a terminal 

(such as by providing balance 

information at a balance-inquiry 

terminal or providing it, routinely or 

upon request, on a terminal receipt at 

the time of an electronic fund transfer). 

The Bureau seeks comment on whether 

a similar requirement to provide balance 

information at a terminal should be 

added to the requirements of proposed 

§ 1005.18(c)(1)(i) for prepaid accounts 

generally. As noted above, the Bureau is 

also requesting comment on whether, 

alternatively, the requirement to provide 

balance information for government 

benefit accounts at a terminal should be 

eliminated from § 1005.15 given the 

other enhancements proposed therein 

and for parity with proposed § 1005.18. 

18(c)(1)(ii) 

The second part of the periodic 

statement alternative for payroll card 

accounts, § 1005.18(b)(1)(ii), currently 

requires financial institutions to provide 

an electronic history of the consumer’s 

account transactions, such as through a 

Web site, that covers at least 60 days 


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289As noted above, in its Study of Prepaid 

Account Agreements, the Bureau found that 97.85 

percent of all prepaid account agreements reviewed 

indicated that electronic access to account 

information was available; the remaining 2.15 

percent of agreements were unclear as to whether 

such access was available. See Study of Prepaid 

Account Agreements, at 18 tbl. 5. 

290The majority of account agreements reviewed 

in the Study of Prepaid Account Agreements that 

addressed access to account information with any 

specificity simply stated that account information 

would be available for at least the past 60 days 

(66.15 percent of all agreements reviewed), a small 

portion explicitly provided for a longer period (7.40 

percent), and the remainder were unclear as to the 

time period (26.46 percent). See id. at 19 tbl. 6. 

291See, e.g., Ctr. for Fin. Services Innovation, 

Prepaid Industry Scorecard, Assessing Quality in 

the Prepaid Industry with CFSI’s Compass 

Principles, at 12 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf (finding that about 60 

percent of the market sampled, which is estimated 

to represent approximately 90 percent of the GPR 

card marketplace, allowed cardholders to access at 

least two years of transactional data online; the 

remaining products provided six months or one 

year of data). 

292The Study of Prepaid Accounts found that 

57.54 percent of agreements reviewed specifically 

stated that electronic periodic statements (rather 

than just electronic access to account history) are 

available. See Study of Prepaid Account 

Agreements, at 20 tbl. 7. 

preceding the date the consumer 

electronically accesses the account. 

Based on the Bureau’s Study of Prepaid 

Account Agreements, other public 

studies, and outreach, the Bureau 

believes that virtually all prepaid 

account providers make available some 

form of free electronic access to balance 

and transaction history information 289

and that at least 60 days of account 

history is typically provided.290 Further, 

the Bureau believes that, based on its 

outreach to industry stakeholders and 

recent public studies, many prepaid 

programs provide more extensive online 

account history information than is 

currently required by the Payroll Card 

Rule (60 days).291 Some prepaid account 

providers also offer periodic (e.g., 

monthly) electronic statements at no 

charge in addition to account history.292

The Bureau is proposing to extend 

this requirement in existing 

§ 1005.18(b)(1)(ii) to prepaid accounts, 

renumbered as new § 1005.18(c)(1)(ii), 

and to expand the length of time that 

online access must cover from 60 days 

to 18 months. The Bureau is proposing 

to extend this time period because it 

believes that based on how consumers 

are currently using prepaid accounts, 

more than 60 days of account history 

may be, in many cases, beneficial for 

consumers. While recent account 

history is important for consumers 

tracking balances or monitoring for 

unauthorized transactions, a longer 

available account history serves a 

variety of potential purposes. For 

example, some consumers might need to 

demonstrate on-time bill payment or to 

compile year-end data for tax 

preparation purposes. The Bureau also 

believes that a consumer may realize 

during any given year that he needs 

financial records from the prior calendar 

year and that access to 18 months of 

prepaid account history will give the 

consumer six months into the next 

calendar year to make such a request. In 

addition, based on outreach to prepaid 

account providers and recent publicly 

available studies, as discussed above, 

the Bureau believes that many prepaid 

accounts provide at least 12 months of 

account history and that, even if they do 

not, the cost of extending existing 

online histories to 18 months should be 

minimal. The Bureau reminds financial 

institutions that, when providing 

electronic access to account information 

as part of the alternative to the 

§ 1005.9(b) periodic statement 

requirement, neither they nor their 

service providers would be permitted to 

charge consumers for providing access 

to account information required 

pursuant to proposed § 1005.18(c)(1)(ii). 

Alternative Approaches Considered by 

the Bureau 

The Bureau considered other 

alternatives to the Payroll Card Rule’s 

approach regarding access to account 

information. Among them, the Bureau 

considered proposing to require 

electronic periodic statements for all 

prepaid accounts, in addition to ongoing 

electronic access to account 

information. An electronic periodic 

statement requirement would require 

providers to deliver electronic periodic 

statements to consumers, even if the 

provider did not have the consumer’s ESign consent. The Bureau viewed this as 

a potential, less-costly alternative to 

written statements. However, the 

Bureau questions whether the benefit of 

providing electronic periodic statements 

would justify the cost given that the 

existing Payroll Card Rule and this 

proposal require that electronic and 

written histories of account transactions 

provided as an alternative to § 1005.9(b) 

contain the information set forth in 

§ 1005.9(b) for periodic statements 

generally. See section-by-section 

analysis of proposed § 1005.18(c)(2). 

The Bureau additionally considered 

proposing to require financial 

institutions that do not provide periodic 

statements pursuant to § 1005.9(b) to 

periodically send an informational 

email or text message notification to 

consumers, for example, noting the 

prepaid account’s remaining balance. 

The Bureau similarly considered 

requiring financial institutions to 

contact consumers by email or text 

message each time an inactivity, 

dormancy, or similar fee is assessed on 

the consumer’s prepaid account. Such 

requirements would help remind 

consumers of the existence of prepaid 

accounts that they may have forgotten or 

have otherwise left dormant with 

unused balances. The Bureau 

considered that such requirements 

likely would be limited to those prepaid 

accounts for which consumers provided 

email addresses or mobile phone 

numbers and consented to receive such 

communications from the financial 

institution. The Bureau ultimately 

concluded, however, not to include 

such a requirement in this Proposed 

Rule because such a requirement may be 

overly burdensome given that 

consumers would have other access to 

account balance and transactional 

history under the proposal. The Bureau 

solicits comments on periodic statement 

alternatives on prepaid accounts. 

In the context of overdraft and other 

credit features on prepaid accounts, 

discussed in more detail below, the 

Bureau has considered the possibility of 

requiring additional real-time 

notifications of transactions triggering 

an overdraft or the accessing of a linked 

credit feature, or requiring real-time optin by consumers in order to approve 

each overdraft or other credit 

transaction in addition to what it 

proposes herein (and not in lieu of what 

§ 1005.17 requires for deposit accounts). 

The Bureau understands that there may 

be technological, operational, and 

procedural challenges to the timing and 

delivery of such a notice or compliance 

with such an opt-in requirement, 

particularly in the point of sale retail 

environment. The Bureau is unsure at 

this time whether such a procedure 

could be implemented given that 

notifications and/or consent might 

require multiple communications 

among financial institutions, card 

networks, and merchants. To the extent 

such real-time notification and consent 

could be provided or obtained by 

mobile device or other means, the 

Bureau continues to monitor 

developments with respect to real-time 

opt-in. Accordingly, the Bureau is not 

proposing any requirements related to 

real-time notification or opt-in, but 

solicits comment on possible options 

and suggestions for what it might 

require in this regard for prepaid 

accounts. 

18(c)(1)(iii) 

The third part of the periodic 

statement alternative for payroll card 

accounts, § 1005.18(b)(1)(iii), currently 

requires financial institutions to provide 


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293The Study of Prepaid Account Agreements 

found that, across all agreements reviewed, 89.23 

percent stated that paper statements or account 

histories are available. For payroll card programs, 

96 percent of agreements reviewed stated that paper 

statements or account histories were available, and 

100 percent for government benefit cards. For GPR 

cards, 88.41 percent of agreements, and 64.29 

percent of agreements for all other types of 

programs stated that paper statements or account 

histories were available. See Study of Prepaid 

Account Agreements, at 21 tbl. 8. 

294The Study of Prepaid Account Agreements 

found that, across all agreements reviewed that 

indicated a paper statement or account history is 

available, 32.41 percent do not charge a fee; 46.90 

percent specifically state a fee; 8.62 percent 

indicated that a fee would be charged but did not 

list the amount; and for 12.07 percent of agreements 

the Bureau was unable to find fee information for 

the programs generally. See id. at 22 tbl. 9. 

295The Study of Prepaid Account Agreements 

found that, across all agreement reviewed, the 

average fee charged in the 136 agreements that 

specified a non-zero fee amount was $3.54 and the 

median fee was $2.98. See id. at 23 tbl. 10. 

296See Ctr. for Fin. Services Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

13 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/_Prepaid_

Industry_Scorecard_2014.pdf. 297See 71 FR 51437, 51444 (Aug. 30, 2006). 

a written history of the consumer’s 

account transactions promptly in 

response to an oral or written request, 

which covers at least 60 days preceding 

the date the financial institution 

receives the consumer’s request. Similar 

to electronic account access above, the 

Bureau is proposing to extend this 

requirement in current 

§ 1005.18(b)(1)(iii) to all prepaid 

accounts, renumbered as proposed 

§ 1005.18(c)(1)(iii), and to expand the 

length of time for which written history 

must be provided from 60 days to 18 

months. 

In its Study of Prepaid Account 

Agreements, the Bureau found that most 

of the agreements reviewed indicate that 

paper account histories or paper 

statements are made available upon 

request.293 For those agreements that 

indicate fees are charged for providing 

paper account histories or statements,294

the amount of the fee varied widely 

(ranging from $0.75 to $10).295 As 

discussed previously, CFSI found 15 out 

of 18 GPR cards it reviewed 

(representing approximately 75 percent 

of the market sampled) allowed 

cardholders to make one-time requests 

for paper statements, and nine cards 

(about 40 percent of the market 

sampled) allowed cardholders to receive 

ongoing monthly statements, typically 

for a fee ranging between $1 and $3.296

As discussed above, the Bureau 

understands from outreach to industry 

and its own consumer research that 

consumer utilization of written account 

histories is very low, regardless of 

whether a fee is charged to obtain such 

information. Of those prepaid account 

providers that shared specific statistics 

with the Bureau, none had greater than 

one percent of active customers 

requesting written histories for GPR 

cards on a regular basis, regardless of 

whether the entity made electronic 

statements available as well. The Bureau 

also observed during its consumer focus 

groups that participant receipt of or 

desire for written account histories was 

very low. 

The Bureau is proposing to extend 

existing comment 18(b)–1, which 

requires that the history of transactions 

provided under existing 

§ 1005.18(b)(1)(ii) and (iii) reflect 

transactions once they have been posted 

to the account, and comment 18(b)–2 

regarding retainability of electronic 

account history, to all prepaid accounts 

as new comments 18(c)–1 and –2, and 

revise the internal paragraph references 

to conform with other numbering 

changes the Bureau is proposing, but 

otherwise leave these two comments 

unchanged. 

As the Board explained in the Payroll 

Card Rule, it anticipated that, in general, 

written account histories would be sent 

the next business day or soon after an 

institution receives the consumer’s oral 

or written request. The Board explained 

that institutions also may designate a 

specific telephone number for 

consumers to call and a specific address 

for consumers to write to request a 

written copy of account transactions. 

The Board also noted that, although 

§ 1005.18 does not address the issue, it 

believed that charging fees to consumers 

who make occasional requests for 

written histories could have a chilling 

effect on consumers’ ability to obtain 

information about transactions and, 

thus, to exercise their error resolution 

rights.297 The Bureau shares these 

concerns. 

The Bureau reminds financial 

institutions that, when providing 

written account histories upon request 

as part of the alternative to the 

§ 1005.9(b) periodic statement 

requirement, generally, neither they nor 

their service providers would be 

permitted charge consumers for 

providing this required information 

pursuant to proposed 

§ 1005.18(c)(1)(iii). During the Bureau’s 

outreach, many industry participants 

indicated that consumers very rarely 

make these types of requests, so the 

Bureau does not anticipate that this 

requirement would pose a significant 

burden. 

The Bureau recognizes, however, that 

in certain situations consumers’ 

requests for written account information 

may exceed what would be required 

under the proposal; therefore, the 

Bureau is proposing to clarify in new 

comment 18(c)–3 those instances where 

a financial institution would be 

permitted to charge a fee for providing 

such information. Proposed comment 

18(c)–3 would include several examples 

of requests that exceed the requirements 

of proposed § 1005.18(c)(1) for 

providing account information and for 

which a financial institution would be 

permitted to charge a fee. A financial 

institution may assess a fee or charge to 

a consumer for responding to 

subsequent requests for written account 

information made in a single calendar 

month. For example, if a consumer 

makes a request for 18 months of 

written account transaction history on 

June 1 and makes a request for 18 

months of written history on August 5, 

the financial institution may not assess 

a fee or charge to the consumer for 

responding to either request. However, 

if the consumer requests 18 months of 

written history on June 1 and then 

makes the same request on June 15, the 

financial institution may assess a fee or 

charge to the consumer for responding 

to the request made on June 15, as this 

is the second request in the same 

month. If a financial institution 

maintains more than 18 months of 

account transaction history, it may 

assess a fee or charge to the consumer 

for providing a written history of the 

consumer’s account information for 

transactions occurring more than 18 

months prior to the date the institution 

receives the consumer’s request, 

provided the consumer specifically 

requests the account transaction history 

for that time period. If a financial 

institution offers a consumer the ability 

to request automatic mailings of written 

history on a monthly or other periodic 

basis, it may, at its option, assess a fee 

or charge for such automatic mailings 

but not for account history requested 

pursuant to proposed 

§ 1005.18(c)(1)(iii). 

Proposed comment 18(c)–4 would 

explain that a financial institution may 

provide fewer than 18 months of written 

account transaction history if the 

consumer requests a shorter period of 

time. If a prepaid account has been open 

for fewer than 18 months, the financial 

institution need only provide account 

information pursuant to proposed 

§ 1005.18(c)(1)(ii) and (iii) since the 

time of account opening. If a prepaid 

account is closed or becomes inactive, 

as defined by the financial institution, 

the financial institution must continue 

to provide at least 18 months of account 

transaction information from the date 


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the request is received. When a prepaid 

account has been closed or inactive for 

18 months, the financial institution is 

no longer required to make available 

any account or transaction information 

available. The proposed comment 

references existing comment 9(b)–3, 

which provides that, with respect to 

written periodic statements, a financial 

institution need not send statements to 

consumers whose accounts are inactive 

as defined by the institution. The 

Bureau expects that for purposes of 

proposed comment 18(c)–4, a financial 

institution would similarly define for 

itself the threshold for when it considers 

a prepaid account inactive, consistent 

with existing comment 9(b)–3. 

The Bureau requests comment on all 

aspects of proposed § 1005.18(c)(1) 

regarding access to prepaid account 

information and commentary related 

thereto. In particular, the Bureau seeks 

comment on the methods of access 

consumers need to their account 

information, and the time period needed 

for such access. Additionally, the 

Bureau requests comment on other 

alternatives for providing access to 

account information, as well as 

potential changes to what is proposed 

herein. 

18(c)(2) Information Included on 

Electronic or Written Histories 

Section 1005.18(b)(2) currently states 

that the history of account transactions 

provided under § 1005.18(b)(1)(ii) and 

(iii) must include the information set 

forth in § 1005.9(b). Section 1005.9(b) 

lists the various items that must be 

included in periodic statements, 

including, but not limited to, detailed 

transaction information and fees 

assessed. The Bureau proposes to 

renumber existing § 1005.18(b)(2) as 

new § 1005.18(c)(2) and revise the crossreferences to correspond with proposed 

§ 1005.18(c)(1)(ii) and (iii), but 

otherwise leave this requirement 

unchanged. The Bureau solicits 

comment on this proposed approach. 

18(c)(3) Inclusion of All Fees Charged 

The Bureau is proposing to require in 

new § 1005.18(c)(3) that a periodic 

statement furnished pursuant to 

§ 1005.9(b) for a prepaid account, an 

electronic history of account 

transactions whether provided under 

proposed § 1005.18(c)(1)(ii) or 

otherwise, and a written history of 

account transactions provided under 

proposed § 1005.18(c)(1)(iii) must 

disclose the amount of any fees assessed 

against a prepaid account, whether for 

electronic fund transfers or otherwise. 

EFTA section 906(c), generally 

implemented in § 1005.9(b), provides 

that, among other things, a periodic 

statement must include the amount of 

any fees assessed against an account for 

electronic fund transfers or account 

maintenance. The Bureau notes that 

Regulation DD requires that periodic 

statements disclose all fees debited to 

accounts covered by that regulation. 

§ 1030.6(a)(3). Regulation DD defines 

‘‘account’’ to mean ‘‘a deposit account at 

a depository institution that is held by 

or offered to a consumer. It includes 

time, demand, savings, and negotiable 

order of withdrawal accounts.’’ 

§ 1030.2(a). Because some prepaid 

accounts, as proposed herein to be 

defined under Regulation E, may not 

also constitute accounts as defined 

under Regulation DD, the Bureau is 

proposing new § 1005.18(c)(3) to ensure 

that periodic statements and histories of 

account transactions for all prepaid 

accounts include all fees, not just those 

related to electronic fund transfers and 

account maintenance. As noted above, 

this proposed revision is authorized 

under EFTA section 904(c) and section 

1032(a) of the Dodd-Frank Act. 

The Bureau solicits comment on this 

portion of the proposal. In addition, the 

Bureau seeks comment on whether any 

other specific protections of Regulation 

DD, which may not apply to prepaid 

accounts provided by financial 

institutions (as defined in Regulation E) 

that are not depository institutions (as 

defined in Regulation DD), could be 

addressed for all prepaid accounts to 

ensure consistent protections for 

prepaid accounts regardless of who is 

providing the account. 

18(c)(4) Summary Totals of Fees, 

Deposits, and Debits 

The Bureau is proposing new 

§ 1005.18(c)(4) to require that financial 

institutions provide a summary total of 

the amount of all fees assessed against 

the consumer’s prepaid account, the 

total amount of all deposits to the 

account, and the total amount of all 

debits from the account, for the prior 

calendar month and for the calendar 

year to date. This information would be 

disclosed on any periodic statement 

provided pursuant to § 1005.9(b), in any 

electronic history of account 

transactions whether provided pursuant 

to proposed § 1005.18(c)(ii)or otherwise, 

and on any written history of account 

transactions provided pursuant to 

proposed § 1005.18(c)(iii). As discussed 

above, the Bureau is concerned that 

disclosure of a single ‘‘all-in’’ estimation 

of fees on a prepaid product’s packaging 

or elsewhere in pre-acquisition 

disclosures would not be feasible and 

ultimately would not provide useful 

information to consumers. The Bureau 

believes, however, that providing 

summary information about actual 

account usage (including fees incurred) 

would be useful to consumers in 

understanding their actual costs in 

using a particular prepaid account. As 

noted above, this proposed revision is 

authorized under EFTA section 904(c) 

and Dodd-Frank Act 1032(a). This 

summary total of fees proposal is similar 

to the requirement to disclose fees and 

interest in open end credit plans under 

Regulation Z. See 12 CFR 1026.7(b)(6). 

The summary total of fees would 

include all fees assessed against the 

prepaid account in each calendar 

month, as well as a total for the year-todate. The summary totals of both 

monthly and annual fees paid, and the 

totals of deposits to and debits from the 

account on a monthly and annual basis, 

would be updated on an ongoing basis 

for each month and each year in the 

prepaid account’s online transaction 

history, and would be disclosed in any 

ad hoc written transaction history 

provided in response to a consumer’s 

request or in a periodic statement. 

Proposed comment 18(c)–5 would 

explain that if a financial institution 

provides periodic statements pursuant 

to § 1005.9(b), total fees, deposits, and 

debits may be disclosed for each 

statement period rather than each 

calendar month, if different. Proposed 

comment 18(c)–5 would also explain 

that the fees that must be included in 

the summary total include those that are 

required to be disclosed pursuant to 

§ 1005.18(b)(2)(ii)(A). For example, an 

institution must include the fee it 

charges a consumer for using an out-ofnetwork ATM in the summary total of 

fees, but it need not include any fee 

charged by an ATM operator with 

whom the institution has no 

relationship for the consumer’s use of 

that operator’s ATM. 

In addition, proposed comment 18(c)– 

5 would explain that the summary total 

of fees should be net of any fee 

reversals. The total amount of all debits 

from the account should be exclusive of 

fees assessed against the account. 

Finally, proposed comment 18(c)–5 

would explain that the total deposits 

and total debits must include all 

deposits to and debits from the prepaid 

account, not just those deposits and 

debits that are the result of electronic 

fund transfers. 

The Bureau solicits comment on this 

portion of its proposal. In particular, the 

Bureau seeks comment on whether 

financial institutions are able to discern 

the amount of third party fees charged 

to a consumer’s prepaid account (such 

as fees imposed by an ATM operator 

where the financial institution has no 


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298The required disclosures for this purpose 

include a summary of the consumer’s liability 

under § 1005.6, or under State law or other 

applicable law or agreement, for unauthorized 

electronic fund transfers; the telephone number and 

address of the person or office to be notified when 

the consumer believes an unauthorized transfer has 

been or may be made; and the financial institution’s 

business days. See §§ 1005.6(a) and 1005.7(b)(1) 

through (3). 

relationship with the operator) and 

whether it would therefore be feasible 

for financial institutions to include such 

third party fees in this summary total of 

fees. The Bureau also seeks comment on 

whether and how credit accessed by a 

prepaid account, and the fees and 

finance charges related thereto, should 

be reflected in these proposed summary 

totals of fees, deposits and debits for the 

prepaid account. 

18(d) Modified Disclosure Requirements 

The Bureau is proposing to extend the 

requirements in existing § 1005.18(c)(1) 

related to initial disclosures regarding 

access to account information and error 

resolution, and in existing 

§ 1005.18(c)(2) regarding annual error 

resolution notices, to all prepaid 

accounts. The Bureau proposes to 

renumber existing § 1005.18(c)(1) and 

(2) as new § 1005.18(d)(1) and (2) for 

organizational purposes and to separate 

the modified requirements related to 

disclosures in existing § 1005.18(c)(1) 

and (2) from the modifications for 

limitations on liability and error 

resolution requirements in existing 

§ 1005.18(c)(3) and (4). See section-bysection analysis of proposed 

§ 1005.18(e). The Bureau proposes to 

adjust the internal cross-references in 

new § 1005.18(d) in light of the various 

paragraph numbering changes and other 

revisions proposed throughout 

§ 1005.18. 

EFTA section 905(a)(7) requires 

financial institutions to provide 

consumers with an annual error 

resolution notice. The annual error 

resolution notice provision for payroll 

card accounts in existing § 1005.18(c)(2) 

permits a financial institution, in lieu of 

providing an annual notice concerning 

error resolution, to include an 

abbreviated error resolution notice on or 

with each electronic and written history 

provided in accordance with existing 

§ 1005.18(b)(1). Financial institutions 

providing periodic statements are 

similarly permitted to provide an 

abbreviated error resolution notice on or 

with each periodic statement pursuant 

to § 1005.8(b). The Bureau considered 

limiting the requirement to provide 

annual error resolution notices to only 

active and registered prepaid accounts, 

but given this existing alternative for 

providing an abbreviated notice with 

electronic and written history, the 

Bureau does not believe such a 

modification is necessary. To further the 

purposes of EFTA to provide a 

framework to establish the rights, 

liabilities, and responsibilities of 

prepaid account users, the Bureau 

believes it is necessary and proper to 

exercise its authority under EFTA 

section 904(c) to propose an adjustment 

to the error resolution notice 

requirement of EFTA section 905(a)(7), 

to permit notices for prepaid accounts 

as described in proposed 

§ 1005.18(d)(2), in order to facilitate 

compliance with error resolution 

requirements. 

The Bureau requests comment on the 

application of these provisions for 

initial disclosures regarding access to 

account information and error 

resolution, and annual error resolution 

notices, to all prepaid accounts. 

Specifically, the Bureau seeks comment 

on whether financial institutions would 

face particular challenges in providing 

annual error resolution notices to all 

consumers using prepaid accounts, as 

well as whether it should require that 

annual error resolution notices be sent 

for prepaid accounts in certain 

circumstances, such as those accounts 

for which a consumer has not accessed 

an electronic history or requested in 

written history in an entire calendar 

year and thus would not have received 

any error resolution notice during the 

course of the year. 

18(e) Modified Limitations on Liability 

and Error Resolution Requirements 

EFTA section 908 governs the timing 

and other requirements for consumers 

and financial institutions pertaining to 

error resolution, including provisional 

credit. EFTA section 909 governs 

consumer liability for unauthorized 

electronic fund transfers. The Bureau is 

proposing to extend the Payroll Card 

Rule’s limited liability provisions and 

error resolution provisions, including 

provisional credit, to all prepaid 

accounts. The Bureau also proposes to 

reorganize existing § 1005.18(c)(3) and 

(4) into proposed § 1005.18(e)(1) and (2) 

and to revise the paragraph headings for 

proposed § 1005.18(e), (e)(1) and (e)(2). 

Similar to the reorganization of existing 

§ 1005.18(c)(1) and (2) above, these 

changes are proposed to simplify the 

organization of proposed § 1005.18 

generally and to separate the modified 

requirements related to limited liability 

and error resolution from other 

modifications made for prepaid 

accounts. 

As discussed below in the section-bysection analysis of proposed 

§ 1005.18(e)(1), (2), and (3), the Bureau 

proposes to modify Regulation E’s 

limited liability and error resolution 

timing requirements for prepaid 

accounts to accommodate how account 

information would be delivered by 

financial institutions choosing to follow 

the periodic statement alternative in 

proposed § 1005.18(c)(1) discussed 

above, and to exempt unverified prepaid 

accounts from the limited liability and 

error resolution requirements. To 

further the purposes of EFTA to provide 

a framework to establish the rights, 

liabilities, and responsibilities of 

prepaid account users and to facilitate 

compliance with its provisions, the 

Bureau believes it is necessary and 

proper to exercise its authority pursuant 

to EFTA section 904(c) to modify the 

timing requirements of EFTA section 

909(a) and to except unverified prepaid 

accounts from the error resolution and 

limited liability requirements of EFTA 

sections 908 and 909 to the extent such 

accounts remain unverified. 

18(e)(1) Modified Limitations on 

Liability Requirements 

EFTA section 909 addresses consumer 

liability and is implemented in § 1005.6. 

For accounts under Regulation E 

generally, including payroll card 

accounts, § 1005.6(a) provides that a 

consumer may be held liable for an 

unauthorized electronic fund transfer 

resulting from the loss or theft of an 

access device only if the financial 

institution has provided certain 

required disclosures and other 

conditions are met.298 If the consumer 

provides timely notice to the financial 

institution within two business days of 

learning of the loss or theft of the access 

device, the consumer’s liability is the 

lesser of $50 or the amount of 

unauthorized transfers made before 

giving notice. § 1005.6(b)(1). If timely 

notice is not given, the consumer’s 

liability is the lesser of $500 or the sum 

of (1) the lesser of $50 or the amount of 

unauthorized transfers occurring within 

two business days of learning of the 

loss/theft and (2) the amount of 

unauthorized transfers that occur after 

two business days but before notice is 

given to the financial institution. 

§ 1005.6(b)(2). Section 1005.6(b)(3) 

provides, in part, that a consumer must 

report an unauthorized electronic fund 

transfer that appears on a periodic 

statement within 60 days of the 

financial institution’s transmittal of the 

statement in order to avoid liability for 

subsequent transfers. 

Existing § 1005.18(c)(3)(i) provides 

that, for payroll card accounts following 

the periodic statement alternative in 

existing § 1005.18(b), the 60-day period 

in § 1005.6(b)(3) for reporting 


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77182 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

299The Study of Prepaid Account Agreements 

found that across all prepaid account agreements 

reviewed, 88.92 percent provided full limited 

liability; 8.31 percent partially limited consumers’ 

liability; and 2.77 percent did not appear to provide 

consumers with any limited liability protections. 

Excluding agreements for payroll card and 

government benefit card programs (100 percent of 

each provided full limited liability protections), 

88.02 percent of agreements for GPR card programs 

and 64.28 percent of all other programs’ agreements 

provide full limited liability protections to 

consumers. See Study of Prepaid Account 

Agreements, at 16 tbl. 4. 

300Ctr. for Fin. Services Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

12 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. 

301The Bureau is proposing an additional 

modification in proposed § 1005.18(e)(3), discussed 

below, to provide an exception to the requirement 

to provide limited liability protection when a 

financial institution has not completed collection of 

consumer identifying information and identity 

verification for a prepaid account, assuming notice 

of the risk of not registering the prepaid account has 

been provided to the consumer. 

302The financial institution has 90 days (instead 

of 45) if the claimed unauthorized electronic fund 

transfer was not initiated in a state, resulted from 

a point-of-sale debit card transaction, or occurred 

within 30 days after the first deposit to the account 

was made. § 1005.11(c)(3)(ii). 

unauthorized transfers begins on the 

earlier of (1) the date the consumer 

electronically accesses his account 

under § 1005.18(b)(1)(ii), provided that 

the electronic history reflects the 

transfer, or (2) the date the financial 

institution sends a written history of the 

consumer’s account transactions 

requested by the consumer under 

§ 1005.18(b)(1)(iii) in which the 

unauthorized transfer is first reflected. 

Alternatively, existing § 1005.18(c)(3)(ii) 

provides that a financial institution may 

comply with the requirements of 

§ 1005.18(c)(3)(i) by limiting a 

consumer’s liability for an unauthorized 

transfer as provided under § 1005.6(b)(3) 

for any transfer reported by the 

consumer within 120 days after the 

transfer was credited or debited to the 

consumer’s account. The Bureau notes 

that this provision only modifies the 60- 

day period for consumers to report an 

unauthorized transfer and does not alter 

any other provision of § 1005.6. 

In response to the Prepaid ANPR, the 

Bureau received few comments 

specifically regarding limited liability 

requirements. Most industry, trade 

association, and consumer advocacy 

group commenters suggested that GPR 

cards should generally be treated the 

same as payroll card accounts under 

Regulation E (except with respect to 

access to account information, 

discussed above, and provisional credit, 

discussed below). A few commenters, 

however, urged against extending 

protections for lost or stolen cards, 

arguing that there is a potential for 

abuse by some consumers, or suggested 

that modified liability provisions are 

needed to account for the increased 

risks they claimed are associated with 

prepaid products. 

The Bureau’s Study of Prepaid 

Account Agreements found that the vast 

majority of programs reviewed limit 

consumer liability in accordance with 

existing Regulation E provisions.299

Similarly, CFSI found that all 18 

programs in its review (representing an 

estimated 90 percent of the GPR card 

marketplace) had adopted the Payroll 

Card Rule’s version of Regulation E 

error resolution and limited liability 

protections.300

The Bureau is proposing to extend to 

all prepaid accounts the existing limited 

liability provisions of Regulation E with 

modifications to the § 1005.6(b)(3) 

timing requirements in proposed 

§ 1005.18(e)(1) for financial institutions 

following the periodic statement 

alternative in proposed 

§ 1005.18(c)(1).301 The text of proposed 

§ 1005.18(e)(1) would update internal 

paragraph citations to reflect other 

numbering changes made in this 

proposal and add the word 

‘‘unauthorized’’ to refer to the transfer 

discussed in proposed 

§ 1005.18(e)(1)(i)(A) for consistency 

with usage elsewhere in proposed 

§ 1005.18(e)(1), but otherwise would 

remain unchanged from existing 

§ 1005.18(c)(3). Related commentary is 

discussed below in the section-bysection analysis of proposed 

§ 1005.18(e)(2). The Bureau notes that 

this proposal does not modify the 

requirement to comply with existing 

§ 1005.6(b)(4), regarding an extension of 

time limits if a consumer’s delay in 

notifying the financial institution was 

due to extenuating circumstances, nor 

any other provisions of § 1005.6. As 

discussed above, this proposed revision 

is authorized under EFTA section 

904(c). The Bureau seeks comments on 

all aspects of this part of the proposal. 

18(e)(2) Modified Error Resolution 

Requirements 

Overview of Existing Requirements 

EFTA section 908 governs the timing 

and other requirements for consumers 

and financial institutions on error 

resolution, including provisional credit, 

and is implemented for accounts under 

Regulation E generally, including 

payroll card accounts, in § 1005.11. 

Section 1005.11(c)(1) and (3)(i) requires 

that a financial institution, after 

receiving notice that a consumer 

believes an electronic fund transfer from 

the consumer’s account was not 

authorized, must investigate promptly 

and determine whether an error 

occurred (i.e., whether the transfer was 

unauthorized), within ten business days 

(20 business days if the electronic fund 

transfer occurred within 30 days of the 

first deposit to the account). Upon 

completion of the investigation, the 

financial institution must report the 

investigation’s results to the consumer 

within three business days. After 

determining that an error occurred, the 

financial institution must correct an 

error within one business day. See 

§ 1005.11(c)(1). Under EFTA section 

909(b), the burden of proof is on the 

financial institution to show that an 

alleged error was in fact an authorized 

transaction; if the financial institution 

cannot establish proof of valid 

authorization, the financial institution 

must credit the consumer’s account. 

Existing § 1005.11(c)(2) provides that 

if the financial institution is unable to 

complete the investigation within ten 

business days, its investigation may take 

up to 45 days if it provisionally credits 

the amount of the alleged error back to 

the consumer’s account within ten 

business days of receiving the error 

notice.302 Provisional credit is not 

required if the financial institution 

requires but does not receive written 

confirmation within 10 business days of 

an oral notice by the consumer. 

§ 1005.11(c)(2)(i)(A). If the investigation 

establishes proof that the transaction 

was, in fact, authorized, the financial 

institution may reverse any provisional 

credit previously extended (assuming 

there are still available funds in the 

account). § 1005.11(d)(2). 

Existing § 1005.18(c)(4) provides that, 

for payroll card accounts following the 

periodic statement alternative in 

existing § 1005.18(b), the period for 

reporting an unauthorized transaction is 

tied, in part, to the date the consumer 

electronically accesses the consumer’s 

account pursuant to existing 

§ 1005.18(b)(1)(ii), provided that the 

electronic account history reflects the 

transfer at that time, or the date the 

financial institution sends a written 

history of the consumer’s account 

transactions requested by the consumer 

pursuant to existing § 1005.18(b)(1)(iii) 

in which the unauthorized transfer is 

first reflected. The Bureau notes that 

this provision only modifies the 60-day 

period for consumers to report an error 

and does not alter any other provision 

of § 1005.11. 

As discussed above, the FMS Rule 

requires that the issuer of a prepaid card 

that receives a Federal payment must 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77183 

303See The Study of Prepaid Account 

Agreements, at 13 tbl. 3. 

304Aite Group LLC, The Contenders: Prepaid 

Debit and Payroll Cards Reach Ubiquity, at 17, 23 

(Nov. 2012). 

305See The Study of Prepaid Account 

Agreements, at 13 tbl. 3. 

306Ctr. for Fin. Services Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

12 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. 

comply with the error resolution and 

provisional credit requirements for 

payroll cards accounts in Regulation E. 

See 31 CFR 210.5(b)(5). The Bureau 

understands that prepaid cards that 

receive Federal payments and, as 

discussed previously, by extension 

many other prepaid cards that are 

eligible to receive Federal payments if 

the consumer so chooses, already 

comply with these provisions. 

Comments Received and Other Industry 

Outreach 

In response to the Prepaid ANPR, 

industry, trade associations, and 

consumer groups were nearly 

unanimous in their support for 

extending Regulation E error resolution 

requirements to prepaid cards. Those 

industry commenters that disagreed 

suggested, however, that the Bureau 

should not extend Regulation E limited 

liability and error resolution provisions 

to prepaid products, arguing that 

consumers should assume some liability 

for fraud or stolen PINs in certain 

situations where the consumer acted 

negligently. One credit union argued 

that increasing protections for prepaid 

cards decreases the incentive for 

consumers to establish checking and 

savings accounts. Other commenters 

suggested that, if prepaid cards were 

covered under Regulation E at all, the 

Regulation should be modified to 

generally match existing industry 

practices rather than requiring financial 

institutions to change products in ways 

that commenters said could cause fees 

to increase, thus making these products 

more expensive for consumers. 

Several industry and trade association 

commenters requested that the Bureau 

shorten any time frame for consumers to 

report unauthorized transactions to 60 

days from the date the transaction is 

posted to the consumer’s account, 

arguing that a longer period is not 

necessary given consumers’ readily 

available access to online account 

information. These parties also pointed 

out that, when consumers significantly 

delay reporting unauthorized 

transactions to their financial 

institution, it can be costly and difficult 

for the institution to investigate. Others 

argued that ten business days is too 

short a period in which to investigate 

errors before extending provisional 

credit and that time period should be 

extended to at least 20 business days or 

longer. 

Commenters were varied in their 

suggested approaches with respect to 

provisional credit. Some program 

managers, in comment letters 

responding to the Bureau’s Prepaid 

ANPR as well as in other outreach 

conducted by the Bureau, have 

expressed concern about extending 

provisional credit to all prepaid card 

accounts, asserting that the potential 

fraud losses would be unsustainable. 

Specifically, they contend that 

cardholders intending to take advantage 

of the rules can make a purchase or 

withdraw cash at an ATM, assert that an 

error has occurred, obtain provisional 

credit (because many claims take most 

providers more than ten or even 20 

business days to resolve), spend down 

those funds, and abandon the card 

before the provider is able to complete 

its investigation. Industry commenters 

argued that prepaid cards may have 

higher incidences of fraudulentlyasserted errors than other types of 

accounts for a number of reasons, 

including that prepaid cards are often 

purchased anonymously; prepaid cards 

are easier to abandon and are more often 

abandoned (by quickly spending down 

the balance and discarding the card); 

consumers may not have any other 

ongoing relationship with the issuing 

bank or program manager; and fraud is 

less likely when a consumer’s paycheck 

or employer is implicated (e.g., in 

accounts receiving direct deposit), 

whether those funds are being sent to a 

prepaid account, payroll card account, 

or other consumer asset account under 

Regulation E. As noted above, EFTA 

places the burden of proof on the 

financial institution to show that an 

alleged error was, in fact, an authorized 

transaction. 

Nevertheless, consumer advocates 

and some industry commenters argued 

that many prepaid accounts are used in 

substantially similar ways as traditional 

consumer asset accounts and thus 

consumers using prepaid accounts 

should receive protections for funds lost 

due to unauthorized use in the same 

timeframe as holders of other accounts 

covered by Regulation E. Consumer 

advocates repeatedly emphasized how 

important provisional credit can be for 

consumers, noting that many consumers 

who use prepaid cards have limited 

liquid assets and may put a substantial 

portion of those assets on their prepaid 

cards. Without provisional credit, if 

those funds are lost due to an 

unauthorized transfer, a consumer could 

be without those funds—most of their 

assets—for the duration of the financial 

institution’s investigation (up to 45 

days, or 90 days in certain 

circumstances). Consumer advocates 

contended that provisional credit may 

be particularly important to prepaid 

account users because they may be less 

likely to have access to other funds. 

Study of Prepaid Account Agreements 

Regarding Error Resolution and 

Provisional Credit 

As discussed previously, the Bureau 

conducted its Study of Prepaid Account 

Agreements to better understand how 

providers of prepaid accounts would be 

affected by a requirement they offer 

error resolution with provisional credit. 

In this Study, the Bureau analyzed 

prepaid account terms and conditions to 

determine current industry practices in 

a number of areas, including with 

respect to error resolution and 

provisional credit. The Bureau found 

that across all agreements reviewed, 

77.85 percent provided full error 

resolution with provisional credit 

protections, 12.31 percent provided 

error resolution with limitations on 

provisional credit; 9.23 percent 

provided error resolution without 

provisional credit; and 0.62 provided no 

error resolution protections.303 Because 

these statistics weight all agreements 

equally, and thus do not reflect 

individual programs’ or providers’ 

market shares, the Bureau also 

specifically analyzed the 22 agreements 

for GPR card programs in the Study that 

belong to five of the largest program 

managers in the GPR card market 

(which together constituted 81 percent 

of the market by load volume and 72.2 

percent market share based on number 

of active cards as of late 2012 304). The 

Bureau found that 17 of these 

agreements provide full error resolution 

protections with provisional credit, 

three provide error resolution with 

limitations on provisional credit, and 

two provide error resolution without 

provisional credit.305

Similarly, as noted above, CFSI found 

that all cards reviewed, representing an 

estimated 90 percent of the GPR card 

marketplace, had adopted the Payroll 

Card Rule’s version of Regulation E’s 

error resolution and limited liability 

protections.306

Apart from the relevant provisions in 

Regulation E, the Bureau notes that the 

four major payment card networks’ rules 

all impose some form of zero liability 

protections for cardholders in certain 

circumstances. At least one network, for 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77184 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

307The Bureau is proposing an additional 

modification in proposed § 1005.18(e)(3), discussed 

below, to provide an exception to the requirement 

to provide error resolution when a financial 

institution has not completed collection of 

consumer identifying information and identity 

verification for a prepaid account, assuming 

appropriate notice of the risk of not registering the 

prepaid account has been provided to the 

consumer. 

example, requires provisional credit to 

be given after five days (rather than ten) 

for unauthorized transactions occurring 

over its network, unless certain 

exceptions apply. 

Proposal 

The Bureau is proposing to extend to 

all prepaid accounts the error resolution 

provisions of Regulation E, including 

provisional credit, with modifications to 

the § 1005.11 timing requirements in 

proposed § 1005.18(e)(2) for financial 

institutions following the periodic 

statement alternative in proposed 

§ 1005.18(c)(1).307 The text of proposed 

§ 1005.18(e)(2) updates internal 

paragraph citations to reflect other 

numbering changes made in this 

proposal, but otherwise remains 

unchanged from existing § 1005.18(c)(4). 

As discussed above, EFTA section 

904(c) authorizes this proposed 

revision. 

The Bureau is proposing to extend to 

all prepaid accounts existing comment 

18(c)–1 regarding the error resolution 

safe harbor provision, renumbered as 

new comment 18(e)–1 and with 

references to payroll card accounts 

changed to prepaid accounts. The 

Bureau is also proposing to extend 

existing comment 18(c)–2 to all prepaid 

accounts, with one substantive 

modification, renumbered as new 

comment 18(e)–2, and with the 

reference to payroll card account 

changed to prepaid account. This 

comment currently provides, in part, 

that a consumer is deemed to have 

accessed a payroll card account 

electronically when the consumer enters 

a user identification code or password 

or otherwise complies with a security 

procedure used by an institution to 

verify the consumer’s identity. The 

Bureau proposes to add language to the 

comment to make clear that access to 

account information via a mobile 

application, as well as through a web 

browser, would constitute electronic 

access to an account for purposes of the 

timing provisions in proposed 

§ 1005.18(e)(1) and (2). The existing 

comment also explains that an 

institution is not required to determine 

whether a consumer has in fact accessed 

information about specific transactions 

to trigger the beginning of the 60-day 

periods for liability limits and error 

resolution under §§ 1005.6 and 1005.11. 

To further clarify this, the Bureau 

proposes to add an additional sentence 

to the end of proposed comment 18(e)– 

2 to explain that a consumer is not 

deemed to have accessed a prepaid 

account electronically when the 

consumer receives an automated text 

message or other automated account 

alert, or checks the account balance by 

telephone. 

The Bureau is proposing to extend 

existing comment 18(c)–3, regarding 

untimely notice of error by a consumer, 

to all prepaid accounts, renumbered as 

new comment 18(e)–3 and with internal 

paragraph citations updated to reflect 

other numbering changes made in this 

proposal. The last sentence of the 

comment currently provides that where 

the consumer’s assertion of error 

involves an unauthorized EFT, the 

institution must comply with § 1005.6 

before it may impose any liability on the 

consumer. The Bureau is proposing to 

specifically note that compliance with 

§ 1005.6 includes compliance with the 

extension of time limits provided in 

§ 1005.6(b)(4). 

The Bureau seeks comments on all 

aspects of its proposal for new 

§ 1005.18(e)(2) and related commentary. 

In particular, the Bureau requests 

comment on whether there is an 

alternative approach to error resolution 

that the Bureau should adopt for 

prepaid accounts. The Bureau also seeks 

comment on whether error resolution 

with provisional credit is appropriate 

for all, or only certain, prepaid 

accounts, and whether there are any 

indicators that financial institutions use 

that might adequately predict the 

validity of a particular error claim, 

which might inform the Bureau’s 

application of error resolution 

requirements to all prepaid accounts. 

The Bureau also seeks comment on 

whether there might be any other 

consequences to extending the 

requirement for error resolution with 

provisional credit to all prepaid 

accounts. In particular, the Bureau seeks 

comment on what impact the concern 

for increased fraud losses (or the 

potential therefor) might have on 

financial institutions’ eligibility 

requirements and initial screening 

processes for new prepaid 

accountholders. The Bureau also seeks 

comment on whether institutions might 

become more apt to close accounts that 

have asserted error claims, and whether 

and how these factors might result in 

decreased access to financial products 

for consumers. 

Alternative Approaches Considered by 

the Bureau 

In light of the various concerns raised 

in comment letters received in response 

to the Prepaid ANPR and during the 

Bureau’s outreach to industry and 

consumer groups, the Bureau recognizes 

that provisional credit can be important 

to consumers, but also that there could 

be an increased risk of fraud by 

cardholders who might be unscrupulous 

and might be able to take advantage of 

a comprehensive provisional credit rule. 

Thus, the Bureau considered a number 

of alternatives to extending full 

provisional credit to all prepaid 

accounts. For example, the Bureau 

considered whether provisional credit 

should be limited only to prepaid 

accounts receiving payroll or 

government payments, those that have 

received some form of direct deposit 

within a certain period, such as 30 days, 

those that have been opened for a 

certain amount of time, or those that 

maintained a balance over a certain 

threshold prior to the alleged error, 

among other things. 

Any of these factors could potentially 

limit provisional credit fraud, although 

each has drawbacks. For example, even 

though providers indicated that a claim 

for an unauthorized transaction in the 

first few days after account opening is 

more likely to be fraudulent than claims 

on older accounts, consumers seeking to 

commit fraud could simply wait the 

designated period of time before 

asserting an error claim and seeking 

provisional credit if the Bureau were to 

require provisional credit only for 

prepaid accounts of a certain age. At the 

same time, honest consumers would be 

without key protections during that time 

period. Another approach would be to 

limit provisional credit to prepaid 

accounts that receive some form of 

direct deposit because consumers who 

receive wage or benefit payments on a 

card may be less likely to risk that 

payment to commit fraud. Ultimately, 

however, the Bureau believes the 

protection offered by this approach 

would potentially be too narrow 

because many consumers using prepaid 

accounts receive wages in forms other 

than direct deposit (such as those that 

receive their wages or tips in cash) and 

would not be able to receive provisional 

credit under such a standard. It would 

similarly leave consumers who do not 

receive any wage or benefit payments 

into their prepaid accounts unprotected. 

The Bureau seeks comment on 

whether there are any other alternatives 

to or potential limits on provisional 

credit that might contain fraud losses for 


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308Relatedly, the Bureau is proposing to require 

that financial institutions include on the short form 

disclosure for all prepaid accounts a statement 

emphasizing the importance of registering the 

prepaid account. See section-by-section analysis of 

proposed § 1005.18(b)(2)(i)(B)(12). 

institutions while adequately protecting 

consumers from harm. 

18(e)(3) Limitations on Liability and 

Error Resolution for Unverified 

Accounts 

To further the purposes of EFTA, the 

Bureau believes it is necessary and 

proper to propose to use its exceptions 

authority under EFTA section 904(c) to 

add new section § 1005.18(e)(3). This 

proposed provision would provide that 

for prepaid accounts that are not payroll 

card accounts or government benefit 

accounts, if a financial institution 

discloses to the consumer the risks of 

not registering a prepaid account using 

a notice that is substantially similar to 

the proposed notice contained in 

paragraph (c) of appendix A–7, a 

financial institution is not required to 

comply with the liability limits and 

error resolution requirements under 

§§ 1005.6 and 1005.11 for any prepaid 

account for which it has not completed 

it collection of consumer identifying 

information and identity verification.308

However, once the consumer’s identity 

has been verified, a financial institution 

must limit the consumer’s liability for 

unauthorized EFTs and resolve any 

errors that occurred prior to verification 

subject to the timing requirements of 

existing §§ 1005.6 or 1005.11, or the 

modified timing requirements in 

proposed § 1005.18(e), as applicable. 

Proposed comment 18(e)–4 would 

explain that for the purpose of 

compliance with proposed 

§ 1005.18(e)(3), consumer identifying 

information may include the consumer’s 

full name, address, date of birth, and 

Social Security number or other 

government-issued identification 

number. Comment 18(e)–4 would also 

explain that for an unauthorized transfer 

or an error asserted on a previously 

unverified prepaid account, whether a 

consumer has timely reported the 

unauthorized transfer or alleged error is 

based on the date the consumer contacts 

the financial institution to report the 

unauthorized transfer or alleged error, 

not the date the financial institution 

completes its customer identification 

and verification process. Comment 

18(e)–4 would further explain that for 

an error asserted on a previously 

unverified prepaid account, the time 

limits for a financial institution’s 

investigation of errors pursuant to 

§ 1005.11(c) begin on the day following 

the date the financial institution 

completed its customer identification 

and verification process. A financial 

institution may not delay completing its 

customer identification and verification 

process, or refuse to verify a consumer’s 

identity, based on the consumer’s 

assertion of an error. 

The Bureau understands that financial 

institutions often conduct customer 

identification and verification at the 

onset of a relationship with a consumer, 

such as at the time a consumer signs up 

to receive wages via a payroll card 

account or when a consumer requests a 

GPR card online. For GPR cards 

purchased at retail stores, the financial 

institution may—but does not always— 

obtain customer-identifying information 

and perform verification at the time the 

consumer calls or goes online to activate 

the card. Because of restrictions 

imposed by FinCEN’s Prepaid Access 

Rule (31 CFR 1022.210(d)(1)(v)) and the 

payment card networks’ operating rules, 

among other things, the Bureau 

understands that customer 

identification and verification is almost 

always performed before a card can be 

reloaded, used to make cash 

withdrawals, or used to receive cash 

back at the point of sale. The Bureau 

believes that providers thus have an 

incentive to encourage consumers to 

register their cards to increase the 

functionality and thus the longevity of 

the consumer’s use of the account. 

Collection of consumer identifying 

information and verification of identity 

under proposed § 1005.18(e)(3) would 

include information collected, and 

identities verified, by a financial 

institution directly as well as by a 

service provider or agent of the 

institution. Thus, the Bureau expects 

that financial institutions providing 

prepaid accounts for purposes such as 

student financial aid disbursements or 

property or casualty insurance 

payments would likely not be able to 

avail themselves of the exclusion in 

§ 1005.18(e)(3) because consumer 

identifying information is collected and 

consumers’ identities verified by the 

financial institution, or a service 

provider or agent of the institution, 

prior to distribution of such prepaid 

accounts. The Bureau solicits comment 

on the proposed exclusion and on what 

other types of prepaid account products 

might be eligible for it, and whether the 

exclusion should be applied more 

broadly or limited only to certain types 

of prepaid account products such as 

those sold anonymously at retail 

locations. 

The Bureau is proposing to adopt this 

exemption because it understands that 

financial institutions may face 

difficulties in determining whether an 

unauthorized transaction occurred if it 

does not know a prepaid 

accountholder’s identity. For example, a 

financial institution might have a video 

recording provided by a merchant or 

ATM operator showing the card user, 

but without having identified the 

accountholder, it would have no way of 

knowing if the individual conducting 

the transaction is authorized to do so. 

The Bureau believes that financial 

institutions would follow the customer 

identification and verification 

requirements set forth in FinCEN’s 

customer identification program 

requirements for banks in 31 CFR 

1020.220 or for providers and sellers of 

prepaid access in 31 CFR 

1022.210(d)(1)(iv). 

The Bureau anticipates that when a 

consumer calls to assert an error on an 

unverified account, the financial 

institution would inform the consumer 

of its policy regarding error resolution 

on unverified accounts and would begin 

the customer identification and 

verification process at that time. As 

noted previously, the Bureau believes 

that providers have an incentive to 

encourage consumers to register their 

cards to increase the functionality and 

thus the longevity of the consumer’s use 

of the account. 

The Bureau seeks comment on all 

aspects of this part of its proposal, 

including whether FinCEN’s 

regulations, as discussed above, are the 

appropriate standard to use for 

identification and verification of 

prepaid accountholders, or whether 

some other standard should be used. 

The Bureau also seeks comment on 

whether error resolution should be 

required even for unidentified or 

unverified accounts or whether, for such 

accounts, the Bureau should exercise its 

exceptions authority under EFTA to 

change the burden of proof from the 

financial institution to the 

accountholder in such circumstances 

rather than eliminate error resolution 

rights altogether. Such a change might 

add protections for consumers in 

particular circumstances, such as if their 

initial cash load amount does not match 

the amount actually credited to their 

prepaid account. (For example, if the 

consumer were to load $100 cash, but 

their online account balance shows only 

$10.) The Bureau seeks comment on the 

proportion of prepaid accounts for 

which customer identification and 

verification is either never performed or 

is attempted but cannot be completed. 

The Bureau also seeks comment on 

whether such accounts should receive 

error resolution protections but without 

requiring financial institutions to grant 

provisional credit. 


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77186 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

The Bureau believes that it is unlikely 

that a financial institution would seek to 

avoid completion of the identification 

and verification process in order to 

refuse to address an error asserted by a 

consumer given the potential benefits to 

the institution associated with having a 

consumer complete the identification 

and verification process. However, the 

Bureau seeks comment on whether such 

evasion is likely to occur and whether 

the Bureau should impose a time limit 

for completion of the customer 

identification and verification process. 

18(f) Initial Disclosure of Fees and Other 

Key Information 

The Bureau is proposing § 1005.18(f), 

which would modify the initial 

disclosure of fees requirement in 

§ 1005.7(b)(5) for prepaid accounts. 

EFTA section 905(a)(4) requires 

financial institutions to disclose to 

consumers, as part of the account’s 

terms and conditions, any charges for 

electronic fund transfers or for the right 

to make such transfers. Existing 

§ 1005.7(b)(5) implements this 

requirement by stating that, as part of 

the initial disclosures, any fees imposed 

by a financial institution for electronic 

fund transfers or for the right to make 

transfers must be disclosed. Existing 

comment 7(b)(5)–1 further clarifies that 

other fees (for example, minimumbalance fees, stop-payment fees, or 

account overdrafts) may, but need not, 

be disclosed. The Bureau believes that 

for prepaid accounts, however, it is 

important that the initial account 

disclosures provided to consumers list 

all fees that may be imposed in 

connection with the prepaid account. 

The Bureau believes that because these 

disclosures are what consumers will 

likely reference throughout their 

ongoing use of their prepaid accounts, it 

is important that these disclosures 

include all relevant fee information, not 

just those fees related to electronic fund 

transfers. 

Thus, to further the purposes of EFTA 

to provide a framework to establish the 

rights, liabilities, and responsibilities of 

prepaid account users, the Bureau 

believes it is necessary and proper to 

exercise its authority under EFTA 

section 904(c) to propose an adjustment 

of the requirement in EFTA section 

905(a)(4), which is implemented in 

existing § 1005.7(b)(5), for prepaid 

accounts. In addition, the Bureau 

believes that disclosure of all fees for 

prepaid accounts will, consistent with 

Dodd-Frank Act section 1032(a), ensure 

that the features of prepaid accounts are 

fully, accurately, and effectively 

disclosed to consumers in a manner that 

permits consumers to understand the 

costs, benefits, and risks associated with 

a prepaid account. Specifically, the 

Bureau is proposing § 1005.18(f), which 

would require that in addition to 

disclosing any fees imposed by a 

financial institution for electronic fund 

transfers or the right to make such 

transfers, the financial institution must 

also include in its initial disclosures 

given pursuant to § 1005.7(b)(5) all other 

fees imposed by the financial institution 

in connection with a prepaid account. 

For each fee, a financial institution must 

disclose the amount of the fee, the 

conditions, if any, under which the fee 

may be imposed, waived, or reduced, 

and, to the extent known, whether any 

third party fees may apply. 

The Bureau believes that most 

providers are already disclosing all fees 

in the terms and conditions 

accompanying prepaid accounts. 

Further, the Bureau notes that 

Regulation DD, which implements 

TISA, requires that initial disclosures 

for deposit accounts include the amount 

of any fee that may be imposed in 

connection with the account (or an 

explanation of how the fee will be 

determined) and the conditions under 

which the fee may be imposed. 

§ 1030.4(b)(4). 

The Bureau is further proposing that 

these disclosures pursuant to proposed 

§ 1005.18(f) include all of the 

information required to be disclosed 

pursuant to § 1005.18(b)(2)(ii)(B) and 

must be provided in a form substantially 

similar to Sample Form A–10(e). The 

Bureau believes that for consistency 

purposes and to facilitate consumer 

understanding of a prepaid account’s 

terms, it is useful for the fee disclosure 

provided pursuant to § 1005.7(b)(5), as 

modified by proposed § 1005.18(f), to be 

in the same format of the long form 

disclosure requirement of proposed 

§ 1005.18(b)(2)(ii)(A). 

The Bureau seeks comment on this 

portion of the proposal. 

18(g) Credit Card Plans Linked to 

Prepaid Accounts 

Proposed § 1005.18(g)(1) would set 

forth timing rules related to when a 

credit card plan under Regulation Z 

could be linked to a prepaid account. 

Proposed § 1005.18(g)(2) would set forth 

rules related to the terms applicable to 

the prepaid account when a credit card 

plan is linked to a prepaid account. 

18(g)(1) Prohibitions 

Proposed § 1005.18(g)(1) generally 

would restrict financial institutions that 

establish or hold prepaid accounts from 

linking a credit card plan under 

Regulation Z to a prepaid account, or 

allowing the prepaid account to be 

linked to such a credit card plan, until 

30 calendar days after the prepaid 

account has been registered. Proposed 

§ 1005.18(g)(1)(i) would restrict 

financial institutions that establish or 

hold prepaid accounts from providing 

solicitations or applications to holders 

of prepaid accounts to open credit card 

accounts subject to Regulation Z, prior 

to 30 calendar days after the prepaid 

accounts have been registered. For 

purposes of proposed § 1005.18(g)(1), 

the term solicitation would mean an 

offer by the person to open a credit or 

charge card account subject to 

Regulation Z that does not require the 

consumer to complete an application. A 

‘‘firm offer of credit’’ as defined in 

section 603(l) of the Fair Credit 

Reporting Act (15 U.S.C. 1681a(l)) for a 

credit or charge card would be a 

solicitation for purposes of proposed 

§ 1005.18(g)(1). 

Proposed § 1005.18(g)(1)(ii) would 

restrict financial institutions that 

establish or hold prepaid accounts of 

consumers from allowing prepaid access 

devices to access credit card plans 

subject to Regulation Z that would make 

the prepaid access devices into credit 

cards at any time prior to 30 calendar 

days after the prepaid accounts have 

been registered. Proposed 

§ 1005.18(g)(1)(iii) would restrict 

financial institutions that establish or 

hold prepaid accounts of consumers 

from allowing credit extensions from 

credit card plans subject to Regulation 

Z to be deposited in prepaid accounts, 

where the credit plans are accessed by 

account numbers that are credit cards 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, prior 

to 30 calendar days after the prepaid 

account has been registered. Proposed 

§ 1005.18(g)(1)(iii) is intended to 

address situations where (1) a separate 

line of credit is linked to a prepaid 

account where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, (2) the 

consumer requests an advance on the 

open-end account using an account 

number only, and (3) the advance is 

deposited into the prepaid account. 

Proposed comment 18(g)–1 would cross 

reference provisions in Regulation Z 

that would provide guidance on when a 

program constitutes a credit plan (see 

proposed § 1026.2(a)(20) and comment 

2(a)(20)–2.ii) and would provide 

guidance on when an access device for 

a prepaid account is a credit card and 

when an account number is a credit 

card where extensions of credit are 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77187 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor (see 

§ 1026.2(a)(15)(i), proposed 

§ 1026.2(a)(15)(vii), and proposed 

comment 2(a)(15)–2.i.F and .G). 

Proposed § 1005.18(g)(1) would 

complement a similar proposed 

provision in Regulation Z, proposed 

§ 1026.12(h), which would require 

credit card issuers to wait at least 30 

calendar days after the prepaid account 

has been registered before the card 

issuer may provide a solicitation or an 

application to the holder of the prepaid 

account to open a credit or charge card 

account that will be accessed by the 

prepaid card that is a credit card under 

Regulation Z, or by an account number 

that is a credit card under Regulation Z 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

The Bureau is proposing 

§ 1005.18(g)(1) pursuant to its authority 

under sections 904(a), 904(c), and 905(a) 

of EFTA (15 U.S.C. 1693b) and DoddFrank Act section 1032(a). The Bureau 

believes that proposed § 1005.18(g)(1) is 

necessary and proper to effectuate the 

express purposes of EFTA to provide a 

framework to establish the rights, 

liabilities and responsibilities of prepaid 

account users by helping consumers 

understand the terms of their prepaid 

accounts and that credit card plans 

linked to the prepaid accounts are 

optional. Under the Bureau’s proposal 

and as discussed above, a consumer’s 

registration of a prepaid account would 

be a critical step for obtaining 

Regulation E’s consumer rights and 

protections with respect to the account, 

and the Bureau’s proposal to restrict 

financial institutions from offering 

credit features to holders of prepaid 

accounts until 30 days after the 

accounts have been registered seeks, in 

part, to ensure that consumers 

understand that they are not required to 

request any credit feature in order to 

register and use a prepaid account. 

The Bureau is also proposing to adopt 

this provision because a consumer’s 

decision of which prepaid account to 

purchase, register, and use is itself a 

complex decision involving several 

variables, including the consumer’s 

finances and purchasing habits. If the 

consumer makes a choice that does not 

ultimately prove to be a good fit, it is 

relatively easy for that consumer to 

acquire a different prepaid account (to 

the extent that account does not have a 

credit feature). The Bureau believes that 

this dynamic has fostered a competitive 

market, and it is concerned that 

combining decisions on prepaid 

accounts and credit features would tend 

to undermine that in at least two ways. 

First, it makes the acquisition of the 

prepaid account even more complex by 

adding more variables to consider; as 

noted previously, consumers may spend 

little time shopping for a prepaid card. 

Second, the presence of a credit feature 

may make it harder for consumers to 

terminate their account relationships if 

consumers can incur significant debts 

before having a chance to determine 

how the prepaid account itself is 

performing. 

The Bureau’s proposal seeks to keep 

that decision separate from a 

consumer’s decision whether to add a 

credit feature to the prepaid account, 

which involves numerous additional 

variables that the consumer should 

consider. The two decisions in 

combination could cause consumers to 

make incorrect or suboptimal decisions. 

The Bureau is particularly concerned 

that the events of purchasing, 

registering, and adding a credit feature 

to a prepaid account could become 

conflated for prepaid accounts that 

consumers obtain on the Internet, 

because in that context the events could 

occur close together in time. In 

particular, the Bureau believes that the 

proposed 30-day waiting period would, 

consistent with Dodd-Frank section 

1032(a), ensure that the features of the 

prepaid account and any credit card 

feature that might become connected to 

it are fully, accurately, and effectively 

disclosed to consumers in a manner that 

permits consumers to understand the 

costs, benefits, and risks associated with 

the account. The Bureau believes that a 

consumer should have the opportunity 

to assess the features of a prepaid 

account by means of actually using it 

before being offered a credit feature that 

might make it more difficult for the 

consumer to terminate the prepaid 

account relationship due to outstanding 

credit balances. 

As discussed in the section-by-section 

analysis of Regulation Z § 1026.12(a)(1), 

under the proposal, a credit card feature 

may be added to a previously issued 

prepaid card only upon the consumer’s 

specific request and only in compliance 

with proposed § 1026.12(h). Proposed 

§ 1026.12(h) would require credit card 

issuers to wait at least 30 calendar days 

after the prepaid account has been 

registered before the card issuer may 

open a credit card account for the 

holder of a prepaid account, or may 

provide a solicitation or an application 

to the holder of the prepaid account to 

open a credit or charge card account, 

that will be accessed by the prepaid 

card that is a credit card under 

Regulation Z or by an account number 

that is a credit card under Regulation Z 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

The Bureau believes that Regulation E 

proposed § 1005.18(g)(1) and Regulation 

Z proposed § 1026.12(h), taken together, 

would promote the informed use of the 

prepaid account and the credit card 

account by separating the decision to 

purchase and register a prepaid account 

from the decision to accept an offer to 

link a credit card account to that 

prepaid account. By separating these 

decisions, § 1005.18(g)(1) would better 

allow consumers to focus on the terms 

and conditions that apply to the prepaid 

account at the time of purchase and 

registration which may enable the 

consumer to better understand those 

terms and conditions, consistent with 

EFTA section 905(a) which requires 

financial institutions to disclose the 

terms and conditions of electronic fund 

transfers involving a consumer’s 

account. The Bureau also believes that 

requiring at least 30 calendar days to 

elapse between the registration of a 

prepaid account and any offer of a 

linked credit or charge card account 

would enhance consumer 

understanding of the terms of the 

prepaid account and would help 

consumers to make more informed 

decisions regarding linking a credit or 

charge card account the prepaid 

account. Otherwise, the Bureau fears 

that consumers could believe that they 

are required to request that the credit or 

charge card account be linked to the 

prepaid account in order to register or 

access the prepaid account. 

The Bureau recognizes that this 

provision would be unique to prepaid 

accounts. Compare existing 1005.17(c). 

Nevertheless and for the reasons 

discussed above, the Bureau believes 

that it is particularly important to 

separate these two decisions for prepaid 

accounts and related overdraft services 

and credit features. The Bureau solicits 

comment on this provision. The Bureau 

also solicits comment on the 30 day 

time frame, and whether a shorter or 

longer time frame would better 

accomplish the goals of the provision. 

The Bureau notes that proposed 

§ 1005.18(g)(1) and Regulation Z 

§ 1026.12(h) would overlap in cases 

where the credit card plan is accessed 

by a prepaid card or the credit card plan 

is being offered by a financial institution 

that holds the prepaid account and is 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. In those cases, the financial 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77188 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

309Under the proposal, with respect to a prepaid 

card that is a credit card where the card accesses 

a credit plan that is offered by a third party, a 

person offering the credit plan that is accessed by 

the prepaid card would be an agent of the person 

issuing the prepaid card and thus, would be a card 

issuer with respect to the prepaid card that is a 

credit card. See Regulation Z proposed comment 

2(a)(7)–1.ii. In this case, both the person offering the 

credit plan and the financial institution issuing the 

prepaid card would be card issuers under 

Regulation Z § 1026.2(a)(7). 310 74 FR 59033, 59044 (Nov. 17, 2009). 

institution would be a ‘‘card issuer’’ 

under Regulation Z § 1026.2(a)(7) 309

and the Bureau is proposing that both 

the requirements of proposed 

Regulation Z § 1026.12(h) and proposed 

Regulation E § 1005.18(g)(1) would 

apply to the financial institution who 

also is a card issuer. Nonetheless, the 

Bureau intends proposed Regulation E 

§ 1005.18(g)(1) and Regulation Z 

§ 1026.12(h) to impose the same 

restrictions in those situations. In cases 

where the credit card account is being 

offered by a person other than the 

person who holds the prepaid account 

and is being accessed by an account 

number as described above, the person 

issuing the account number that is a 

credit card (i.e., card issuer) must 

comply with proposed Regulation Z 

§ 1026.12(h). In addition, the financial 

institution that holds the prepaid 

account must comply with Regulation E 

§ 1026.18(g)(1). The Bureau believes that 

imposing complementary restrictions on 

both the card issuer that is offering the 

credit card account and the financial 

institution that holds the prepaid 

account would prevent circumvention 

of the prohibition, and help ensure that 

consumers’ decisions whether to open a 

credit card account linked to the 

prepaid account are separate from when 

the prepaid account is purchased or 

registered, in order to enable consumers 

to understand better the terms and 

conditions that apply to the prepaid 

account, consistent with EFTA section 

905(a) which requires financial 

institutions to disclose the terms and 

conditions of electronic fund transfers 

involving a consumer’s account. 

18(g)(2) Requirements 

Proposed § 1005.18(g)(2) would set 

forth rules related to the terms 

applicable to the prepaid account when 

a credit card plan is linked to a prepaid 

account. Specifically, proposed 

§ 1005.18(g)(2) would provide that 

where a credit card plan subject to 

Regulation Z may be offered at any 

point to the consumer with respect to a 

prepaid account that is accessed by an 

access device for the prepaid account 

where the access device is a credit card 

under Regulation Z or is accessed by an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, a 

financial institution that establishes or 

holds such a prepaid account may not 

apply different terms and conditions to 

a consumer’s account that do not relate 

to an extension of credit, carrying a 

credit balance, or credit availability, 

depending on whether the consumer 

elects to link such a credit card plan to 

the prepaid account. 

Proposed comment 18(g)–2.i would 

provide guidance on the applicability of 

the restriction in proposed 

§ 1005.18(g)(2). Specifically, proposed 

comment 18(g)–2.i would explain that a 

financial institution may offer different 

terms on different prepaid account 

products, where the terms may differ 

between a prepaid account product 

where a credit card plan subject to 

Regulation Z cannot be linked to the 

prepaid account, and a prepaid account 

product where a credit card plan subject 

to Regulation Z can be linked to the 

prepaid account. Nonetheless, on the 

prepaid account product where a credit 

card plan subject to Regulation Z may 

be offered at any point to the consumer 

that is accessed by an access device for 

the prepaid account that is a credit card 

under Regulation Z or is accessed by an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, a 

financial institution that establishes or 

holds such a prepaid account may not 

apply different terms and conditions to 

a consumer’s account that do not relate 

to an extension of credit, carrying a 

credit balance, or credit availability, 

depending on whether the consumer 

elects to link such a credit card plan to 

the prepaid account. Proposed comment 

18(g)–2.ii explains that § 1005.18(g)(2) 

prevents a financial institution from 

waiving fees or reducing the amount of 

fees that do not relate to an extension of 

credit, carrying a credit balance, or 

credit availability if the consumer elects 

to link the prepaid account to a credit 

card plan. 

Proposed comment 18(g)–2.ii would 

provide examples of account terms and 

conditions that would be subject to the 

restrictions in proposed § 1005.18(g)(2). 

The proposed examples in comment 

18(g)–2.ii include fees assessed on the 

prepaid account that do not relate to an 

extension of credit, carrying a credit 

balance, or credit availability, including 

any transaction fees for transactions that 

are completely funded by the prepaid 

account and any one-time or periodic 

fees imposed for opening or holding a 

prepaid account. The proposed 

comment also would cross reference 

Regulation Z proposed § 1026.4(b)(2) 

and comment 4(b)(2)–1.iii and .iv, 

which provide additional guidance on 

fees that relate to an extension of credit, 

carrying a credit balance or credit 

availability. Proposed comment 18(g)– 

2.iii also would provide examples of 

account terms and conditions that are 

not subject to the restrictions in 

proposed § 1005.18(g)(2) because these 

terms and conditions would relate to an 

extension of credit, carrying a credit 

balance, or credit availability. The 

proposed examples would include (1) 

fees or charges assessed on the prepaid 

account applicable to transactions that 

access the credit card plan subject to 

Regulation Z, including transaction fees 

for transactions that either access just 

the credit card plan, or access both the 

prepaid account and the credit card 

plan; and (2) any one-time or periodic 

fees imposed for the issuance or 

availability of the credit card plan 

subject to Regulation Z. Proposed 

comment 18(g)–2.iv provides examples 

that illustrate the prohibition in 

proposed § 1005.18(g)(2). 

The Bureau is proposing 

§ 1005.18(g)(2) pursuant to its authority 

under EFTA sections 904(a) and (c). In 

implementing its overdraft opt-in rule 

under § 1005.17, the Board required that 

‘‘[a] financial institution shall provide to 

consumers who do not affirmatively 

consent to the institution’s overdraft 

service for ATM and one-time debit card 

transactions the same account terms, 

conditions, and features that it provides 

to consumers who affirmatively consent, 

except for the overdraft service for ATM 

and one-time debit card transactions.’’ 

§ 1005.17(b)(3). The Board recognized 

that without this requirement, ‘‘some 

institutions could otherwise effectively 

compel the consumer to provide 

affirmative consent to the institution’s 

payment of overdrafts for ATM and 

onetime debit card transactions by 

providing consumers who do not opt in 

with less favorable terms, conditions, or 

features than consumers who do opt 

in.’’ 310 The Bureau believes that the 

same requirement should be extended 

here for the same reasons. As discussed 

in the section-by-section analysis of 

Regulation Z § 1026.12(a)(1), under the 

proposal, a credit card feature may be 

added to a previously issued prepaid 

card only upon the consumer’s specific 

request and only in compliance with 

proposed § 1026.12(h), which would 

require credit card issuers to wait at 

least 30 calendar days after the prepaid 

account has been registered before the 


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311See 77 FR 30923, 30925 (May 24, 2012). 

card issuer may open a credit or charge 

card account, or provide a solicitation or 

an application to the holder of the 

prepaid account to open a credit or 

charge card account, that will be 

accessed by the prepaid card that is a 

credit card under Regulation Z or an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

The Bureau believes some institutions 

could otherwise effectively compel the 

consumer to request a credit card plan 

be linked to the prepaid account as 

described above by providing 

consumers who do not make such a 

request with less favorable terms, 

conditions, or features than consumers 

who do make such requests. For 

example, an institution could waive the 

monthly fee for holding a prepaid 

account for consumers who request that 

the credit card plan be linked to the 

prepaid account, but not waive the 

monthly fee for consumers who do not 

make such a request. 

18(h) Compliance Dates 

The Bureau is proposing that all 

prepaid accounts comply with the 

requirements of EFTA and Regulation E, 

as modified by proposed § 1005.18, 

within nine months of publication of 

the Bureau’s final rule in the Federal 

Register. This nine month effective date 

would apply to disclosures for newlymanufactured prepaid account materials 

and disclosures or other information 

delivered to consumers online or by 

telephone. The Bureau is proposing a 

delayed effective date for prepaid 

account packaging, access devices, and 

other printed materials that were 

created prior to the nine-month effective 

date, so that immediate removal or 

destruction of unsold or undistributed 

prepaid account packaging, access 

devices, or other physical materials 

created prior to the nine month effective 

date would not be mandated. However, 

within 12 months of publication of the 

Bureau’s final rule in the Federal 

Register, all prepaid accounts would 

have to comply fully with the 

requirements of the rule including its 

disclosure requirements, regardless of 

when the physical packaging, access 

devices, or other physical materials on 

which such disclosures appear were 

created. 

The Bureau addresses its proposed 

effective date in two places. The 

effective date for proposed § 1005.18 is 

discussed in this section (a crossreference to the proposed § 1005.18(h) 

effective date appears in proposed 

§ 1005.15(c) for pre-acquisition 

disclosure requirements for government 

benefit accounts) while the effective 

date for the rest of this proposal is 

discussed in the Effective Date section 

at the conclusion of the section-bysection analysis. 

Comments Received and Stakeholder 

Outreach Regarding Effective Date 

In determining the appropriate 

effective date to propose for this rule, 

the Bureau considered comments 

submitted in response to the Prepaid 

ANPR and also conducted further 

outreach and research. In the Prepaid 

ANPR, the Bureau stated that one of its 

goals was to be mindful of avoiding any 

unnecessary burden on industry. The 

Bureau also asked a series of specific 

questions related to how market 

participants manage their prepaid 

product inventory: (1) Through what 

methods, and under what 

circumstances, do market participants 

communicate a change of contract 

terms, or other information, to 

cardholders?; (2) Are there inventory 

replacement cycles that drive the 

printing of cards to stock distribution 

outlets?; (3) Do market participants 

conduct periodic maintenance of 

systems during which updating 

compliance systems would impose less 

of a burden? If so, how often does this 

maintenance occur?; and (4) Are there 

other issues with respect to the cost of 

regulatory compliance about which the 

Bureau should be aware? 311

In response, a number of industry 

commenters noted that mandating too 

short an implementation transition 

period to comply with new disclosure 

requirements would result in financial 

institutions having to remove, replace, 

and destroy existing inventory. These 

commenters contended that such 

logistical procedures would be quite 

burdensome and costly. Some 

commenters also noted the potential 

adverse environmental impact that 

could stem from a short implementation 

period resulting in the destruction of 

large quantities of unused products 

rendered unsaleable or undistributable 

by virtue of new rules. 

Industry commenters instead urged 

the Bureau to provide for an 

implementation period long enough to 

allow for the exhaustion of existing card 

inventories through ordinary sales, a 

process most commenters generally 

estimated would span 12 to 18 months, 

although a few suggested even longer. 

Under such an approach, industry 

commenters argued, financial 

institutions would be able to introduce 

newly-printed and compliant prepaid 

account product packages gradually so 

that they could avoid excessive 

expenses without needing to destroy a 

large number of non-compliant 

packages. Consumer advocacy groups 

and other commenters generally did not 

address this issue. 

Few industry commenters addressed 

the potential time needed for the 

implementation of changes related to 

other potential issues to be addressed by 

the proposed rule, such as error 

resolution procedures, access to account 

information, or other provisions in 

Regulation E. Commenters who did 

address these changes requested that 

financial institutions be given between 

12 and 24 months of time to implement 

any systems-related updates. One 

commenter noted that such regulatory 

changes generally require making 

changes to systems, sales processes and 

training tools; conducting tests to ensure 

that changes are properly implemented 

without disruption to cardholders; and 

communicating changes to cardholders. 

These commenters further noted that 

systems-related updates are typically 

undertaken at predetermined biannual 

intervals and that regulatory deadlines 

resulting in systems-related updates at 

previously unscheduled times would be 

particularly costly and disruptive. 

Proposal 

The Bureau is proposing, in general, 

a nine month effective date for the 

requirements of new § 1005.18. 

Proposed § 1005.18(h)(1) would state 

that, except as provided in proposed 

§ 1005.18(h)(2), the requirements of 

EFTA and Regulation E, as modified by 

proposed § 1005.18, apply to prepaid 

accounts nine months following the 

publication of the Bureau’s final rule in 

the Federal Register. The disclosure 

requirements in proposed § 1005.18(b) 

and (f)(2) would apply to prepaid 

account packaging, access devices, and 

other physical materials that are 

manufactured, printed, or otherwise 

prepared in connection with a prepaid 

account on or after nine months. Thus, 

proposed § 1005.18(h)(1) would 

generally make applicable to all prepaid 

accounts the requirements of EFTA and 

Regulation E, as modified by proposed 

§ 1005.18’s proposed provisions 

including those governing disclosures, 

access to prepaid account information, 

limited liability and error resolution, 

among others, after nine months. 

However, this first proposed effective 

date would not require destruction of 

previously-printed materials because it 

would only require packages, cards and 

other materials printed on or after the 

nine month date to comply with the 

rule’s disclosure requirements in 


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77190 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

proposed § 1005.18(b) and (f)(2). These 

disclosure requirements would apply 

after nine months, however, for prepaid 

account disclosures and other 

information made available to 

consumers online or by telephone. 

For prepaid account packaging, access 

devices, and other printed materials 

created prior to this first effective date, 

the Bureau believes that nothing 

proposed herein would mandate a 

change-in-terms notice insofar as the 

proposal would not require increased 

fees, liability, or fewer types of available 

electronic fund transfers for consumers. 

See § 1005.8(a) and 12 CFR 1030.5(a)(1). 

If, however, financial institutions wish 

to avail themselves of the more limited 

error resolution or limited liability 

requirements for existing unregistered 

prepaid accounts and their existing 

terms provide greater protections, then 

a change-in-terms notice may be 

required. 

Of course, if financial institutions 

wish to make substantive changes to 

prepaid account fees or terms, they 

would, as always, be required to remove 

from retail stores and other distribution 

channels prepaid account packaging, 

access devices, and other printed 

materials that their changes render 

inaccurate, and to provide notice of 

those changes to consumers with 

existing prepaid accounts. The Bureau 

believes that such legal requirements 

exist independent of the proposed rule 

under operative state consumer 

protection and contract laws. 

The Bureau understands that it may 

take some financial institutions longer 

than nine months to fully redesign 

prepaid account packaging, access 

devices, and other printed materials, 

and to begin printing new products. The 

Bureau is not proposing to mandate that 

financial institutions start 

manufacturing new materials exactly at 

the nine month mark. Rather, the 

Bureau is proposing to require that at 

whatever point after the nine month 

date a financial institution does decide 

to print new materials, those materials 

be in compliance with the requirements 

of proposed § 1005.18. 

Other than disclosure-related issues 

discussed in proposed § 1005.18(h)(2), 

the Bureau believes nine months is an 

appropriate implementation period for 

the provisions proposed herein. The 

Bureau seeks to ensure that consumers 

receive the benefit of the protections 

proposed herein as soon as possible. As 

noted in the previous discussions of the 

Bureau’s Study of Prepaid Account 

Agreements, a majority of providers are 

already complying with a majority of 

the proposed requirements. To the 

extent entities do need to make changes, 

the Bureau believes that they can be 

accomplished within a nine month 

period. Nevertheless, the Bureau seeks 

comment on whether nine months is 

appropriate or whether a longer or 

shorter period should be adopted for 

these parts of the proposal. 

The Bureau is also proposing a 

delayed effective date for certain 

packaging-related changes, which 

would be 12 months following the 

publication of the final rule in the 

Federal Register. This second date, in 

proposed § 1005.18(h)(2), would require 

full compliance with the rule’s 

disclosure requirements and prohibit 

the offering, sale or otherwise making 

available of prepaid accounts and 

related packaging, access devices, or 

other printed materials without such 

disclosures. As a result, by 12 months, 

financial institutions and their third 

party distribution agents would have to 

remove from retail store shelves and 

other distribution channels any prepaid 

accounts with disclosures not fully in 

compliance with the rule. As noted 

above, the Bureau believes that 12 

months is an appropriate period after 

which products with old disclosures 

should not be sold. As noted, industry 

representatives have indicated to the 

Bureau that typically, prepaid product 

restocking cycles occur at least every 12 

to 18 months, if not more frequently, 

although it could take as long as 24 

months to sell out all existing product 

on retail shelves. By allowing financial 

institutions time to prepare, the Bureau 

expects its proposal to minimize, even 

if it may not entirely eliminate, 

destruction of prepaid product 

packaging. The Bureau notes that not all 

existing inventories will be exhausted 

after 12 months as part of normal 

restocking cycles. However, the Bureau 

believes that after 12 months, such 

inventories will be sufficiently 

exhausted such that to permit the sale 

of non-compliant packages should no 

longer be permitted. Further, the Bureau 

notes so long as it proposed a fixed enddate for the sale of non-compliant 

packages, prepaid providers will always 

have to incur certain fixed costs 

involved in confirming that noncompliant product is removed from 

retail stock. Thus, even if the Bureau 

adopted the longest period suggested by 

Prepaid ANPR commenters, providers 

still would need to incur costs in 

confirming that they and their retail 

partners are no longer offering noncompliant products for sale. 

The Bureau seeks comment on its 

proposed implementation timeframes 

for this proposed rule as set forth in 

proposed § 1005.18(h), as well as 

possible alternative approaches. In 

particular, the Bureau seeks comment 

and supporting data on the costs to 

industry and benefits to consumers that 

might be expected from the Bureau’s 

proposed effective dates and from any 

alternative approaches. Of particular 

interest to the Bureau is whether and to 

what extent the proposed timeframes 

would require financial institutions to 

remove, replace, and destroy portions of 

their product inventories and, if so, 

what the costs of doing so would be at 

various time intervals, including those 

proposed herein. The Bureau solicits 

comment both on the potential costs of 

alternate implementation timelines and 

on possible logistical constraints, such 

as the expected amount of time needed 

for third parties to print and deliver new 

prepaid account packages and other 

materials to financial institutions or 

those institutions’ distribution networks 

or other service providers, and the 

expected amount of time needed for 

financial institutions to update their 

systems to comply with the proposed 

disclosure requirements and other 

requirements of Regulation E generally. 

In addition, the Bureau specifically 

requests comment on whether an 

effective date longer than 9 months 

would be needed for financial 

institutions to comply with the access to 

account information requirements 

proposed in § 1005.18(c) and, if so, what 

an appropriate effective date for this 

portion of the proposal might be. The 

Bureau understands that many financial 

institutions currently provide prepaid 

account consumers with access to more 

than 60 days of account history and, 

additionally, that financial institutions 

generally have obligations to retain 

prepaid account transactional records 

outside the context of Regulation E for 

far longer than 60 days. The Bureau 

specifically seeks comment on the 

amount of prepaid account transactional 

records financial institutions currently 

retain now and any difficulties financial 

institutions would face in using such 

transactional records to comply with 

proposed § 1005.18(c). 

The Bureau is not proposing a longer 

effective date for implementation of the 

disclosures on prepaid access devices in 

proposed § 1005.18(b)(7) for access 

devices that were sold or delivered to 

consumers prior to the effective date of 

the final rule. The Bureau understands 

that prepaid cards generally already list 

the financial institution’s name, 

telephone number and URL of a Web 

site on the back of the card, and thus no 

changes to consumers’ access devices 

would need to be made as a result of 

this proposal. The Bureau requests 

comment, however, on whether there 

may be prepaid cards that currently do 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77191 

not list this information and, if so, 

whether the Bureau should allow 

financial institutions longer than nine 

months to replace those cards. 

The Bureau also seeks comments on 

whether it should adopt an alternative 

approach to the effective date of this 

proposal or whether it should adopt a 

single effective date for all proposed 

provisions. 

Section 1005.19 Internet Posting of 

Prepaid Account Agreements 

The Bureau is proposing new 

§ 1005.19 to require prepaid card issuers 

to submit agreements for prepaid 

accounts to the Bureau for posting on a 

publicly-available Web site established 

and maintained by the Bureau. The 

Bureau is also proposing to require 

issuers to make prepaid account 

agreements available to the public on 

the issuers’ own Web sites or, in certain 

limited circumstances, provide 

agreements directly to consumers 

holding prepaid accounts via a 

restricted Web site or in writing upon 

request. These new provisions in 

proposed § 1005.19 would be similar to 

existing requirements in Regulation Z 

12 CFR 1026.58 for open-end consumer 

credit card plans. 

The Bureau is proposing § 1005.19 

pursuant to its disclosure authority in 

EFTA section 905(a), its adjustment 

authority in EFTA section 904(c), and 

its authority in section 1032(a) of the 

Dodd-Frank Act. The Bureau believes 

collection and disclosure of the 

agreements allows for clear and 

accessible disclosure of the terms and 

conditions of prepaid accounts, and is 

necessary and proper to effectuate the 

purposes of EFTA to provide a 

framework to establish the rights, 

liabilities, and responsibilities of 

prepaid account consumers, because the 

proposed rule will assist consumers’ 

understanding of and shopping for 

prepaid accounts based on the terms 

and conditions of those accounts. In 

addition, collection and disclosure of 

the agreements would, consistent with 

Dodd-Frank Act section 1032(a), permit 

the Bureau to prescribe rules to ensure 

that the features of any consumer 

financial product or service, both 

initially and over the term of the 

product or service, are fully, accurately, 

and effectively disclosed to consumers 

in a manner that permits consumers to 

understand the costs, benefits, and risks 

associated with the product or service, 

in light of the facts and circumstances. 

The Bureau is also proposing § 1005.19 

pursuant to its authority in section 

1022(c)(4) of the Dodd-Frank Act, which 

permits it to gather information from 

time to time regarding the organization, 

business conduct, markets, and 

activities of covered persons and service 

providers. Specifically, the Bureau is 

proposing to receive prepaid account 

agreements submitted by issuers on a 

quarterly basis, subject to certain 

exceptions, and to post those 

agreements on its Web site in order to 

aid the Bureau’s monitoring for risks to 

consumers in the offering or provision 

of consumer financial products or 

services under section 1022(c)(1) and (4) 

of the Dodd-Frank Act. 

In 2009, section 204 of the Credit 

CARD Act added new TILA section 

122(d) to require creditors to post 

agreements for open-end consumer 

credit card plans on the creditor’s Web 

sites and to submit those agreements to 

the Board for posting on a publiclyavailable Web site established and 

maintained by the Board. 15 U.S.C. 

1632(d). The Board implemented these 

provisions in what is now 12 CFR 

1026.58. The Bureau’s receipt of credit 

card agreements pursuant to § 1026.58 

has aided the Bureau in its market 

monitoring functions, and the Bureau’s 

posting of those credit card agreements 

on its Web site may, among other things, 

enable consumers to more effectively 

compare credit cards. 

The Bureau is proposing § 1005.19 for 

substantially the same reasons with 

respect to prepaid accounts. The Bureau 

expects to use the prepaid account 

agreements it receives from issuers 

pursuant to proposed § 1005.19 to assist 

in its market monitoring efforts. In 

addition, the Bureau’s posting of 

prepaid account agreements on its Web 

site would allow consumers to more 

easily compare terms of prepaid 

accounts currently in the marketplace as 

well as facilitate third parties’ analysis 

of prepaid accounts and the 

development of online shopping tools. 

Consumers would also benefit from 

having access to their prepaid account 

agreements available through the 

issuers’ Web sites (or available upon 

request in limited instances). 

The specific requirements in 

proposed § 1005.19 largely mirror 

existing provisions in § 1026.58 and the 

Bureau expects these rules to generally 

function in the same manner, albeit 

with certain modifications made in 

proposed § 1005.19 to address 

differences between the credit card and 

prepaid account markets. 

19(a) Definitions 

The Bureau is proposing in 

§ 1005.19(a) certain definitions specific 

to proposed § 1005.19. 

19(a)(1) Agreement 

The Bureau is proposing 

§ 1005.19(a)(1) to define ‘‘agreement’’ or 

‘‘prepaid account agreement’’ for 

purposes of proposed § 1005.19 as the 

written document or documents 

evidencing the terms of the legal 

obligation, or prospective legal 

obligation, between a prepaid account 

issuer and a consumer for a prepaid 

account. An agreement or prepaid 

account agreement also includes fee 

information, as defined in proposed 

§ 1005.19(a)(3), which is discussed 

below. Proposed § 1005.19(a)(1) mirrors 

the definition of ‘‘agreement’’ or ‘‘credit 

card agreement’’ in § 1026.58(b)(1) in 

Regulation Z. 

Proposed comment 19(a)(1)–1 would 

explain that an agreement may consist 

of several documents that, taken 

together, define the legal obligation 

between the issuer and the consumer. 

The Bureau has not included the second 

part of Regulation Z comment 58(b)(1)– 

2, which gives the example of 

provisions that mandate arbitration or 

allow an issuer to unilaterally alter the 

terms of the card issuer’s or consumer’s 

obligation are part of the agreement 

even if they are provided to the 

consumer in a document separate from 

the basic credit contract. The Bureau 

does not believe that prepaid account 

agreements contain arbitration clauses 

or provisions allowing the issuer to 

unilaterally alter contract terms in 

documents separate from the main 

agreement, and therefore does not 

believe such examples are necessary to 

include in proposed comment 19(a)(1)– 

1. The Bureau also has not included a 

comment similar to Regulation Z 

comment 58(b)(1)–1, which addresses 

inclusion of certain pricing information 

in a credit card agreement, as the 

Bureau does not believe such a 

comment is relevant to prepaid 

accounts. 

19(a)(2) Amends 

The Bureau is proposing 

§ 1005.19(a)(2) to provide that for 

purposes of proposed § 1005.19, an 

issuer ‘‘amends’’ an agreement if it 

makes a substantive change (an 

‘‘amendment’’) to the agreement. A 

change is substantive if it alters the 

rights or obligations of the issuer or the 

consumer under the agreement. Any 

change in the fee information, as 

defined in proposed § 1005.19(a)(3), 

discussed below, is deemed to be 

substantive. Proposed § 1005.19(a)(2) 

mirrors the definition of the term 

amends in § 1026.58(b)(2). 

With respect to § 1026.58, the Board 

determined that requiring resubmission 


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77192 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

312 75 FR 7658, 7760 (Feb. 22, 2010). 313See 76 FR 22948, 22987 (Apr. 25, 2011). 

of credit card agreements following 

minor, technical changes would impose 

a significant administrative burden with 

no corresponding benefit of increased 

transparency.312 The Bureau believes 

the same would be true for prepaid 

account issuers and therefore proposes 

a similar definition here. 

Proposed comment 19(a)(2)–1, which 

mirrors Regulation Z comment 58(b)(2)– 

1, would give examples of changes, 

other than changes to fee information, 

that generally would be considered 

substantive, including: (i) Addition or 

deletion of a provision giving the issuer 

or consumer a right under the 

agreement, such as a clause that allows 

an issuer to unilaterally change the 

terms of an agreement; (ii) addition or 

deletion of a provision giving the issuer 

or consumer an obligation under the 

agreement, such as a clause requiring 

the consumer to pay an additional fee; 

(iii) changes that may affect the cost of 

the prepaid account to the consumer, 

such as changes in a provision 

describing how the prepaid account’s 

monthly fee will be calculated; (iv) 

changes that may affect how the terms 

of the agreement are construed or 

applied, such as changes in a choice-oflaw provision; and (v) changes that may 

affect the parties to whom the agreement 

may apply, such as provisions regarding 

authorized users or assignment of the 

agreement. 

Proposed comment 19(a)(2)–2, which 

mirrors Regulation Z comment 58(b)(2)– 

2, would give examples of changes that 

generally would not be considered 

substantive, such as: (i) Correction of 

typographical errors that do not affect 

the meaning of any terms of the 

agreement; (ii) changes to the issuer’s 

corporate name, logo, or tagline; (iii) 

changes to the format of the agreement, 

such as conversion to a booklet from a 

full-sheet format, changes in font, or 

changes in margins; (iv) changes to the 

name of the prepaid account to which 

the program applies; (v) reordering 

sections of the agreement without 

affecting the meaning of any terms of 

the agreement; (vi) adding, removing, or 

modifying a table of contents or index; 

and (vii) changes to titles, headings, 

section numbers, or captions. 

The Bureau requests comment, 

however, on whether certain changes, 

such as to an issuer’s corporate name or 

to the name of the prepaid account to 

which the program applies, should be 

considered substantive for purposes of 

proposed § 1005.19. The Bureau 

questions whether such changes, if not 

reflected in agreements posted to the 

Bureau’s or the issuer’s Web site, might 

inhibit a consumer’s ability to locate an 

agreement for an existing prepaid 

account or to effectively comparison 

shop for a new prepaid account. 

19(a)(3) Fee Information 

The Bureau is proposing 

§ 1005.19(a)(3) to define ‘‘fee 

information’’ for purposes of proposed 

§ 1005.19 as the information listed for 

the long form fee disclosure in proposed 

§ 1005.18(b)(2)(ii). The Bureau believes 

that to enable consumers to shop for 

prepaid accounts and to compare 

information about various prepaid 

accounts in an effective manner, it is 

necessary that the agreements posted on 

the Bureau’s Web site include fees and 

other pricing information. The Bureau 

expects that most issuers will include 

the long form disclosure required by 

proposed § 1005.18(b)(2)(ii) directly in 

their prepaid account agreements. 

Others may perhaps maintain the long 

form disclosure as an addendum or 

other supplement to their prepaid 

account agreements. 

Proposed § 1005.19(a)(3) is similar to 

the definition of pricing information in 

§ 1026.58(b)(7), but omits the exclusion 

for temporary or promotional rates and 

terms or rates and terms that apply only 

to protected balances, as the Bureau 

does not believe there is currently an 

equivalent to such rates and terms for 

prepaid accounts. 

The Bureau requests comment on 

whether it should also require that the 

short form disclosure that would be 

required by proposed § 1005.18(b)(2)(i) 

also be included in the definition of fee 

information for purposes of proposed 

§ 1005.19 and thus generally required to 

be submitted to the Bureau and posted 

on the issuer’s Web site, as discussed 

below. The Bureau also solicits 

comment on whether, in light of the 

revisions proposed herein regarding 

credit accessed by prepaid accounts, an 

exclusion is needed for temporary rates 

and terms or rates and terms that apply 

only to protected balances similar to the 

exclusion in § 1026.58(b)(7). 

19(a)(4) Issuer 

The Bureau is proposing 

§ 1005.19(a)(4) to define ‘‘issuer’’ or 

‘‘prepaid account issuer’’ for purposes 

of proposed § 1005.19 as the entity to 

which a consumer is legally obligated, 

or would be legally obligated, under the 

terms of a prepaid account agreement. 

Proposed § 1005.19(a)(4) mirrors the 

definition of card issuer in 

§ 1026.58(b)(4). 

As discussed in more detail above, the 

Bureau understands that, in some cases, 

more than one financial institution is 

involved in the administration of a 

prepaid program. For example, a smaller 

bank may partner with a larger bank to 

market prepaid accounts to the smaller 

bank’s customers, or a bank may partner 

with a program manager to offer prepaid 

accounts. The Bureau also understands 

that the terms of the arrangements can 

vary, for example with respect to which 

party uses its name and brand in 

marketing materials, sets fees and terms, 

conducts customer identification and 

verification, provides access to account 

information, holds the pooled account, 

and absorbs the risk of default or fraud. 

The Board believed that with respect 

to the definition of card issuer in what 

is now § 1026.58(b)(4), without a brightline rule defining which institution is 

the issuer, institutions might find it 

difficult to determine their obligations 

under § 1026.58.313 Similarly, absent 

clarification from the Bureau, it may be 

difficult to determine which entity 

would be responsible for compliance 

with proposed § 1005.19 for a particular 

prepaid account. For example, if two 

financial institutions are involved in 

issuing a prepaid program, one may 

have fewer than 3,000 open accounts 

while the other has more than 3,000 

open accounts. It may be difficult to 

determine whether, for example, the de 

minimis exception (see proposed 

§ 1005.19(b)(4)) applies in such cases. In 

addition, it may be unclear which 

institution is obligated to post and 

maintain the agreements on its Web site 

pursuant to proposed § 1005.19(c) or 

(d)(1)(i) or respond to telephone 

requests for copies of agreements 

pursuant to proposed § 1005.19(d)(1)(ii), 

discussed below. The Bureau therefore 

believes it would be beneficial to clarify 

which institution would be the prepaid 

account issuer for purposes of proposed 

§ 1005.19. 

The Bureau is thus proposing to 

define issuer, in proposed 

§ 1005.19(a)(4), with respect to a 

particular agreement as the entity to 

which a consumer is legally obligated, 

or would be legally obligated, under the 

terms of that agreement. The Bureau is 

proposing this approach for several 

reasons. 

First, the proposed definition would 

create a bright-line rule that would 

enable institutions involved in issuing 

prepaid accounts to determine their 

obligations under proposed § 1005.19. 

Second, the proposed definition would 

be consistent with the actual legal 

relationship into which a consumer 

enters under a prepaid account 

agreement. Third, the Bureau believes 

that the institution to which the 

consumer is legally obligated under the 


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agreement may be in the best position 

to provide accurate, up-to-date 

agreements to both the Bureau and 

consumers. 

Fourth, the Bureau understands that 

an institution that partners with 

multiple other entities to issue prepaid 

accounts, such as in the payroll card 

account context, will in many cases use 

the same agreement for all the prepaid 

accounts issued in connection with 

those arrangements. Therefore, while 

the number of prepaid accounts issued 

with a given partner may be small, the 

total number of consumers subject to the 

corresponding agreement may be quite 

large. The Bureau believes it would be 

beneficial to have such agreements 

submitted to the Bureau for posting on 

the Bureau’s Web site. 

The Bureau believes that in some 

cases consumers may be unsure about 

which institution issues their prepaid 

account. For example, a consumer may 

apply for a prepaid account through a 

link on the Web site of a bank with 

which the consumer has a pre-existing 

relationship, and the face of the prepaid 

card may prominently display that 

bank’s logo. In some such cases, the 

consumer may assume that the card is 

issued by that bank, even though Web 

site disclaimers, the prepaid account 

agreement, the back of the prepaid card, 

and other materials explain that the card 

is issued by another institution. The 

Bureau believes, however, that 

institutions can take steps to alleviate 

this confusion, for example by 

disclosing the identity of the other 

institution and providing contact 

information for the other institution or 

a link to the other institution’s Web site. 

The Bureau also believes that 

consumers would benefit from having a 

clearer understanding of to which 

institution they are legally obligated 

under a prepaid account agreement. 

Proposed comment 19(a)(4)–1, which 

mirrors Regulation Z comment 58(b)(4)– 

1, would provide the following example 

of how the definition of issuer would 

apply. Bank X and Bank Y work 

together to issue prepaid accounts. A 

consumer that obtains a prepaid account 

issued pursuant to this arrangement 

between Bank X and Bank Y is subject 

to an agreement that states ‘‘This is an 

agreement between you, the consumer, 

and Bank X that governs the terms of 

your Bank Y Prepaid Account.’’ The 

prepaid account issuer in this example 

is Bank X, because the agreement 

creates a legally enforceable obligation 

between the consumer and Bank X. 

Bank X is the issuer even if the 

consumer applied for the prepaid 

account through a link on Bank Y’s Web 

site and the cards prominently feature 

the Bank Y logo on the front of the card. 

Proposed comment 19(a)(4)–2, which 

mirrors Regulation Z comment 58(b)(4)– 

2, would explain that while an issuer 

has a legal obligation to comply with the 

requirements of proposed § 1005.19, it 

generally may use a third-party service 

provider to satisfy its obligations under 

proposed § 1005.19, provided that the 

issuer acts in accordance with 

regulatory guidance regarding use of 

third-party service providers and other 

applicable regulatory guidance. In some 

cases, an issuer may wish to arrange for 

the entity with which it partners to 

issue prepaid accounts to fulfill the 

requirements of proposed § 1005.19 on 

the issuer’s behalf. For example, 

Program Manager and Bank work 

together to issue prepaid accounts. 

Under the proposed § 1005.19(a)(4) 

definition, Bank is the prepaid account 

issuer for purposes of proposed 

§ 1005.19. However, Program Manager 

services the prepaid accounts, including 

mailing account opening materials and 

periodic statements to consumers. 

While Bank is responsible for ensuring 

compliance with proposed § 1005.19, 

Bank may arrange for Program Manager 

(or another appropriate third-party 

service provider) to submit prepaid 

account agreements to the Bureau under 

proposed § 1005.19 on Bank’s behalf. 

Bank must comply with regulatory 

guidance regarding use of third-party 

service providers and other applicable 

regulatory guidance. 

Proposed comment 19(a)(4)–3, which 

mirrors Regulation Z comment 58(b)(4)– 

3.i, would note that, as explained in 

proposed comment 19(c)–2, if an issuer 

provides consumers with access to 

specific information about their 

individual accounts, such as providing 

electronic history of consumers’ account 

transactions pursuant to 

§ 1005.18(c)(1)(ii), through a third-party 

Web site, the issuer is deemed to 

maintain that Web site for purposes of 

proposed § 1005.19. Such a Web site is 

deemed to be maintained by the issuer 

for purposes of proposed § 1005.19 even 

where, for example, an unaffiliated 

entity designs the Web site and owns 

and maintains the information 

technology infrastructure that supports 

the Web site, consumers with prepaid 

accounts from multiple issuers can 

access individual account information 

through the same Web site, and the Web 

site is not labeled, branded, or otherwise 

held out to the public as belonging to 

the issuer. A partner institution’s Web 

site is an example of a third-party Web 

site that may be deemed to be 

maintained by the issuer for purposes of 

proposed § 1005.19. For example, 

Program Manager and Bank work 

together to issue prepaid accounts. 

Under the proposed § 1005.19(a)(4) 

definition, Bank is the issuer that issues 

these prepaid accounts for purposes of 

proposed § 1005.19. Bank does not 

maintain a Web site specifically related 

to its prepaid accounts. However, 

consumers can access information about 

their individual accounts, such as an 

electronic history of their account 

transactions, through a Web site 

maintained by Program Manager. 

Program Manager designs the Web site 

and owns and maintains the 

information technology infrastructure 

that supports the Web site. The Web site 

is branded and held out to the public as 

belonging to Program Manager. Because 

consumers can access information about 

their individual accounts through this 

Web site, the Web site is deemed to be 

maintained by Bank for purposes of 

proposed § 1005.19. Bank therefore may 

comply with proposed § 1005.19(c) or 

(d)(1)(i) by ensuring that agreements 

offered to the public are posted on 

Program Manager’s Web site in 

accordance with proposed § 1005.19(c) 

or (d)(1)(i), respectively. Bank need not 

create and maintain a Web site branded 

and held out to the public as belonging 

to Bank in order to comply with 

proposed § 1005.19(c) and (d)(1)(i) as 

long as Bank ensures that Program 

Manager’s Web site complies with these 

sections. 

The Bureau is not proposing a 

comment similar to that of Regulation Z 

comment 58(b)(4)–3.ii which addresses 

Web site posting of private label credit 

card plans, as the Bureau does not 

believe such a comment is relevant for 

prepaid accounts, as discussed below. 

The Bureau solicits comment on its 

proposed definition of issuer, whether 

additional guidance would be helpful, 

and on whether there are preferable 

alternative approaches to defining issuer 

for purposes of proposed § 1005.19. 

Additionally, the Bureau is aware that 

some program managers offer prepaid 

accounts in conjunction with multiple 

issuers, where the terms of the prepaid 

account agreements are largely similar. 

The Bureau also solicits comment on 

whether submission of a separate 

agreement for each issuer is the best 

approach in this situation or whether 

such agreements should be submitted in 

some other manner. 

19(a)(5) Offers 

The Bureau is proposing 

§ 1005.19(a)(5) to provide that for 

purposes of proposed § 1005.19, an 

issuer ‘‘offers,’’ or ‘‘offers to the public,’’ 

a prepaid account agreement if the 

issuer solicits applications for or 


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77194 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

otherwise makes available prepaid 

accounts that would be subject to that 

agreement. 

Proposed comment 19(a)(5)–1 would 

explain that an issuer is deemed to offer 

a prepaid account agreement to the 

public even if the issuer solicits 

applications for or otherwise makes 

available prepaid accounts only to a 

limited group of persons. For example, 

an issuer may market affinity cards to 

students and alumni of a particular 

institution of higher education, or may 

solicit only residents of a specific 

geographic location for a particular 

prepaid account; in these cases, the 

agreement would be considered to be 

offered to the public. Similarly, 

agreements for prepaid accounts issued 

by a credit union are considered to be 

offered to the public even though such 

prepaid accounts are available only to 

credit union members. Agreements for 

payroll card accounts, government 

benefit accounts, or for prepaid 

accounts used to distribute student 

financial aid disbursements, or property 

and casualty insurance payouts, and 

other similar programs are also 

considered to be offered to the public. 

Proposed § 1005.19(a)(5) is similar to 

the definition of the term ‘‘offers’’ in 

§ 1026.58(b)(5). Section 1026.58(b)(5) 

provides that an issuer ‘‘offers’’ or 

‘‘offers to the public’’ an agreement if 

the issuer is soliciting or accepting 

applications for accounts that would be 

subject to that agreement. The Bureau 

does not believe that prepaid account 

issuers solicit or accept applications for 

prepaid accounts in the same manner as 

credit card issuers do for credit card 

accounts, and thus has modified this 

language for purposes of proposed 

§ 1005.19(a)(5). Proposed comment 

19(a)(5)–1 is similar to Regulation Z 

comment 58(b)(5)–1, but includes 

several additional examples of prepaid 

accounts offered to the public. The 

Bureau is not proposing an equivalent 

comment to Regulation Z’s comment 

58(b)(5)–2, which provides that a card 

issuer is deemed to offer a credit card 

agreement to the public even if the 

terms of that agreement are changed 

immediately upon opening to terms not 

offered to the public, as the Bureau does 

not believe that prepaid account terms 

are modified in this manner. 

19(a)(6) Open Account 

The Bureau is proposing 

§ 1005.19(a)(6) to provide that for 

purposes of proposed § 1005.19, a 

prepaid account is an ‘‘open account,’’ 

or ‘‘open prepaid account,’’ if (i) there 

is an outstanding balance in the prepaid 

account; (ii) if the consumer can load 

funds to the account even if the account 

does not currently hold a balance; or 

(iii) the consumer can access credit 

through a credit plan that would be a 

credit card account under Regulation Z, 

12 CFR part 1026 that is offered in 

connection with a prepaid account. A 

prepaid account that has been 

suspended temporarily (for example, 

due to a report by the consumer of 

unauthorized use of the card) is 

considered an open account or open 

prepaid account. 

Proposed comment 19(a)(5)–1 would 

explain that a prepaid account that 

meets any of the criteria set forth in 

proposed § 1005.19(a)(5) is considered 

open even if the issuer considers the 

account inactive. The term open 

account is used in the provisions 

regarding the de minimis and product 

testing exceptions in proposed 

§ 1005.19(b)(4) and (5) and the 

requirements in proposed § 1005.19(d) 

for agreements not submitted to the 

Bureau, discussed below. 

Proposed § 1005.19(a)(6) is similar to 

the definition of open account or open 

credit card account in § 1026.58(b)(6). 

While § 1026.58(b)(6) defines an open 

credit card account as one in which the 

cardholder can obtain extensions of 

credit on the account, or there is an 

outstanding balance on the account that 

has not been charged off, the Bureau has 

modified the definition to better reflect 

what it believes constitutes an open 

account in the prepaid context. 

Proposed § 1005.19(a)(6) includes the 

explanation used in § 1026.58(b)(6), 

which provides that an account that has 

been suspended temporarily (for 

example, due to a report by the 

consumer of unauthorized use of the 

card) is nonetheless considered an open 

account. Proposed comment 19(a)(6)–1 

is similar to Regulation Z comment 

58(b)(6)–1, with modifications to reflect 

the terms of proposed § 1005.19(a)(6). 

19(a)(7) Prepaid Account 

The Bureau is proposing 

§ 1005.19(a)(7) to provide that for 

purposes of proposed § 1005.19, 

‘‘prepaid account’’ means a prepaid 

account as defined in proposed 

§ 1005.2(b)(3). Proposed comment 

19(a)(7)–1 would explain that for 

purposes of proposed § 1005.19, a 

prepaid account includes, among other 

things, a payroll card account as defined 

in proposed § 1005.2(b)(3)(iii) and a 

government benefit account as defined 

proposed §§ 1005.2(b)(3)(iv) and 

1005.15(a)(2). 

The Bureau solicits comment on 

whether there are any types of prepaid 

accounts as defined in proposed 

§ 1005.2(b)(3) that should be excluded 

from the definition of prepaid account 

for purposes of this section or that 

should be excluded from certain of the 

requirements of this section. 

The Bureau expects that issuers 

offering prepaid accounts with overdraft 

services or other credit features 

proposed to be governed as credit cards 

under Regulation Z, as discussed below, 

would submit to the Bureau pursuant to 

proposed § 1005.19 both the initial 

prepaid account agreement (including 

the disclosures required by proposed 

§ 1005.18(b)(2)(ii)(B) as part of the fee 

information pursuant to proposed 

§ 1005.19(a)(3)) and the subsequent 

prepaid account agreement disclosing 

overdraft or credit terms, and also 

submit the latter agreement to the 

Bureau as a credit card agreement 

pursuant to § 1026.58. The Bureau does 

not believe this approach would impose 

significant burden on prepaid account 

issuers, but nonetheless solicits 

comment on this approach. 

Private Label Credit Cards 

The Board defined the term ‘‘private 

label credit card account’’ in what is 

now § 1026.58(b)(8)(i) as a credit card 

account under an open-end (not home 

secured) consumer credit plan with a 

credit card that can be used to make 

purchases only at a single merchant or 

an affiliated group of merchants. The 

term ‘‘private label credit card plan’’ in 

§ 1026.58(b)(8)(ii) is similarly defined as 

all of the private label credit card 

accounts issued by a particular issuer 

with credit cards usable at the same 

single merchant or affiliated group of 

merchants. Regulation Z contains an 

exception and other specific provisions 

tailored specifically to private label 

credit card accounts and plans. See, e.g., 

§ 1026.58(b)(8), (c)(6); comments 

58(b)(8)–1 through –4; comments 

58(c)(6)–1 through –6; and comment 

58(d)–3. 

The Bureau does not believe that 

equivalent provisions are necessary or 

appropriate for proposed § 1005.19, as 

the equivalent of a private label credit 

card in the prepaid context would be a 

closed-loop gift card. Such gift cards are 

outside the scope of the term prepaid 

account, as defined in proposed 

§§ 1005.2(b)(3) and 1005.19(a)(7). 

19(b) Submission of Agreements to the 

Bureau 

Proposed § 1005.19(b) would require 

each issuer to electronically submit to 

the Bureau prepaid account agreements 

offered by the issuer on a quarterly 

basis. The Bureau will post the prepaid 

account agreements it receives on its 

Web site pursuant to proposed 

§ 1005.19(b)(7), discussed below. 


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19(b)(1) Quarterly Submissions 

The Bureau is proposing 

§ 1005.19(b)(1) to require issuers to 

make quarterly submissions of prepaid 

account agreements to the Bureau, in 

the form and manner specified by the 

Bureau. Such quarterly submissions 

would be required to be sent to the 

Bureau no later than the first business 

day on or after January 31, April 30, July 

31, and October 31 of each year. 

Proposed comment 19(b)(1)–1 would 

refer to Regulation Z comment 58(c)(1)– 

1 for additional guidance as to the 

quarterly submission timing 

requirement. 

Regulation Z’s § 1026.58(b)(3) defines 

the term ‘‘business day,’’ for purposes of 

§ 1026.58, to mean a day on which the 

creditor’s offices are open to the public 

for carrying on substantially all of its 

business functions. Section 1005.2(d) 

contains a similar definition of the term 

business day (any day on which the 

offices of the consumer’s financial 

institution are open to the public for 

carrying on substantially all business 

functions). Insofar as that definition 

applies generally in subpart A and the 

Bureau believes it is appropriate for use 

in proposed § 1005.19, the Bureau 

believes it is unnecessary to define the 

term again within proposed § 1005.19. 

Proposed § 1005.19(b)(1) would 

require that each quarterly submission 

contain the following four items. First, 

a quarterly submission must contain 

identifying information about the issuer 

and the agreements submitted, 

including the issuer’s name, address, 

and identifying number (such as an 

RSSD ID number or tax identification 

number), and the name of the program 

manager, if any, for each agreement. 

Second, the quarterly submission 

must contain the prepaid account 

agreements that the issuer offered to the 

public as of the last business day of the 

preceding calendar quarter that the 

issuer has not previously submitted to 

the Bureau. 

Third, the quarterly submission must 

contain any prepaid account agreement 

previously submitted to the Bureau that 

was amended during the previous 

calendar quarter and that the issuer 

offered to the public as of the last 

business day of the preceding calendar 

quarter, as described in proposed 

§ 1005.19(b)(2) discussed below. 

Finally, the quarterly submission 

must contain notification regarding any 

prepaid account agreement previously 

submitted to the Bureau that the issuer 

is withdrawing, as described in 

proposed § 1005.19(b)(3), (4)(iii), and 

(5)(iii) discussed below. 

Proposed comment 19(b)(1)–2.i would 

explain that an issuer is not required to 

make any submission to the Bureau at 

a particular quarterly submission 

deadline if, during the previous 

calendar quarter, the issuer did not take 

any of the following actions: (A) 

Offering a new prepaid account 

agreement that was not submitted to the 

Bureau previously; (B) amending an 

agreement previously submitted to the 

Bureau; and (C) ceasing to offer an 

agreement previously submitted to the 

Bureau. Proposed comment 19(b)(1)–2.ii 

would refer to Regulation Z comment 

58(c)(1)–2.ii for additional guidance as 

to when a quarterly submission is not 

required. 

Proposed comment 19(b)(1)–3 would 

explain that proposed § 1005.19(b)(1) 

permits an issuer to submit to the 

Bureau on a quarterly basis a complete, 

updated set of the prepaid account 

agreements the issuer offers to the 

public. Proposed comment 19(b)(1)–3 

would also refer to Regulation Z 

comment 58(c)(1)–3 for additional 

guidance regarding quarterly 

submission of a complete set of updated 

agreements. 

Proposed § 1005.19(b)(1) generally 

mirrors § 1026.58(c)(1), except for the 

addition of the program manager’s name 

into proposed § 1005.19(b)(1)(i). 

Proposed comments 19(b)(1)–1, –2, and 

–3 are similar to Regulation Z comments 

58(c)(1)–1, –2, and –3 except that 

proposed comments 19(b)(1)–1, –2.ii 

and –3 have been shortened to crossreference the parallel comments in 

Regulation Z for specific examples 

regarding quarterly submission of 

agreements as the Bureau intends that 

these provisions would function the 

same for prepaid accounts as they do for 

credit card accounts. 

Proposed § 1005.19(b) would require 

submission to the Bureau of agreements 

for all prepaid accounts offered to the 

public, unless one or more of the 

exceptions discussed below are met for 

withdrawn agreements (proposed 

§ 1005.19(b)(3)), issuers that qualify for 

the de minimis exception (proposed 

§ 1005.19(b)(4)), or agreements offered 

as part of a product test (proposed 

§ 1005.19(b)(5)). The Bureau solicits 

comment, however, on whether it 

should instead require submission of 

agreements for all open prepaid 

accounts (rather than only for 

agreements that are currently offered to 

the public), unless the de minimis or 

product testing exceptions are met. The 

Bureau believes that, in many instances, 

when a prepaid account issuer decides 

to cease offering a specific prepaid 

account program to the public, it also 

closes all existing accounts under that 

program after a period of time. The 

Bureau requests comment on whether 

this practice is widespread, or whether 

prepaid account issuers may have large 

numbers of open prepaid accounts 

under programs that are no longer 

offered to the public. If there are such 

programs, the Bureau believes there may 

be benefits to consumers in being able 

to locate agreements for such programs 

via the Bureau’s Web site even if those 

programs are no longer being offered to 

the public. 

In addition, the Bureau solicits 

comment on whether submission of 

agreements on a quarterly basis is 

appropriate, or whether a shorter 

period, or a longer period such as semiannually or annually, should be used. 

The Bureau also solicits comment on 

whether, alternatively, it should require 

issuers to submit revised agreements 

whenever agreements are revised, and 

whether such a requirement would 

impose a lower burden on issuers than 

would a set submission schedule. 

As discussed above, proposed 

§ 1005.19(b)(1) would require quarterly 

submission of agreements for all prepaid 

accounts offered to the public, unless 

one or more exceptions are met and 

proposed comment 19(b)(1)–3 would 

explain an issuer is permitted to submit 

a complete, updated set of the prepaid 

account agreements each quarter. The 

Bureau solicits comment on whether, 

alternatively, it should instead require 

issuers to resubmit all agreements on a 

quarterly (or other) basis. 

19(b)(2) Amended Agreements 

The Bureau is proposing 

§ 1005.19(b)(2) to provide that if a 

prepaid account agreement has been 

submitted to the Bureau, the agreement 

has not been amended, and the issuer 

continues to offer the agreement to the 

public, no additional submission 

regarding that agreement is required. 

Proposed comment 19(b)(2)–1 would 

refer to Regulation Z comment 58(c)(3)– 

1 for additional guidance regarding no 

requirement to resubmit agreements that 

have not been amended. 

Proposed § 1005.19(b)(2) would also 

require that if a prepaid account 

agreement that previously has been 

submitted to the Bureau is amended, 

and the issuer offered the amended 

agreement to the public as of the last 

business day of the calendar quarter in 

which the change became effective, the 

issuer must submit the entire amended 

agreement to the Bureau, in the form 

and manner specified by the Bureau, by 

the first quarterly submission deadline 

after the last day of the calendar quarter 

in which the change became effective. 

Proposed comment 19(b)(2)–2 would 


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314 74 FR 54124, 54189 (Oct. 21, 2009). 

315 74 FR 54124, 54191 (Oct. 21, 2009). 

further explain that the issuer is 

required to submit the amended 

agreement to the Bureau only if the 

issuer offered the amended agreement to 

the public as of the last business day of 

the calendar quarter in which the 

change became effective and would 

refer to Regulation Z comment 58(c)(3)– 

2 for additional guidance regarding the 

submission of amended agreements. 

Proposed comment 19(b)(2)–3 would 

reiterate that agreements that are not 

offered to the public as of the last day 

of the calendar quarter should not be 

submitted to the Bureau and would refer 

to Regulation Z comment 58(c)(3)–3 for 

additional guidance on agreements that 

have been amended but are no longer 

offered to the public. 

Finally, proposed comment 19(b)(2)– 

4 would explain that an issuer may not 

fulfill the requirement in proposed 

§ 1005.19(b)(2) to submit the entire 

amended agreement to the Bureau by 

submitting a change-in-terms or similar 

notice covering only the terms that have 

changed. In addition, amendments must 

be integrated into the text of the 

agreement (or the optional addendum 

described in proposed § 1005.19(b)(6)), 

not provided as separate riders. 

Proposed comment 19(b)(2)–4 would 

also refer to Regulation Z comment 

58(c)(3)–4 for additional guidance as to 

the submission of revised agreements. 

The Bureau believes that permitting 

issuers to submit change-in-terms 

notices or riders containing 

amendments or revisions would make it 

difficult to determine a prepaid 

account’s current fees and terms. 

Consumers could be required to sift 

through change-in-terms notices and 

riders in an attempt to assemble a 

coherent picture of the terms currently 

offered. The Bureau believes that issuers 

are better placed than consumers to 

assemble this information and that 

prepaid issuers customarily incorporate 

revised terms into their prepaid account 

agreements on a regular basis rather 

than only issue separate riders or 

notices. 

The Bureau solicits comment on 

whether it should require that other 

specific information be submitted 

regarding the prepaid account program 

or programs to which a specific 

agreement applies. For example, for 

payroll card accounts, the Bureau could 

require submission of the name of each 

employer that offers a payroll card 

account under a specific agreement, to 

assist consumers in identifying on the 

Bureau’s or the issuer’s Web site the 

agreement to which their payroll card 

account is subject. 

The Bureau also seeks comment on 

the possible format or formats in which 

it might require issuers to submit 

prepaid account agreements. For 

example, proposed § 1005.19(c)(4), 

discussed below, would require issuers 

to post agreements on their Web sites in 

any electronic format that is readily 

usable by the general public. The 

Bureau requests comment on whether it 

should adopt a similar standard for 

agreements that are provided to it 

pursuant to proposed § 1005.19(b), or 

whether it should instead (or 

additionally) require issuers to provide 

agreements (or a portion of the 

agreement, such as the long form 

disclosure) using, for example, a 

machine-readable text format such as 

JSON, XML, or similar format that could 

be used by the Bureau or third parties 

to more easily create comparison 

shopping tools. See proposed comment 

18(b)(3)(i)(B)–3 (discussing machinereadable text). 

The Bureau expects to provide 

additional details regarding the 

electronic submission process in 

connection with the release of its final 

rule on this subject. Issuers will have no 

submission obligations until the Bureau 

has issued technical specifications 

addressing the form and manner for 

submission of agreements. The Bureau 

intends for the streamlined electronic 

submission process to be operational 

before proposed § 1005.19(b) becomes 

effective. 

Proposed § 1005.19(b)(2) mirrors the 

Regulation Z provisions regarding 

submission of amended agreements in 

§ 1026.58(c)(3). Proposed comments 

19(b)(2)–1 through –4 mirror Regulation 

Z comments 58(c)(3)–1 through –4, 

although the proposed 19(b)(2) 

comments have been shortened to crossreference the parallel comments in 

Regulation Z for specific examples of 

submission of amended agreements as 

the Bureau intends that these provisions 

would function the same for prepaid 

accounts as they do for credit card 

accounts. 

19(b)(3) Withdrawal of Agreements 

The Bureau is proposing 

§ 1005.19(b)(3) to provide that if an 

issuer no longer offers to the public a 

prepaid account agreement that 

previously has been submitted to the 

Bureau, the issuer must notify the 

Bureau, in the form and manner 

specified by the Bureau, by the first 

quarterly submission deadline after the 

last day of the calendar quarter in which 

the issuer ceased to offer the agreement. 

Proposed § 1005.19(b)(3) mirrors the 

Regulation Z provisions regarding 

withdrawal of agreements previously 

submitted to the Bureau in 

§ 1026.58(c)(4). Proposed comment 

19(b)(3)–1 cross-references Regulation Z 

comment 58(c)(4)–1 for a specific 

example regarding withdrawal of 

submitted agreements as the Bureau 

intends that this provision would 

function the same for prepaid accounts 

as it does for credit card accounts. 

With respect to credit cards, the Board 

found that the number of credit card 

agreements currently in effect but no 

longer offered to the public was 

extremely large, and thus providing 

such agreements to the Board would 

have posed a significant burden on 

industry as well as diluted the active 

agreements posted on the Board’s Web 

site to such an extent that they might no 

longer be useful to consumers.314 The 

Bureau does not believe that prepaid 

issuers have open prepaid accounts 

subject to agreements no longer offered 

to the public the same way that credit 

card issuers do. However, the Bureau 

believes that the primary benefit of 

making prepaid account agreements 

available on the Bureau’s Web site 

would be to assist consumers in 

comparing prepaid account agreements 

offered by various issuers when 

shopping for a new prepaid account. 

Including agreements that are no longer 

offered to the public would not facilitate 

comparison shopping by consumers 

because consumers could not obtain the 

accounts subject to these agreements. 

Thus, the Bureau is proposing that an 

issuer only submit to the Bureau under 

proposed § 1005.19(b) those agreements 

that the issuer currently offers to the 

public. 

19(b)(4) De Minimis Exception 

The Bureau is proposing 

§ 1005.19(b)(4) to provide a de minimis 

exception for the requirement to submit 

prepaid account agreements to the 

Bureau. Proposed § 1005.19(b)(4)(i) 

would state that an issuer is not 

required to submit any prepaid account 

agreements to the Bureau if the issuer 

had fewer than 3,000 open prepaid 

accounts as of the last business day of 

the calendar quarter. As in Regulation Z, 

this de minimis exception would apply 

to all open prepaid accounts of the 

issuer, not to each of the issuer’s 

prepaid account programs separately. 

For Regulation Z, the Board was not 

aware of a way to define a ‘‘credit card 

plan’’ that would not divide issuers’ 

portfolios into such small units that 

large numbers of credit card agreements 

could fall under the de minimis 

exception.315 The Board therefore 

established a de minimis exception 

based on an issuer’s total number of 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77197 

316HSN Consultants, Inc., The Nilson Report, 

Issue 1035 at 8, 10–11 (Feb. 2014), and The Nilson 

Report, Issue 1038 at 10–11 (Apr. 2014). Public data 

for the next tranche of credit card issuers does not 

include account volume, but it does include 

outstandings volume. The lowest outstandings for 

an issuer in the third 50 cohort are more than 60 

percent of the outstandings for the smallest issuer 

by total account volume in the top-100. See The 

Nilson Report, Issue 1042 at 11 (June 2014). As the 

smallest issuer by total account volume in the top100 exceeded the de minimis threshold by several 

factors, the available indications are that the third 

50 cohort would not fall below the de minimis 

threshold either. 

317HSN Consultants, Inc., The Nilson Report, 

Issue 1043 at 10 (June 2014). One issuer had 9,000 

cards in circulation, another had 8,000, and a third 

had only 3,000. 

318One issuer was reported to have 14,000 cards 

in circulation, another had 16,000, and a third had 

18,000. 

319Nilson reports that the top-50 prepaid issuers 

accounted for some $118 billion in purchase 

volume in 2013. The Nilson Report, Issue 1043 at 

1 (June 2014). One leading consultancy has 

estimated load on open-loop prepaid products for 

that year at over $242 billion. Mercator Advisory 

Grp., Eleventh Annual U.S. Prepaid Cards Market 

Forecasts, 2014–2017 (Nov. 2014). 

open accounts. § 1026.58(c)(5). The 

Bureau believes that the same issues 

apply in attempting to define a ‘‘prepaid 

account program’’ for purposes of a de 

minimis threshold, and therefore 

similarly proposes to adopt a de 

minimis threshold that applies to all of 

an issuer’s prepaid programs, rather 

than on a program-by-program basis. 

The Bureau is proposing to use a 

lower de minimis threshold of 3,000 

open prepaid accounts, in place of the 

10,000 open accounts threshold used in 

Regulation Z. The prepaid accounts 

market is smaller than the credit card 

market (based on number of open 

accounts) and there are some 

indications that smaller issuers (i.e., 

with small numbers of open accounts 

rather than small based on entity size) 

may account for more of the prepaid 

market than do smaller issuers in the 

credit card market. The Bureau seeks to 

create a de minimis threshold that 

would exempt a similar portion of open 

prepaid accounts from this requirement 

as are exempted by the current 

analogous requirement for credit cards. 

However, the Bureau lacks specific data 

that would permit it to accurately 

determine a comparable threshold for 

prepaid accounts. 

Public data indicate that none of the 

top 100 Visa and MasterCard credit card 

issuers (ranked by dollar amount of 

outstandings, and which covers both 

consumer and commercial credit cards) 

come close to falling below the 10,000 

Regulation Z de minimis threshold, 

even as those issuers (when combined 

with Discover and American Express, 

which are the two largest U.S. issuers 

that are not MasterCard or Visa issuers) 

amount to more than 92 percent of total 

general purpose credit card loans 

outstanding.316 The smallest credit card 

issuers in this top-100 list, based on 

total accounts and total active accounts, 

exceed the de minimis threshold by a 

factor of between two (for active 

accounts) and nearly four (for total 

accounts). 

In comparison, the same public 

source indicates that three of the top 50 

Visa and MasterCard prepaid account 

issuers would fall below a 10,000 

threshold, and one of these is right at 

the proposed 3,000 threshold.317

Furthermore, the data in this report 

include a number of types of other 

prepaid products beyond commercial 

cards that are outside the proposed 

definition of prepaid account, such as 

consumer gift, healthcare, and rebates/

rewards, creating the likelihood that 

additional top-50 prepaid issuers could 

fall below a de minimis threshold of 

10,000 open prepaid accounts.318

Although it is not straightforward to 

calculate exactly how much of the 

market these top-50 prepaid issuers 

represent, available indications are that 

it is significantly below the 92 percent 

accounted for by the top-100 credit card 

issuers.319

The Bureau solicits comment on its 

proposed adoption of a 3,000 open 

accounts threshold for the de minimis 

exception. In addition, the Bureau 

recognizes that the proposed de minimis 

exception would not alleviate the 

administrative burden on large issuers 

of submitting agreements for prepaid 

account programs with a very small 

number of open accounts. The Bureau 

solicits comment on whether it should 

create a de minimis exception 

applicable to a prepaid account program 

offered by an issuer of any size and, if 

so, how the Bureau should define 

‘‘prepaid account program’’ for purposes 

of such an exception. 

Proposed comment 19(b)(4)–1 would 

explain that the de minimis exception 

in proposed § 1005.19(b)(4) is distinct 

from the product testing exception in 

proposed § 1005.19(b)(5). The de 

minimis exception provides that an 

issuer with fewer than 3,000 open 

prepaid accounts is not required to 

submit any agreements to the Bureau, 

regardless of whether those agreements 

qualify for the product testing 

exception. In contrast, the product 

testing exception provides that an issuer 

is not required to submit to the Bureau 

agreements offered solely in connection 

with certain types of prepaid account 

programs with fewer than 3,000 open 

accounts, regardless of the financial 

institution’s total number of open 

accounts. Proposed comment 19(b)(4)–2 

would refer to Regulation Z comment 

58(c)(5)–2 for additional guidance on 

the de minimis exception. 

Proposed § 1005.19(b)(4)(ii) would 

state that if an issuer that previously 

qualified for the de minimis exception 

ceases to qualify, the issuer must begin 

making quarterly submissions to the 

Bureau no later than the first quarterly 

submission deadline after the date as of 

which the issuer ceased to qualify. 

Proposed comment 19(b)(4)–3 would 

refer to Regulation Z comment 58(c)(5)– 

3 for additional guidance on the date for 

determining whether an issuer qualifies 

for the de minimis exception. Proposed 

comment 19(b)(4)–4 would refer to 

Regulation Z comment 58(c)(5)–4 for 

additional guidance on the date for 

determining whether an issuer ceases to 

qualify for the de minimis exception. 

Finally, proposed § 1005.19(b)(4)(iii) 

would state that if an issuer that did not 

previously qualify for the de minimis 

exception newly qualifies for the de 

minimis exception, the issuer must 

continue to make quarterly submissions 

to the Bureau until the issuer notifies 

the Bureau that it is withdrawing all 

agreements it previously submitted to 

the Bureau. Proposed comment 

19(b)(4)–5 would refer to Regulation Z 

comment 58(c)(5)–5 for additional 

guidance on an issuer’s option to 

withdraw its agreements submitted to 

the Bureau. 

Proposed § 1005.19(b)(4) mirrors the 

Regulation Z provisions regarding the 

de minimis exception in § 1026.58(c)(5), 

except for the lower proposed de 

minimis threshold figure. Proposed 

comments 19(b)(4)–1 to –5 mirror 

Regulation Z comments 58(c)(5)–1 to –5, 

although proposed comments 19(b)(1)–2 

to –5 have been shortened to crossreference the parallel comments in 

Regulation Z for specific examples 

regarding the de minimis exception as 

the Bureau intends that these provisions 

would function the same for prepaid 

accounts as they do for credit card 

accounts. In addition, the references to 

the private label credit card exception in 

Regulation Z comment 58(c)(5)–1 have 

been removed as the Bureau does not 

believe that exception is relevant in the 

prepaid card context, as discussed 

above. 

19(b)(5) Product Testing Exception 

The Bureau is proposing 

§ 1005.19(b)(5) to provide a product 

testing exception to the requirement to 

submit prepaid account agreements to 

the Bureau. Proposed § 1005.19(b)(5) 

mirrors the Regulation Z provisions 

regarding the product testing exception 

in § 1026.58(c)(7). 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77198 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

Proposed § 1005.19(b)(5)(i) would 

provide that an issuer is not required to 

submit to the Bureau a prepaid account 

agreement if, as of the last business day 

of the calendar quarter, the agreement: 

(A) Is offered as part of a product test 

offered to only a limited group of 

consumers for a limited period of time; 

(B) is used for fewer than 3,000 open 

prepaid accounts; and (C) is not offered 

to the public other than in connection 

with such a product test. 

Proposed § 1005.19(b)(5)(ii) would 

provide that if an agreement that 

previously qualified for the product 

testing exception ceases to qualify, the 

issuer must submit the agreement to the 

Bureau no later than the first quarterly 

submission deadline after the date as of 

which the agreement ceased to qualify. 

Finally, proposed § 1005.19(b)(5)(iii) 

would provide that if an agreement that 

did not previously qualify for the 

product testing exception newly 

qualifies for the exception, the issuer 

must continue to make quarterly 

submissions to the Bureau with respect 

to that agreement until the issuer 

notifies the Bureau that the agreement is 

being withdrawn. 

The Bureau believes that the 

administrative burden on issuers of 

preparing and submitting to the Bureau 

agreements used for a small number of 

prepaid accounts in connection with a 

product test by an issuer outweighs the 

benefit of increased transparency of 

including these agreements on the 

Bureau’s Web site. The Bureau 

understands that issuers often test new 

prepaid account strategies and products 

by offering prepaid accounts to discrete, 

targeted groups of consumers for a 

limited time. Posting these agreements 

on the Bureau’s and issuers’ Web sites 

would not facilitate comparison 

shopping by consumers, as these terms 

are offered only to a limited group of 

consumers for a short period of time. 

Including these agreements could 

mislead consumers into believing that 

these terms are available more generally. 

In addition, posting these agreements 

could make issuer testing strategies 

transparent to competitors. 

The Bureau seeks comment on 

whether it should impose a time limit 

on how long an issuer can avail itself of 

the product testing exception, and if so, 

what that time limit might be, or 

whether the Bureau should adopt other 

conditions on use of the product testing 

exception. The Bureau is concerned 

about possible circumvention of the 

proposed requirements in § 1005.19(b) 

via the product testing exception. For 

example, the Bureau is concerned about 

the possibility that issuers might deem 

small payroll card account programs 

part of a product test, even when all or 

substantially all of a particular 

employer’s employees are enrolled in 

the payroll card account program. The 

Bureau seeks comment on whether it 

should specify that if all, or 

substantially all, of a company’s 

employees are enrolled in a payroll card 

account program (excluding programs 

for the employees of the issuer or a 

service provider to the issuer, such as a 

program manager), that program does 

not qualify for the product testing 

exception. 

19(b)(6) Form and Content of 

Agreements Submitted to the Bureau 

Proposed § 1005.19(b)(6) would set 

forth the form and content requirements 

for prepaid account agreements 

submitted to the Bureau. 

19(b)(6)(i) Form and Content Generally 

The Bureau is proposing 

§ 1005.19(b)(6)(i) to provide that each 

prepaid account agreement must 

contain the provisions of the agreement 

and the fee information in effect as of 

the last business day of the preceding 

calendar quarter. Proposed comment 

19(b)(6)–1 would provide the following 

example to aid in determining the ‘‘as 

of’’ date of an agreement: On June 1, an 

issuer decides to decrease the out-ofnetwork ATM withdrawal fee associated 

with one of the agreements it offers to 

the public. The change in that fee will 

become effective on August 1. If the 

issuer submits the agreement to the 

Bureau on July 31 (for example, because 

the agreement has been otherwise 

amended), the agreement submitted 

should not include the new lower outof-network ATM withdrawal fee 

because that lower fee was not in effect 

on June 30, the last business day of the 

preceding calendar quarter. Proposed 

comment 19(b)(6)–1 is similar to 

Regulation Z comment 58(c)(8)–1. 

Proposed § 1005.19(b)(6)(i) would also 

state that agreements must not include 

any personally identifiable information 

relating to any consumer, such as name, 

address, telephone number, or account 

number. Further, as explained in 

proposed § 1005.19(b)(6)(i), the 

following would not be deemed to be 

part of the agreement for purposes of 

proposed § 1005.19, and therefore are 

not required to be included in 

submissions to the Bureau: (1) Ancillary 

disclosures required by State or Federal 

law, such as affiliate marketing notices, 

privacy policies, or disclosures under 

the E-Sign Act; (2) solicitation or 

marketing materials; (3) periodic 

statements; and (4) documents that may 

be sent to the consumer along with the 

prepaid account or prepaid account 

agreement such as a cover letter, a 

validation sticker on the card, or other 

information about card security. Finally, 

proposed § 1005.19(b)(6)(i) would state 

that agreements must be presented in a 

clear and legible font. 

Proposed § 1005.19(b)(6)(i) generally 

mirrors the Regulation Z provisions in 

§ 1026.58(c)(8)(i) regarding the form and 

content of agreements that would be 

submitted to the Bureau. This paragraph 

excludes, however, two additional items 

listed in § 1026.58(c)(8)(i)(C) that are not 

deemed to be part of a credit card 

agreement—ancillary agreements 

between the issuer and the consumer, 

such as debt cancellation contracts or 

debt suspension agreements, and offers 

for credit insurance or other optional 

products and other similar 

advertisement—because the Bureau 

does not believe these items are relevant 

in the prepaid account context. 

Proposed § 1005.19(b)(6)(i) is not 

intended to provide an exhaustive list of 

the ancillary State and Federal law 

disclosures that are not deemed to be 

part of an agreement under proposed 

§ 1005.19. As indicated by the use of the 

phrase ‘‘such as,’’ the listed disclosures 

are merely examples of ‘‘ancillary 

disclosures required by Federal or State 

law.’’ The Bureau does not believe it is 

feasible to include in this paragraph a 

comprehensive list of all such 

disclosures, as such a list would be 

extensive and would change as State 

and Federal laws and regulations are 

amended. The Bureau notes that an 

issuer would not be prohibited by this 

or any other provision of proposed 

§ 1005.19 from choosing to include 

these items in submitted agreements. 

19(b)(6)(ii) Fee Information 

The Bureau is proposing 

§ 1005.19(b)(6)(ii) to provide that fee 

information must be set forth either in 

the prepaid account agreement or in a 

single addendum to that agreement. The 

agreement or addendum thereto must 

contain all of the fee information, which 

is defined by proposed § 1005.19(a)(3) 

as the information listed for the longform fee disclosure in proposed 

§ 1005.18(b)(2)(ii), as discussed above. 

Proposed § 1005.19(b)(6)(ii) deviates 

from the provisions governing pricing 

information in § 1026.58(c)(8)(ii) in that 

the proposed language permits, but does 

not require, prepaid account fee 

information to be provided in an 

addendum to the prepaid account 

agreement. The Bureau requests 

comment on whether it should require, 

rather than permit, prepaid account fee 

information in an addendum to the 

agreement and whether such a 

requirement might aid consumers in 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77199 

320 75 FR 7658, 7769 (Feb. 22, 2010). 321See 75 FR 7658, 7770 (Feb. 22, 2010). 

more easily locating fee information in 

prepaid account agreements. 

Proposed § 1005.19(b)(6)(ii) also omits 

the provisions contained in 

§ 1026.58(c)(8)(ii)(B) and (C) that 

address how to disclose pricing 

information that varies from one 

cardholder to another (such as annual 

percentage rates) and how to disclose 

variable rates and margins. Because 

prepaid account fees and terms 

currently do not vary between 

consumers based on creditworthiness or 

other factors in the same way that credit 

card account pricing and other terms do, 

the Bureau does not believe these 

provisions are either applicable or 

necessary with respect to prepaid 

account agreements. The Bureau 

likewise has not proposed an equivalent 

to § 1026.58(c)(8)(iii) which allows for 

an optional variable terms addendum 

that allows provisions other than those 

related to pricing information that may 

vary from one cardholder to another 

depending on the cardholder’s 

creditworthiness, State of residence or 

other factors to be set forth in a single 

addendum separate from the pricing 

information addendum. The Bureau has 

likewise not proposed a comment 

equivalent to that of 58(c)(8)–2 

regarding pricing information, nor that 

of 58(c)(8)–4 regarding the optional 

variable terms addendum. The Bureau 

solicits comment on whether, in light of 

the revisions proposed herein regarding 

credit accessed by prepaid accounts, it 

should incorporate provisions similar to 

§ 1026.58(c)(8)(ii)(B), (8)(ii)(C), (8)(iii) or 

comments 58(c)(8)–2 or 58(c)(8)–4 into 

proposed § 1005.19. 

With credit cards, issuers offer a range 

of terms and conditions and issuers may 

make those terms and conditions 

available in a variety of different 

combinations, particularly with respect 

to items included in the pricing 

information. In Regulation Z, pricing 

information is required to be set out in 

a separate pricing information 

addendum, regardless of whether 

pricing information is also contained in 

the main text of the agreement. The 

Board concluded that it could be 

difficult for consumers to find pricing 

information if it is integrated into the 

text of the credit card agreement. The 

Board believed that requiring pricing 

information to be attached as a separate 

addendum would ensure that this 

information is easily accessible to 

consumers.320 The Bureau does not 

believe that prepaid account agreements 

vary in the same manner. The Bureau 

also believes that if prepaid account 

agreements contain the long form fee 

disclosure required by proposed 

§ 1005.18(b)(2)(ii) (see Sample Form A– 

10(e)), consumers would be able to 

easily locate such fee information 

within a prepaid account agreement and 

to compare fee information across 

agreements. 

Proposed comment 19(b)(6)–2, which 

is largely similar to Regulation Z 

comment 58(c)(8)–3, would explain that 

fee agreement variations do not 

constitute separate agreements. Fee 

information that may vary from one 

consumer to another depending on the 

consumer’s State of residence or other 

factors must be disclosed by setting 

forth all the possible variations or by 

providing a range of possible variations. 

Two agreements that differ only with 

respect to variations in the fee 

information would not constitute 

separate agreements for purposes of 

proposed § 1005.19. For example, an 

issuer offers two types of prepaid 

accounts that differ only with respect to 

the monthly fee. The monthly fee for 

one type of account is $4.95, while the 

monthly fee for the other type of 

account is $0 if the consumer regularly 

receives direct deposit to the prepaid 

account. The provisions of the 

agreement and fee information for the 

two types of accounts are otherwise 

identical. The issuer should not submit 

to the Bureau one agreement with fee 

information listing a $4.95 monthly fee 

and another agreement with fee 

information listing a $0 monthly fee. 

Instead, the issuer should submit to the 

Bureau one agreement with fee 

information listing possible monthly 

fees of $4.95 or $0, including the 

explanation that the latter fee is 

dependent upon the consumer regularly 

receiving direct deposit. 

19(b)(6)(iii) Integrated Agreement 

The Bureau is proposing 

§ 1005.19(b)(6)(iii) to prohibit issuers 

from providing provisions of the 

agreement or fee information to the 

Bureau in the form of change-in-terms 

notices or riders (other than the optional 

fee information addendum). Changes in 

provisions or fee information must be 

integrated into the text of the agreement, 

or the optional fee information 

addendum, as appropriate. Proposed 

comment 19(b)(6)–3 would provide the 

following example illustrating this 

requirement: It would be impermissible 

for an issuer to submit to the Bureau an 

agreement in the form of a terms and 

conditions document dated January 1, 

2015, four subsequent change in terms 

notices, and two addenda showing 

variations in fee information. Instead, 

the issuer must submit a document that 

integrates the changes made by each of 

the change in terms notices into the 

body of the original terms and 

conditions document and a single 

optional addendum displaying 

variations in fee information. 

Proposed § 1005.19(b)(6)(iii) is similar 

to § 1026.58(c)(8)(iv) in that they both 

prohibit providing agreements and fee 

(or pricing) information to the Bureau in 

the form of change-in-terms notice or 

riders, but the proposed language has 

been modified to reflect that prepaid 

account fee information may, but is not 

required to be, provided in an optional 

fee information addendum. Proposed 

comment 19(b)(6)–3 is similar to 

Regulation Z comment 58(b)–5. 

As discussed previously, the Bureau 

believes that permitting issuers to 

submit agreements that include changein-terms notices or riders containing 

amendments and revisions would be 

confusing for consumers and would 

greatly lessen the usefulness of the 

agreements posted on the Bureau’s Web 

site. In addition, the Bureau believes 

that prepaid account issuers customarily 

incorporate revised terms into their 

prepaid account agreements on a regular 

basis. 

The Board believed that there could 

potentially be significant burden on 

issuers for updating credit card 

agreements following changes in terms 

because of the potential variety in terms 

offered under a single agreement.321 The 

Bureau does not believe a similar 

burden exists for prepaid account 

agreements because a single prepaid 

account agreement would not contain a 

variety of variable terms predicated on 

the consumer’s credit worthiness or 

other factors. In addition, the Bureau 

does not believe that prepaid account 

issuers modify the terms of prepaid 

account agreements as frequently as 

credit card issuers do. The Bureau 

nonetheless seeks comment on this 

aspect of the proposal. 

19(b)(7) Bureau Posting of Prepaid 

Account Agreements 

The Bureau is proposing 

§ 1005.19(b)(7) to provide that the 

Bureau shall receive prepaid account 

agreements submitted by prepaid 

account issuers pursuant to proposed 

§ 1005.19(b), and shall post such 

agreements on a publicly-available Web 

site established and maintained by the 

Bureau. There is no equivalent to 

proposed § 1005.19(b)(7) in § 1026.58 as 

the Bureau’s posting of credit card 

agreements it receives is directed by 

TILA section 122(d). 15 U.S.C. 1632(d). 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77200 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

322 75 FR 7658, 7772 (Feb. 22, 2010). 

19(c) Posting of Agreements Offered to 

the Public 

The Bureau is proposing § 1005.19(c) 

to require an issuer to post and maintain 

on its publicly available Web site the 

prepaid account agreements that the 

issuer would be required to submit to 

the Bureau under proposed § 1005.19(b). 

Agreements posted pursuant to 

proposed § 1005.19(c) must conform to 

the form and content requirements for 

agreements submitted to the Bureau 

specified in proposed 

§ 1005.19(b)(6)(i)(B) through (D) and 

may be posted in any electronic format 

that is readily usable by the general 

public. Agreements posted pursuant to 

proposed § 1005.19(c) must be accurate 

and updated whenever changes are 

made. Agreements must be placed in a 

location that is prominent and readily 

accessible by the public and must be 

accessible without submission of 

personally identifiable information. 

Section 1026.58(d)(1) requires credit 

card issuers to update the agreements 

posted on their Web sites at least as 

frequently as the quarterly schedule 

required for submission of agreements 

to the Bureau, but permits an issuer to 

update its agreements more frequently if 

it so chooses. For Regulation Z, the 

Board considered a consumer group 

comment requesting that the online 

agreement be updated within a specific 

period of time no greater than 72 hours. 

The Board declined to adopt such a 

requirement because it believed that the 

burden to card issuers of updating 

agreements in such a short time would 

outweigh the benefit. In addition, the 

Board noted that if a consumer applies 

or is solicited for a credit card, the 

consumer will receive the updated 

disclosure under existing rules in 

Regulation Z subpart B.322 The Bureau 

believes that prepaid account issuers 

generally update their agreements 

posted online as changes are made. The 

Bureau does not believe that prepaid 

account issuers face the same burdens 

as credit card issuers in updating 

prepaid account agreements posted 

online because the terms of such 

agreements do not vary in the same 

manner as credit card agreement terms, 

which may offer a variety of rates and 

fees depending on the creditworthiness 

of the consumer. Thus, for prepaid 

account agreements, the Bureau is 

proposing in § 1005.19(c)(3) that 

prepaid account agreements posted only 

be accurate and that issuers update their 

agreements whenever changes are made. 

The Bureau seeks comment on whether 

this portion of the proposal aligns with 

current industry practice and whether 

the Bureau should nonetheless specify a 

specific timeframe for updating prepaid 

account agreements posted online. 

Proposed comment 19(c)–1 would 

explain that an issuer’s obligation to 

post and maintain prepaid account 

agreements on its Web site pursuant to 

proposed § 1005.19(c) is distinct from 

that of § 1005.7, which requires an 

issuer to provide certain disclosures at 

the time a consumer contracts for an 

electronic fund transfer service or before 

the first electronic fund transfer is made 

involving the consumer’s account, as 

well as the change in terms notice 

required under § 1005.8(a). This 

requirement is also distinct from that of 

proposed § 1005.18(b)(2)(ii), which 

would require issuers to make the long 

form disclosure available to consumers 

prior to prepaid account acquisition and 

which, depending on the methods an 

issuer offers prepaid accounts to 

consumers, may require posting of the 

long form disclosure on the issuer’s Web 

site. If, for example, an issuer is not 

required to submit any agreements to 

the Bureau because the issuer qualifies 

for the de minimis exception under 

proposed § 1005.19(b)(4), the issuer is 

not required to post and maintain any 

agreements on its Web site under 

proposed § 1005.19(c). The issuer would 

still be required to provide each 

individual consumer with access to his 

or her specific prepaid account 

agreement under proposed § 1005.19(d), 

discussed below, by posting and 

maintaining the agreement on the 

issuer’s Web site or by providing a copy 

of the agreement upon the consumer’s 

request. The issuer may also be required 

to post the long form disclosure 

required by proposed § 1005.18(b)(2)(ii) 

online as well, depending on the 

methods by which the issuer offers 

prepaid accounts to consumers. 

Proposed comment 19(c)–2 would 

explain that if an issuer provides 

consumers with access to specific 

information about their individual 

accounts, such as balance information 

or copies of statements, through a thirdparty Web site, the issuer is considered 

to maintain that Web site for purposes 

of proposed § 1005.19. Such a thirdparty Web site is deemed to be 

maintained by the issuer for purposes of 

proposed § 1005.19(c) even where, for 

example, an unaffiliated entity designs 

the Web site and owns and maintains 

the information technology 

infrastructure that supports the Web 

site, consumers with prepaid accounts 

from multiple issuers can access 

individual account information through 

the same Web site, and the Web site is 

not labeled, branded, or otherwise held 

out to the public as belonging to the 

issuer. Therefore, issuers that provide 

consumers with access to accountspecific information through a thirdparty Web site can comply with 

proposed § 1005.19(c) by ensuring that 

the agreements the issuer submits to the 

Bureau are posted on the third-party 

Web site in accordance with proposed 

§ 1005.19(c). 

Proposed § 1005.19(c) is similar to 

§ 1026.58(d), but does not include 

provisions regarding private label credit 

cards, as discussed above. Specifically, 

the Bureau is not proposing an 

equivalent to the provision addressing 

the Web site to be used for posting 

private label credit card agreements in 

§ 1026.58(d)(1) as well as § 1026.58(d)(4) 

requiring quarterly updates of credit 

card agreements posted on card issuers’ 

Web sites, as discussed above. Proposed 

comment 19(c)–1 is similar to 

Regulation Z comment 58(d)–1, 

although it has been modified to 

distinguish the requirement in proposed 

§ 1005.19(c) from other disclosurerelated obligations in Regulation E. 

Proposed comment 19(c)–2 mirrors 

Regulation Z comment 58(d)–2, 

although both it and proposed comment 

19(c)–1 have been modified and to 

remove the portions discussing the 

private label credit card exception. An 

equivalent to Regulation Z comment 

58(d)–3, regarding private label credit 

card plans, has likewise been omitted. 

19(d) Agreements for All Open 

Accounts 

19(d)(1) Availability of Individual 

Consumer’s Prepaid Account Agreement 

The Bureau is proposing 

§ 1005.19(d)(1) to state that, with respect 

to any open prepaid account, unless the 

prepaid account agreement is provided 

to the Bureau pursuant to proposed 

§ 1005.19(b) and posted to the issuer’s 

publicly available Web site pursuant to 

proposed § 1005.19(c), an issuer must 

either post and maintain the consumer’s 

agreement on its Web site, or promptly 

provide a copy of the consumer’s 

agreement to the consumer upon the 

consumer’s request. Unlike agreements 

posted pursuant to proposed 

§ 1005.19(c), which must be maintained 

on an issuer’s publicly available Web 

site, agreements posted pursuant to 

proposed § 1005.19(d) may be housed 

on a portion of the issuer’s Web site that 

is available to consumers once they 

have logged into their accounts. If the 

issuer makes an agreement available 

upon request, the issuer must provide 

the consumer with the ability to request 

a copy of the agreement by telephone. 

The issuer must send to the consumer 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77201 

323See 74 FR 54124, 54192 (Oct. 21, 2009). 

324See, e.g., proposed § 1005.18(b)(7) (requiring 

disclosure of a telephone number on the prepaid 

account access device, to be used to contact the 

financial institution about the prepaid account). 

a copy of the consumer’s prepaid 

account agreement no later than five 

business days after the issuer receives 

the consumer’s request. 

Proposed comment 19(d)–1, which is 

similar to Regulation Z comment 58(e)– 

1, would provide examples illustrating 

the requirements of proposed 

§ 1005.19(d)(1). An issuer that is not 

required to submit agreements to the 

Bureau because it qualifies for the de 

minimis exception under proposed 

§ 1005.19(b)(4) would still be required 

to provide consumers with access to 

their specific agreements under 

proposed § 1005.19(d). Similarly, an 

agreement that is no longer offered to 

the public would not be required to be 

submitted to the Bureau under proposed 

§ 1005.19(b), but would still need to be 

provided to the consumer to whom it 

applies under proposed § 1005.19(d). 

The Bureau does not believe it would 

be appropriate to apply the de minimis 

exception, the product testing 

exception, or the exception for accounts 

not currently offered to the public to the 

requirement that issuers provide 

consumers with access to their specific 

prepaid account agreement through the 

issuer’s Web site. In addition, the 

Bureau believes that, for the reasons 

discussed above, posting prepaid 

account agreements that are not 

currently offered to the public on the 

Bureau’s Web site would not be 

beneficial to consumers. However, the 

Bureau believes that the benefit of 

increased transparency of providing an 

individual cardholder access to his or 

her specific prepaid account agreement 

is substantial regardless of whether the 

cardholder’s agreement continues to be 

offered by the issuer. The Bureau 

believes that this benefit outweighs the 

administrative burden on issuers of 

providing such access, and the Bureau 

therefore is not proposing to exempt 

agreements that are not offered to the 

public from the requirements of 

proposed § 1005.19(d)(1). Similarly, the 

proposal requires that prepaid account 

issuers with fewer than 3,000 open 

prepaid accounts would not be required 

to submit agreements to the Bureau. 

However, the Bureau believes that the 

benefit of increased transparency 

associated with providing an individual 

cardholder with access to his or her 

specific prepaid account agreement is 

substantial regardless of the number of 

the issuer’s open accounts. The Bureau 

believes that this benefit of increased 

transparency for consumers outweighs 

the administrative burden on issuers of 

providing such access, and the Bureau 

therefore is not proposing to apply the 

de minimis exception to the 

requirements in proposed 

§ 1005.19(d)(1). 

The Board believed that the 

administrative burden associated with 

posting each cardholder’s credit card 

agreement on the issuer’s Web site 

might be substantial for some issuers, 

particularly smaller institutions with 

limited information technology 

resources, and thus gave issuers the 

option of providing copies of 

agreements in response to cardholders’ 

requests. The ability to provide 

agreements in response to a request 

made via telephone or Web site would 

ensure that cardholders still be able to 

obtain copies of their credit card 

agreements promptly.323

The Bureau does not know whether 

similar challenges are faced by prepaid 

account issuers, particularly for issuers 

that would qualify for the de minimis or 

product testing exceptions. The Bureau 

is thus proposing to similarly allow 

prepaid account issuers to satisfy the 

requirements of proposed 

§ 1005.19(d)(1) by providing a copy of a 

consumer’s prepaid account agreement 

to the consumer upon the consumer’s 

request. The Bureau requests comment 

on whether this allowance is necessary 

or if prepaid account issuers should all 

be required to post agreements on their 

Web sites. The Bureau also requests 

comment on whether issuers should be 

required by this regulation to provide 

copies of prepaid account agreements to 

all consumers upon request, regardless 

of whether the agreements are also 

posted online. 

Section 1026.58(e)(1) requires a credit 

card issuer to accept cardholders’ 

requests for copies of their credit card 

agreements via the issuer’s Web site as 

well as by telephone. The Bureau 

believes that prepaid account issuers 

will generally post prepaid account 

agreements to their Web sites pursuant 

to proposed § 1005.19(d)(1)(i), even if 

the agreement is posted in a location 

that is only accessible to prepaid 

account consumers after they have 

logged in to their accounts. The Bureau 

thus expects that few, if any, issuers 

would be required to provide 

agreements in response to a consumer’s 

request pursuant to proposed 

§ 1005.19(d)(1)(ii). The Bureau therefore 

does not believe it is necessary to 

require issuers to receive requests via 

the issuers’ Web sites, although issuers 

could certainly allow consumers to 

make requests in that manner if they so 

choose. 

Section 1026.58(e)(1)(ii) also requires 

credit card issuers to allow cardholders 

to request copies of their agreements by 

calling a readily available telephone line 

the number for which is displayed on 

the issuer’s Web site and clearly 

identified as to its purpose. Regulation 

Z comment 58(e)–2 provides additional 

clarification as to what is required to 

satisfy the ‘‘readily available telephone 

line’’ standard. Because the Bureau is 

proposing to require prepaid account 

issuers to provide telephone numbers 

for a variety of other purposes,324 the 

Bureau does not believe it is necessary 

to provide the same level of specificity 

regarding the telephone number to be 

used to request a copy of a prepaid 

account agreement pursuant to 

proposed § 1005.19(d)(1)(ii) nor to 

provide a comment equivalent to that of 

Regulation Z comment 58(e)–2. 

Section 1026.58(e)(1) also allows a 

credit card issuer, in response to such 

a cardholder’s request for a copy of the 

cardholder’s agreement, to provide that 

agreement to the cardholder 

electronically, such as by posting a copy 

of the agreement to its Web site in a 

location that is accessible by the 

cardholder. Because the Bureau expects 

that few, if any, issuers would be 

required to provide agreements upon 

request pursuant to proposed 

§ 1005.19(d)(1)(ii), as discussed above, it 

does not appear to be necessary or 

useful to allow an issuer to post a 

prepaid account agreement to a 

consumer’s online account in response 

to a consumer’s request. The Bureau is 

thus not proposing to permit issuers to 

provide copies of prepaid account 

agreements electronically in response to 

consumers’ requests, except as 

permitted in proposed 

§ 1005.19(d)(2)(vi), discussed below. In 

addition, a provision corresponding to 

§ 1026.58(e)(2), containing a special 

provision for issuers without interactive 

Web sites, has not been included in 

proposed § 1005.19, as the Bureau is not 

aware of any prepaid issuers that do not 

maintain Web sites (or do not use a 

third-party service provider to maintain 

such a Web site) from which consumers 

can access specific information about 

their individual prepaid accounts and 

thus does not believe such a provision 

is necessary for prepaid accounts. The 

Bureau is not proposing an equivalent to 

Regulation Z comment 58(e)–3, which 

provides examples regarding the 

deadline for providing copies of 

requested agreements, as the Bureau 

does not believe such examples are 

necessary given the more limited ways 

that issuers are permitted to respond to 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77202 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

325 75 FR 7658, 7773 (Feb. 22, 2010). 326See 74 FR 54124, 54193 (Oct. 21, 2009). 

requests under proposed 

§ 1005.19(d)(1)(ii). 

Section 1026.58(e)(ii) provides that 

the card issuer must send to the 

cardholder or otherwise make available 

to the cardholder a copy of the 

cardholder’s agreement in electronic or 

paper form no later than 30 days after 

the issuer receives the cardholder’s 

request. The Board originally proposed 

requiring issuers to respond to such a 

request within 10 business days, but 

some commenters contended that 10 

business days would not provide 

sufficient time to respond to a request. 

The commenters noted that they would 

be required to integrate changes in terms 

into the agreement and providing 

pricing information, which, particularly 

for older agreements that may have had 

many changes in terms over the years, 

could require more time. The Board 

believed it would be reasonable to 

provide more time for an issuer to 

respond to a cardholder’s request for a 

copy of the credit card agreement, and 

thus allowed for 30 days in the final 

rule.325

The Bureau does not believe that 

issuers would face the same challenges 

in integrating changes in terms into 

prepaid account agreements in the same 

manner as with credit card agreements. 

The Bureau believes that requiring 

issuers to provide prepaid account 

agreements within five business days 

gives issuers adequate time to respond 

to requests while providing consumers 

with prompt access to their prepaid 

account agreements. The Bureau solicits 

comment regarding whether this period 

should be shorter or longer. 

19(d)(2) Form and Content of 

Agreements 

The Bureau is proposing 

§ 1005.19(d)(2) to address the form and 

content requirements for agreements 

provided to consumers pursuant to 

proposed § 1005.19(d)(1). Proposed 

§ 1005.19(d)(2)(i) would state that, 

except as otherwise provided in 

proposed § 1005.19(d), agreements 

posted on the issuer’s Web site pursuant 

to proposed § 1005.19(d)(1)(i) or sent to 

the consumer upon the consumer’s 

request pursuant to proposed 

§ 1005.19(d)(1)(ii) must conform to the 

form and content requirements for 

agreements submitted to the Bureau as 

specified in proposed § 1005.19(b)(6). 

Proposed § 1005.19(d)(2)(ii) provides 

that if the issuer posts an agreement on 

its Web site pursuant to proposed 

§ 1005.19(d)(1)(i), the agreement may be 

posted in any electronic format that is 

readily usable by the general public and 

must be placed in a location that is 

prominent and readily accessible to the 

consumer. Proposed § 1005.19(d)(2)(iii) 

would state that agreements posted or 

otherwise provided pursuant to 

proposed § 1005.19(d) may contain 

personally identifiable information 

relating to the consumer, such as name, 

address, telephone number, or account 

number, provided that the issuer takes 

appropriate measures to make the 

agreement accessible only to the 

consumer or other authorized persons. 

Proposed § 1005.19(d)(2)(iv) would 

state that agreements posted or 

otherwise provided pursuant to 

proposed § 1005.19(d) must set forth the 

specific provisions and fee information 

applicable to the particular consumer. 

Proposed § 1005.19(d)(2)(v) would 

provide that agreements posted 

pursuant to proposed § 1005.19(d)(1)(i) 

must be accurate and updated whenever 

changes are made. Agreements provided 

upon consumer request pursuant to 

proposed § 1005.19 (d)(1)(ii) must be 

accurate as of the date the agreement is 

mailed or electronically delivered to the 

consumer. Proposed § 1005.19(d)(2)(vi) 

would state that agreements provided 

upon consumer request pursuant to 

proposed § 1005.19(d)(1)(ii) must be 

provided by the issuer in paper form, 

unless the consumer agrees to receive 

the agreement electronically. 

Proposed § 1005.19(d)(2) is generally 

similar to § 1026.58(e)(3), except that it 

contains modifications to reflect the 

changes in proposed § 1005.19(d)(1) 

regarding the methods in which prepaid 

account agreements may be provided to 

consumers pursuant to proposed 

§ 1005.19(d). Proposed § 1005.19(d)(2) 

does not, however, include the 

provision contained in 

§ 1026.58(e)(3)(iv) that requires 

agreements for all open prepaid 

accounts that are posted to a card 

issuer’s Web site or otherwise provided 

to consumers to contain complete and 

accurate provisions and pricing 

information as of a date no more than 

60 days prior to the date on which the 

agreement is posted to the card issuer’s 

Web site pursuant to § 1026.58(e)(1)(i) 

or the date the cardholder’s request is 

received under § 1026.58(e)(1)(ii) or 

(e)(2). As described above, the Bureau 

does not believe that updating prepaid 

account agreements is as complex as for 

credit card agreements, nor that prepaid 

account agreements are modified as 

frequently as credit card agreements 

may be. Therefore, the Bureau does not 

believe that prepaid account issuers 

should be permitted to provide 

agreements to consumers that are as 

much as 60 days out of date. Instead, 

pursuant to proposed § 1005.19(d)(2)(v), 

the Bureau is proposing to require that 

agreements posted online be accurate 

and updated when changes are made, 

and that agreements provided upon 

consumer request be accurate as of the 

date the agreement is mailed or 

electronically delivered to the 

consumer. 

19(e) E-Sign Act Requirements 

The Bureau is proposing § 1005.19(e) 

to state that, except as otherwise 

provided in proposed § 1005.19, issuers 

may provide prepaid account 

agreements in electronic form under 

proposed § 1005.19(c) and (d) without 

regard to the consumer notice and 

consent requirements of section 101(c) 

of the Electronic Signatures in Global 

and National Commerce Act (E-Sign 

Act) (15 U.S.C. 7001 et seq.). Because 

TILA section 122(d) specifies that a 

credit card issuer must provide access to 

cardholder agreements on the issuer’s 

Web site, the Board did not believe that 

the requirements of the E-Sign Act 

applied to the regulations now 

contained at § 1026.58.326 The Bureau is 

proposing § 1005.19(e) for ease of 

administration of these requirements 

and for consistency with § 1026.58(f). 

The Bureau requests comment on 

proposed § 1005.19 generally, including 

whether it should require submission 

and posting of agreements at all and 

whether the procedures proposed herein 

are appropriate. 

Other Regulation E Subpart A 

Provisions Applicable to Prepaid 

Accounts 

Because the Bureau is proposing to 

bring prepaid accounts within the 

definition of account generally under 

Regulation E, the requirements of 

Regulation E would apply to prepaid 

accounts except as modified or 

supplemented by this proposal. Except 

as otherwise addressed by this proposal, 

the Bureau envisions that such 

provisions would extend to prepaid 

accounts in the same manner they 

currently apply to payroll card 

accounts. Such requirements include, 

but are not limited to, § 1005.5 regarding 

the issuance of access devices, 

§ 1005.8(a) regarding change in terms 

notices, § 1005.10(a) through (d) 

regarding preauthorized transfers to and 

from consumers’ accounts, and 

§ 1005.14 regarding electronic fund 

transfer service providers that do not 

hold consumers’ accounts. 

The Bureau requests comment 

generally on the extension of these and 

other provisions in Regulation E to 

prepaid accounts. The Bureau also seeks 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77203 

327The Bureau tested a version of this proposed 

model language with consumers. See ICF Report, at 

23. 

comment on whether any of these or 

other provisions in Regulation E 

provisions warrant specific modification 

for prepaid accounts. 

Appendix A–5 Model Clauses for 

Government Benefit Accounts 

(§ 1005.15(e)(1) and (2)) 

Existing appendix A–5 provides 

model language for government agencies 

that offer accounts for distributing 

government benefits to consumers 

electronically; this model language 

reflects the modifications made to 

certain Regulation E provisions by 

existing § 1005.15. The Bureau is 

proposing to relabel appendix A–5 as 

Model Clauses for Government Benefit 

Accounts (§ 1005.15(e)(1) and (2)) and 

to revise the heading of paragraph (a) for 

clarity. The Bureau is also proposing to 

revise the text of paragraph (a) of 

appendix A–5, which currently explains 

to consumers how to obtain information 

about account balances and account 

histories, to note that the consumer’s 

balance information, along with an 18 

month history of the consumer’s 

account transactions, is available online. 

The Bureau also proposes to revise the 

paragraph regarding a written 

transaction summary to correspond with 

the proposed revised language for 

prepaid accounts in paragraph (a) of 

appendix A–7, to state that the 

consumer has a right to at least 18 

months of written history of account 

transactions by calling or writing to the 

agency (or its designee). The paragraph 

also states that the consumer will not be 

charged a fee for such information 

unless the consumer requests it more 

than once per month. The paragraph 

retains the existing optional bracketed 

language stating that the consumer may 

also request such a history by contacting 

his or her caseworker. 

The Bureau is similarly proposing to 

revise paragraph (b) of appendix A–5, 

which sets forth model clauses 

regarding disclosure of error resolution 

procedures for government agencies that 

provide alternative means of obtaining 

account information. The Bureau is 

proposing to revise the section citation 

in the paragraph heading, and to revise 

the first paragraph of paragraph (b) to 

correspond with the proposed revised 

language for prepaid accounts in 

paragraph (b) of appendix A–7. 

Specifically, the Bureau proposes to 

remove the sentence stating that the 

agency must hear from the consumer no 

later than 60 days after the consumer 

learns of the error, and to add language 

stating that the agency must allow the 

consumer to report an error until 60 

days after the earlier of the date the 

consumer electronically accesses his or 

her account, if the error could be viewed 

in the electronic history, or the date the 

agency sent the first written history on 

which the error appeared. The 

paragraph would also state that the 

consumer may request a written 

transaction history at any time by 

calling or writing, or optionally by 

contacting the consumer’s caseworker. 

The Bureau requests comment on 

these proposed modifications to 

appendix A–5 and whether any 

additional modifications should be 

made. In particular, the Bureau solicits 

comment on whether it is necessary to 

retain the optional bracketed language 

that currently appears in paragraph (a) 

of appendix A–5, and that is mirrored 

in paragraph (b), directing consumers to 

request a written summary of 

transactional history by contacting the 

consumer’s caseworker. The Bureau is 

particularly interested in whether any 

government benefit account programs 

use this optional language in their 

disclosures and whether inclusion of 

such language reduces consumer 

confidence in government benefit 

accounts or the privacy of consumers’ 

account histories. 

Appendix A–7 Model Clauses for 

Financial Institutions Offering Prepaid 

Accounts (§ 1005.18(d) and (e)(3)) 

Existing appendix A–7 provides 

model clauses for financial institutions 

that offer payroll card accounts; these 

clauses reflect the modifications made 

by the Payroll Card Rule to certain 

Regulation E provisions in existing 

§ 1005.18. To reflect the proposed 

expansion of § 1005.18 to cover prepaid 

accounts, the Bureau is proposing to 

revise the heading for appendix A–7 as 

well as the heading for paragraph (a) of 

appendix A–7. The Bureau is also 

proposing to revise paragraph (a) of 

appendix A–7, which explains to 

consumers how to obtain account 

information for payroll card accounts, to 

change the term payroll card account to 

prepaid account, and to provide that at 

least 18 months of electronic and 

written account transaction history is 

available to the consumer, rather than 

60 days, as proposed in 

§ 1005.18(c)(1)(ii) and (iii). The Bureau 

also proposes to add a sentence at the 

end of paragraph (a) of appendix A–7 to 

inform consumers that they cannot be 

charged for requesting such written 

account transaction history, unless 

requests are made more than once per 

month. As discussed above, the Bureau 

is proposing to allow financial 

institutions to assess a fee or charge for 

subsequent requests for written account 

information made in a single calendar 

month, in proposed comment 18(c)–3.i. 

The Bureau is similarly proposing to 

revise the heading of paragraph (b), and 

to revise the text of paragraph (b) of 

appendix A–7, which sets forth model 

clauses regarding disclosure of error 

resolution procedures for financial 

institutions that provide alternative 

means of obtaining payroll card account 

information, to change the term payroll 

card account to prepaid account and to 

renumber the section citation in the 

heading. 

The Bureau is also proposing to add 

a new paragraph (c) at the end of 

appendix A–7, for use by a financial 

institution that chooses, as explained in 

proposed comment 18(e)–4, not to 

comply with the liability limits and 

error resolution requirements in 

§§ 1005.6 and 1005.11 for prepaid 

accounts which it has not completed its 

collection of consumer identifying 

information and identity verification. 

This model language would state that 

it is important for consumers to register 

their prepaid accounts as soon as 

possible and that until a consumer 

registers his or her prepaid account, the 

financial institution is not required to 

research or resolve errors regarding the 

consumer’s account. To register an 

account, the consumer is directed to a 

Web site and telephone number. The 

model language explains that the 

financial institution will ask for 

identifying information about the 

consumer (including full name, address, 

date of birth, and Social Security 

Number or government-issued 

identification number), so that it can 

verify the consumer’s identity. Once the 

financial institution has done so, it will 

address the consumer’s complaint or 

question as described earlier in 

appendix A–7.327

Appendix A–10 Model Forms and 

Sample Forms for Financial Institutions 

Offering Prepaid Accounts 

(§ 1005.15(c)(2) and § 1005.18(b)) 

The Bureau is proposing Model Forms 

A–10(a) through (d) and (f) and Sample 

Forms A–10(e) and (g) in appendix A in 

relation to the disclosure requirements 

set forth in proposed § 1005.15(c)(2) and 

proposed § 1005.18(b). Proposed Model 

Form A–10(a)would set forth the short 

form disclosure for government benefit 

accounts as described in proposed 

§ 1005.15(c)(2). Proposed Model Form 

A–10(b) would set forth the short form 

disclosure for payroll card accounts as 

described in proposed 

§ 1005.18(b)(2)(i)(A). Proposed Model 

Form A–10(c) would set forth the short 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77204 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

328 77 FR 6194 (Feb. 7, 2012). This final rule was 

subsequently amended. See 77 FR 40459 (July 10, 

2012), 77 FR 50244 (Aug. 20, 2012), 78 FR 6025 

(Jan. 29, 2013), 78 FR 30662 (May 22, 2013), 78 FR 

49365 (Aug. 14, 2013), and 79 FR 55970 (Sept. 18, 

2014) (collectively, the Remittance Rule). 329 77 FR 30923, 30925 (May 24, 2012). 

form disclosure for prepaid accounts 

that could offer an overdraft service or 

other credit feature as described in 

proposed § 1005.18(b)(2)(i)(B)(9). 

Proposed Model Form A–10(d) would 

set forth the short form disclosure for 

prepaid accounts that would not offer 

an overdraft service or other credit 

feature as described in proposed 

§ 1005.18(b)(2)(i)(B)(9). Proposed Model 

Form A–10(f) would set forth the short 

form disclosure for prepaid accounts 

that offer multiple service plans and 

choose to disclose them on one short 

form disclosure as described in 

proposed § 1005.18(b)(3)(iii)(B)(1). 

Proposed Sample Form A–10(e) 

would set forth the long form disclosure 

for prepaid accounts as described in 

proposed § 1005.18(b)(3)(iii)(A). 

Proposed Sample Form A–10(g) would 

set forth the long form disclosure for 

prepaid accounts that offer multiple 

service plans as described in proposed 

§ 1005.18(b)(3)(iii)(B)(2). 

Subpart B—Requirements for 

Remittance Transfers 

Section 1073 of the Dodd-Frank Act 

added section 919 to EFTA to establish 

consumer protections for remittance 

transfers sent by consumers in the 

United States to individuals and 

businesses in foreign countries. Among 

other things, EFTA section 919 requires 

the following protections for covered 

transactions sent by remittance transfer 

providers: (i) The provision of 

disclosures prior to and at the time of 

payment by the sender of the transfer; 

(ii) cancellation and refund rights; and 

(iii) the investigation and remedy of 

errors by providers. It also establishes 

liability standards for providers for the 

acts of their agents. On February 7, 

2012, the Bureau published a final rule 

implementing these provisions largely 

in new subpart B of Regulation E.328

The Remittance Rule only applies to 

those entities that are remittance 

transfer providers. A remittance transfer 

provider is any person that provides 

remittance transfers for a consumer in 

the normal course of its business, 

regardless of whether the consumer 

holds an account with such person. 

§ 1005.30(f). A remittance transfer is the 

electronic transfer of funds requested by 

a sender to a designated recipient that 

is sent by a remittance transfer provider. 

§ 1005.30(e)(1). The term remittance 

transfer applies regardless of whether 

the sender holds an account with the 

provider, and regardless of whether the 

transaction is also an electronic fund 

transfer, as defined in § 1005.3(b). The 

Remittance Rule applies to remittance 

transfers sent to and from prepaid 

products. See generally, § 1005.30(c) 

and (e), and comments 30(c)–2.iii, 

30(e)–2.ii, 30(e)–3.i.C, and 30(h)(3). 

Section 1005.30 Remittance Transfer 

Definitions 

30(g) Sender 

The Bureau proposes to make a 

conforming change to comment 30(g)–3. 

Currently, the comment contains a 

reference to an exception from the 

definition of account for bona fide trust 

accounts. As discussed earlier in this 

section-by-section analysis, the Bureau 

is proposing to renumber the exception 

for bona fide trust accounts as 

§ 1005.2(b)(2). Accordingly, the Bureau 

is proposing conforming change to 

comment 30(g)–3 to reflect the proposed 

renumbering. 

As discussed above, the Remittance 

Rule applies to remittance transfers sent 

to and from prepaid products. The 

Bureau does not intend this proposed 

rule to alter the applicability of the 

Remittance Rule to transfers sent to and 

from prepaid products. At the same 

time, the Bureau welcomes comment on 

the proposed rule’s potential 

implications for the Remittance Rule. As 

discussed in the section-by-section 

analysis above, with certain exceptions 

such as payroll card accounts, accounts 

for the receipt of certain government 

benefits, and gift cards (or certain other 

types of limited purpose cards), prepaid 

products generally have not been 

covered under current subpart A of 

Regulation E. In proposing to expand 

the current definition of account in 

Regulation E, additional prepaid 

products such as GPR cards and certain 

digital wallets would fall within the 

definition of account under Regulation 

E. Accordingly, the Bureau seeks 

comment on whether additional 

clarification or guidance is necessary 

with respect to the Remittance Rule. 

Regulation Z 

Overview of Bureau’s Approach to Its 

Regulation Z Proposal 

In developing this proposal, the 

Bureau has considered whether and 

how to regulate credit accessed through 

a prepaid account. Specifically, the 

Bureau has considered potential 

transactions where financial institutions 

allow consumers to overdraw their 

prepaid accounts through an overdraft 

service, a draw from a linked line of 

credit, or by pushing credit onto a 

specified prepaid account to cover 

transactions for which there are 

insufficient or unavailable funds. As is 

explained in detail below, the Bureau 

proposes to treat most credit plans for 

which finance charges are imposed as 

‘‘open-end (not-home secured) credit 

plans’’ accessed by a ‘‘credit card’’ 

under Regulation Z, and thus subject to 

credit card protections. In addition and 

as is explained above, the Bureau is also 

proposing to revise provisions in 

Regulation E regarding compulsory use 

(proposed § 1005.10(e)(1)) and to adopt 

other rules specific to prepaid accounts 

that offer credit features (proposed 

§§ 1005.12(a) and 1005.18(b)(2)(i)(B)(9), 

(b)(2)(ii)(B) and (g)) to provide 

consumers with greater control over 

how they enroll in a credit feature and 

pay any credit balances associated with 

their prepaid accounts, and also to 

prevent evasion of the Regulation Z 

protections. 

In its evaluation of credit features 

offered in connection with prepaid 

accounts, the Bureau has carefully 

considered a variety of information and 

factors, including existing relevant 

consumer protection regulations 

governing overdraft services and a range 

of credit products subject to Regulation 

Z; consumers’ use of those features to 

the extent offered in today’s market, 

consumer expectations, and 

understanding of prepaid accounts and 

credit features offered in connection 

with prepaid accounts (including 

through discussion in the Bureau’s 

consumer testing); review of comments 

received from industry, consumers, and 

consumer advocacy groups in response 

to the Prepaid ANPR; analysis of data 

from the Bureau’s overdraft research on 

deposit accounts and other available 

research; further outreach to industry, 

consumer advocacy, and other groups; 

and ongoing market analysis. 

The bulk of the feedback the Bureau 

has received has focused specifically on 

the permissibility of overdraft services 

on prepaid accounts. In the Prepaid 

ANPR, the Bureau noted that while 

most GPR cards do not offer overdraft 

features, some do allow cardholders to 

opt in to an overdraft program in which 

the issuer may authorize overdrafts and 

charge an overdraft transaction fee.329

The Bureau then sought public input on 

the costs, benefits, and consumer 

protection issues related to any credit 

features that financial institutions may 

offer on GPR cards. 

The Bureau received a significant 

number of comments on the issue of 

credit features and prepaid accounts. 

Most industry commenters encouraged 

the Bureau not to adopt regulations that 


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330 ICF Report at 6. 

would limit these credit features. In 

particular, commenters stated that 

overdraft for prepaid accounts should 

function as it does for accounts with 

linked debit cards—i.e., subject to the 

current Regulation E opt-in framework 

for overdraft. Commenters argued that to 

the extent the Bureau wants to treat 

prepaid accounts as transaction account 

substitutes, they should be subject to the 

same regulatory requirements (and 

exceptions) as those accounts, including 

opt-in requirements for overdraft 

services. One trade association argued 

that it would be unfair for the Bureau to 

prohibit overdraft on prepaid cards 

while such features remain permitted on 

checking accounts. Some industry 

commenters argued that their customers 

want—or even need—access to shortterm credit in connection with their 

GPR cards. Several other trade 

associations similarly argued that 

consumers want access to credit features 

on prepaid cards. They urged the 

Bureau to ensure that consumers 

understand such features, and they 

argued that the Bureau should conform 

regulations for such products to those 

that now exist for traditional deposit 

accounts in Regulations E, Z, and DD. 

However, some industry commenters 

urged the Bureau not to permit credit 

features in connection with prepaid 

products. For example, one credit union 

stated that, in its opinion, only the 

funds loaded onto a prepaid card should 

be made available for transactions. A 

large financial institution similarly 

stated that, in its opinion, GPR cards 

should remain ‘‘prepaid,’’ without being 

linked or having access to overdraft 

services. A community bank stated that 

it was its practice to urge prepaid card 

customers who wanted overdraft 

services to transition into checking 

accounts, where it had systems in place 

to deal with the credit risk, and that it 

would not permit overdrafts on its 

prepaid products. 

Most consumer advocates that 

commented also urged that the Bureau 

ban overdraft services in connection 

with prepaid products, because the 

overdraft fees and accumulating debt 

can be harmful. They argued that 

prepaid consumers are often more 

vulnerable or do not anticipate having 

to deal with credit on their prepaid 

accounts. These commenters explained 

that prepaid cards are marketed to and 

used by a variety of vulnerable groups, 

including low-income consumers, 

consumers with blemished credit 

histories, unbanked and underbanked 

consumers with limited access to 

traditional accounts, young consumers 

and students, undereducated 

consumers, public benefit recipients, 

and consumers who are trying to control 

their spending. Many of these 

vulnerable groups have, historically, 

struggled with credit products, 

including overdraft. Additionally, at 

least one consumer advocacy group 

commenter urged the Bureau to subject 

overdraft services on prepaid accounts 

to Regulation Z’s rules for credit cards. 

Consumer group commenters further 

argued that permitting credit features on 

prepaid cards could eviscerate State 

payday and usury laws as well as 

protections for servicemembers, such as 

the MLA. Consumer advocacy group 

commenters also argued that application 

of existing opt-in overdraft rules, which 

currently apply to deposit accounts and 

payroll card accounts, would not 

prevent harm to consumers who use 

prepaid cards because opt-in does not, 

in the opinion of the commenters, 

protect vulnerable consumers from 

predatory lending. In addition, the 

consumer advocacy group commenters 

contended that credit features on 

prepaid products are unnecessary 

because less vulnerable consumers who 

can access credit will still have access 

to credit cards, deposit accounts that 

offer overdraft services, lines of credit, 

and other credit products. 

The Bureau also received a number of 

comments from consumers who use 

prepaid products currently offering 

overdraft services. Most of these 

consumers voiced support for such 

services, stating that the overdraft fee 

charged by their prepaid products was 

less than the overdraft fees charged by 

banks, allowing them to bridge cash 

shortfalls between paychecks and fulfill 

other short-term credit needs. Most 

participants in the Bureau’s consumer 

testing, however, expressed concern 

about overdraft programs and explained 

that they preferred prepaid products 

because they did not allow them to 

spend more than what was loaded onto 

the card.330

Since the close of the comment period 

for the Prepaid ANPR, the Bureau has 

continued its evaluation of prepaid 

products and related credit features, 

received additional feedback on this 

issue from interested parties, and the 

Bureau has also collected relevant data. 

In various forms, parties have submitted 

studies, additional comment, and other 

evidence to advocate for different 

approaches to regulating overdraft 

services and credit features on prepaid 

accounts. The Bureau has also reviewed 

data gathered by third parties and 

reported on by non-profit organizations 

and other government agencies. 

As explained in more detail below, 

the Bureau has concluded that the most 

appropriate approach is to propose to 

treat a broad range of credit features that 

financial institutions could offer in 

connection with prepaid accounts as 

subject to the rules governing credit 

cards under TILA, EFTA, and their 

implementing regulations. This includes 

programs structured as overdraft 

services; the Bureau is declining to 

extend existing exemptions under 

Regulation Z and Regulation E’s 

compulsory use provision for overdraft 

services on deposit accounts to prepaid 

accounts. In this overview, the Bureau 

first addresses the application of 

Regulation Z’s rules for open-end (not 

home-secured) credit plans and for 

credit cards to overdraft services and 

other credit features offered on prepaid 

accounts. Next, the Bureau discusses the 

benefits of applying these rules to all 

credit features offered on prepaid 

accounts. Finally, the Bureau provides 

section-by-section analysis of its 

specific proposed revisions to 

Regulation Z. 

Credit Offered in Connection With 

Prepaid Cards—Including Overdraft 

Services—Satisfies TILA’s Definition of 

Open-End Credit 

The Bureau believes that a range of 

credit features offered in connection 

with prepaid accounts—including those 

features structured as overdraft 

services—should be subject to 

regulation as credit cards under TILA, 

EFTA, and their implementing 

regulations. Specifically, the Bureau 

believes that overdraft lines of credit, 

overdraft services, and similar credit 

features offered in connection with a 

prepaid account satisfy the definitions 

of (1) credit; (2) open-end (not homesecured) credit plan; and (3) credit cards 

under TILA and Regulation Z. Although 

the Board had chosen to exempt 

overdraft services (but not other forms 

of credit) offered in connection with 

traditional deposit accounts from 

Regulation Z, the Bureau chooses not to 

exercise its exception authority to 

expand further the scope of the existing 

exemptions to prepaid accounts. 

As described above, TILA defines 

credit broadly as the right granted by a 

creditor to a debtor to defer payment of 

debt or to incur debt and defer its 

payment. 15 U.S.C. 1602(f). Under the 

statute and Regulation Z, open-end 

credit exists where there is a plan in 

which the creditor reasonably 

contemplates repeated transactions; the 

creditor may impose a finance charge 

from time to time on an outstanding 

unpaid balance, and the credit is 

generally replenished to the extent that 


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331The term ‘‘creditor’’ also includes a card 

issuer, which is a person that issues credit cards, 

when that person extends credit accessed by the 

credit card. See § 1026.2(a)(17)(iii) and (iv). 

Regulation Z defines the term ‘‘credit card’’ to mean 

any card, plate, or other single credit device that 

may be used from time to time to obtain credit. See 

§ 1026.2(a)(15). A charge card is a credit card on an 

account for which no periodic rate is used to 

compute a finance charge. See § 1026.2(a)(15)(iii). 

In addition to being creditors under TILA and 

Regulation Z, card issuers also generally must 

comply with the credit card rules in the FCBA and 

in the Credit CARD Act (if the card accesses an 

open-end credit plan), as implemented in 

Regulation Z subparts B and G. See generally 

§§ 1026.5(b)(2)(ii), 1026.7(b)(11), 1026.12 and 

1026.51 through .1026.60. 

332See also OCC 2001 Guidance; Joint Guidance 

(noting that overdraft satisfies the definition of 

‘‘credit’’ in TILA). 

any outstanding balance is repaid. 

§ 1026.2(a)(20). Closed-end credit is 

credit that does not meet the definition 

of open-end credit. § 1026.2(a)(10). 

The Board subjected overdraft lines of 

credit in connection with traditional 

deposit accounts to Regulation Z 

requirements for open-end credit, but 

carved overdraft services on traditional 

deposit accounts out from Regulation Z 

through operation of the definitions of 

the terms ‘‘creditor’’ and ‘‘finance 

charge.’’ A creditor is generally defined 

under Regulation Z to mean a person 

who regularly extends consumer credit 

that is subject to a finance charge or is 

payable by written agreement in more 

than four installments (not including a 

down payment), and to whom the 

obligation is initially payable, either on 

the face of the note or contract, or by 

agreement when there is no note or 

contract. See § 1026.2(a)(17)(i).331 In 

1969, however, the Board adopted an 

exclusion to the definition of finance 

charge for ‘‘charges imposed by a 

financial institution for paying items 

that overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing.’’ See 

§ 1026.4(c)(3). Thus, the Board created 

an exception for financial institutions 

that offer overdraft services in 

connection with traditional deposit 

accounts if they do not agree in writing 

to pay the items and do not structure the 

repayment of the credit by written 

agreement in more than four 

installments. Under the exception, the 

fees charged for the overdrafts are not 

‘‘finance charges’’ under Regulation Z, 

and thus a financial institution 

extending credit is not a ‘‘creditor’’ 

under Regulation Z because it is not 

charging a finance charge and is not 

structuring the repayment of the credit 

by written agreement in more than four 

installments. As discussed further 

below, the Bureau declines to extend 

this exception to include prepaid 

accounts. Absent this exception, the 

Bureau believes that overdraft services, 

like overdraft lines of credit and similar 

credit features that could be offered in 

connection with prepaid accounts, will 

meet the definitions of credit and openend credit under TILA and Regulation Z 

if interest rates, transaction fees, or 

other types of finance charges are 

imposed in connection with the credit 

services. 

Finance Charge 

The Bureau analyzed whether it was 

reasonable to interpret ‘‘credit’’ to 

include when overdrafts are paid in 

relation to prepaid accounts. The 

Bureau believes it is because, in 

accordance with TILA’s definition of 

credit, the payment of an overdraft 

represents the right granted by a creditor 

to a debtor to defer payment of debt or 

to incur debt and defer its payment. 15 

U.S.C. 1602(f). 

In its analysis, the Bureau examined 

whether a fee charged for an overdraft 

service (or other credit feature on a 

prepaid product) qualifies as a finance 

charge. TILA section 106(a) defines 

finance charge as the sum of all charges, 

payable directly or indirectly by the 

person to whom the credit is extended, 

and imposed directly or indirectly by 

the creditor as an incident to the 

extension of credit. 15 U.S.C. 1605(a). 

The plain language of the definition of 

credit in TILA section 103(e) covers 

situations in which a consumer makes 

a transaction which exceeds the funds 

in the consumer’s account, and the bank 

elects to cover the transaction by 

advancing funds to the consumer which 

the consumer must repay. 15 U.S.C. 

1602(f). This statutory language does not 

exempt overdraft services, including 

those that may be offered in connection 

with prepaid accounts.332 The Bureau 

believes that fees levied for overdraft 

services or other credit features on 

prepaid accounts—such as interest 

charges, transaction charges, service 

charges, and annual or other periodic 

fees to participate in the credit 

program—generally represent finance 

charges. See section-by-section analysis 

of proposed § 1026.4(a), (b)(2), (c)(3) and 

(c)(4). Regulation Z defines ‘‘finance 

charge’’ as the cost of consumer credit 

as a dollar amount. The term includes 

any charge payable directly or indirectly 

by the consumer and imposed directly 

or indirectly by the creditor as an 

incident to or a condition of the 

extension of credit. § 1026.4(a). The 

Bureau believes that fees that are levied 

for overdraft services are thus ‘‘finance 

charges’’ because they are directly 

payable by the consumer and imposed 

directly by the creditor as a condition of 

the extension of credit, which would be 

funds advanced to cover the consumer’s 

overdraft. 

Open-End (Not Home-Secured) Credit 

Plan 

Having determined that fees for 

overdraft services and other types of 

credit products in connection with 

prepaid accounts can be finance 

charges, the Bureau then examined the 

question of whether the programs 

themselves are open-end (not homesecured) credit plans. As discussed 

below, the Bureau believes that 

overdraft lines of credit, overdraft 

services, and similar products that 

could be offered in connection with 

prepaid accounts can be regulated by 

Regulation Z as ‘‘open-end credit’’ 

where a financial institution routinely 

extends credit to cover transactions for 

which there are insufficient funds in the 

account (even if the institution retains, 

by contract, the discretion not to pay the 

transactions) and obligates the 

consumer contractually to repay the 

debt, and may impose finance charges 

from time to time on an outstanding 

unpaid balance. The Bureau recognizes 

(as noted above) that a line of credit 

where there is a written agreement to 

pay overdrafts and impose finance 

charges is already covered by Regulation 

Z as ‘‘open-end credit,’’ whether it is 

associated with a prepaid or checking 

account; pursuant to this proposal and 

as discussed further below, overdraft 

services for prepaid accounts would 

now be treated similarly to such lines of 

credit, with certain proposed 

modifications. 

TILA section 103(j) defines an openend credit plan as ‘‘a plan under which 

the creditor reasonably contemplates 

repeated transactions, which prescribes 

the terms of such transactions, and 

which provides for a finance charge 

which may be computed from time to 

time on the outstanding unpaid 

balance.’’ 15 U.S.C. 1602(j). Regulation 

Z defines ‘‘open-end credit’’ to mean 

consumer credit extended by a creditor 

under a plan in which (1) the creditor 

reasonably contemplates repeated 

transactions; (2) the creditor may 

impose a ‘‘finance charge’’ from time to 

time on an outstanding unpaid balance; 

and (3) the amount of credit that may be 

extended to the consumer during the 

term of the plan (up to any limit set by 

the creditor) is generally made available 

to the extent that any outstanding 

balance is repaid. Regulation Z explains 

that for there to be an open-end credit 

plan, there must first be a plan. 

Comment 2(a)(20)–2 explains that a plan 


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333As noted above, the nature of such an 

arrangement also establishes an arrangement 

between the institution and the consumer to pay 

certain overdrafts. 

334Several commenters to the Prepaid ANPR also 

made this point. 

335Bureau staff reviewed many agreements in the 

Bureau’s database. See generally http:// 

www.consumerfinance.gov/credit-cards/

agreements/. 

336FDIC Overdraft Payment Supervisory 

Guidance at 3. 

337As is discussed below, the Bureau intends to 

exclude overdrafts for which no finance charge as 

defined in § 1026.4 and no fee described in 

§ 1026.4(c) is charged and repayment is not 

expected by written agreement in more than four 

installments. 

connotes a contractual arrangement 

between the creditor and the consumer. 

For a plan to be an open-end credit 

plan, it must then satisfy the three 

requirements noted above. See 

§ 1026.2(a)(20). 

The Bureau understands that financial 

institutions offering automated overdraft 

services include in their account 

agreements details about how the 

overdraft service will operate and 

information about overdraft fees. These 

terms and conditions documents 

explain that consumers using overdraft 

programs must agree to repay the debt 

created by an overdraft and the related 

fee, indicating that a contractual 

arrangement between the creditor and 

the consumer exists. Although these 

agreements typically note that the 

financial institution retains discretion to 

authorize or decline any particular 

overdraft, as a practical matter financial 

institutions operating automated 

overdraft programs exercise limited if 

any discretion in authorizing particular 

transactions so long as the overdraft 

transaction is within the overdraft limit 

that the institution previously 

established.333 The Bureau understands 

that financial institutions have 

historically argued (in connection with 

deposit account overdraft services) that 

an overdraft service is not an open-end 

credit plan subject to TILA because, in 

the account agreement, they typically 

reserve discretion not to pay 

overdrafts.334 In practice, the Bureau 

believes that this discretion is typically 

limited; automated overdraft systems for 

prepaid accounts are typically 

programmed to approve all would-be 

overdrafts that are within a 

predetermined credit limit. 

Furthermore, the Bureau believes that 

the contractual reservation of discretion 

is no different from credit card issuers’ 

standard practice of reserving discretion 

to decline a credit card transaction 

without prior notice, notwithstanding 

that the transaction is within the credit 

limit.335 Thus, the Bureau believes that 

simply labeling an overdraft service as 

discretionary is insufficient to negate 

the existence of a credit plan. 

The FDIC reached a similar 

conclusion in its guidance on automated 

overdraft payment programs, noting a 

distinction between ad hoc overdraft 

services, which typically involve 

irregular and infrequent occasions on 

which a bank employee exercises 

discretion in a specific instance about 

whether to pay an item (so a customer 

can avoid an NSF fee that the payee may 

impose), and ‘‘risks posed by automated 

overdraft payment programs.’’ 

According to the FDIC guidance, such 

programs ‘‘are established programs 

[that] are often partially or fully 

computerized, that are used by 

institutions to determine whether [NSF] 

transactions qualify for overdraft 

coverage based on pre-determined 

criteria.’’ 336 The Bureau believes the 

latter formulation is how established 

prepaid overdraft services function and 

thus that a plan exists in these cases. 

Having determined that a plan exists, 

the Bureau evaluated whether such a 

plan satisfies the three prongs necessary 

to establish the plan as an open-end (not 

home-secured) credit plan. The first 

prong asks whether overdraft services, 

including those offered in connection 

with prepaid accounts, can be plans 

under which the creditor reasonably 

contemplates repeated transactions. 

Particularly to the extent that prepaid 

and deposit account overdraft services 

are automated, the Bureau believes that 

overdraft programs typically 

contemplate and approve repeated 

transactions.337 Indeed, every prepaid 

overdraft service that charges a fee of 

which the Bureau is aware contemplates 

and approves repeated transactions. 

The Bureau then examined the second 

prong of the definition of ‘‘open-end 

credit’’ to determine whether the 

creditor may impose a finance charge 

from time to time on an outstanding 

unpaid balance. See § 1026.2(a)(20)(ii). 

As noted above, the Bureau believes that 

overdraft service fees and charges on 

other credit features easily meet the 

general definition of finance charge. 

With regard to the element focusing on 

whether a finance charge may be 

computed and imposed from time to 

time on an outstanding balance, the 

Official Interpretations to Regulation Z 

explain that this provision simply 

means that there is no specific amount 

financed for the plan for which the 

finance charge, total of payments, and 

payment schedule can be calculated in 

advance of the usage of the plan. See 

comment 2(a)(20)–4 (explaining that the 

requirement that a finance charge may 

be computed and imposed from time to 

time on the outstanding balance means 

there is no specific amount financed for 

the plan for which the finance charge, 

total of payments, and payment 

schedule can be calculated and that a 

plan may meet the definition of openend credit even though a finance charge 

is not normally imposed, provided the 

creditor has the right, under the plan, to 

impose a finance charge from time to 

time on the outstanding balance). For a 

credit plan where credit is replenishing, 

an amount financed cannot be 

calculated for the plan. Such credit 

plans will meet this element if a finance 

charge may be imposed on the plan. 

Indeed, a plan may meet the definition 

of open-end credit even though a 

finance charge is not normally imposed, 

provided the creditor reserves the right, 

under the plan, to impose a finance 

charge from time to time on an 

outstanding balance. See comment 

2(a)(20)–4. 

The Bureau does not anticipate that 

there will be a specific amount financed 

for a prepaid overdraft service at the 

time it is established; instead, credit 

extensions may be added from time to 

time to the outstanding balance for the 

plan, and fees or other finance charges 

may be imposed from time to time in 

connection with the usage of the plan, 

thus satisfying this criterion. To the 

extent that such a plan involves finance 

charges but no periodic rate, it may be 

a charge card, which is specifically 

subject to coverage under Regulation Z. 

See, e.g., 1026.2(a)(15)(iii) (defining a 

‘‘charge card’’ as ‘‘a credit card on an 

account for which no periodic rate is 

used to compute a finance charge’’). 

Lastly, the Bureau anticipates that 

automated overdraft services for prepaid 

accounts generally will be structured 

such that the credit line for the plan will 

generally replenish to the extent that 

any outstanding balance is repaid, thus 

satisfying the final prong of the 

definition of open-end credit, that the 

amount of credit that may be extended 

is generally made available to the extent 

that any outstanding balance is repaid. 

Comment 2(a)(20)–5 currently provides 

that this criterion means that the total 

amount of credit that may be extended 

during the existence of an open-end 

plan is unlimited because available 

credit is generally replenished as earlier 

advances are repaid. This unlimited 

credit distinguishes open-end credit 

from a series of advances made pursuant 

to a closed-end credit loan commitment, 

but it does not mean that the creditor 

must establish a specific credit limit for 

the line of credit or that the credit plan 

must always be replenished to its 

original amount. The creditor may 


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338 46 FR 50288, 50293 (Oct. 9, 1981). 

339See 75 FR 7657, 7664 (Feb. 22, 2010); see also 

§ 1026.2(a)(15)(ii). 

reduce a credit limit or refuse to extend 

new credit in a particular case due to 

changes in the creditor’s financial 

condition or the consumer’s 

creditworthiness, if permitted by 

Regulation Z; indeed, the Bureau 

believes that this is a quite common 

practice with respect to credit cards. 

While consumers should have a 

reasonable expectation of obtaining 

credit as long as they remain current 

and within any preset credit limits, 

further extensions of credit need not be 

an absolute right in order for the plan 

to meet the self-replenishing criterion. 

The Bureau believes that overdraft 

services linked to prepaid accounts 

generally are and will be structured to 

meet this criterion. Insofar as the Bureau 

has determined that the three prongs of 

an open-end credit plan are met, it finds 

that an overdraft service on a prepaid 

account is an open-end credit plan 

much like an overdraft line of credit or 

other similar products linked to prepaid 

accounts. 

Overdraft Services and Other Credit 

Features on Prepaid Accounts and 

TILA’s Definition of a Credit Card 

Having determined that overdraft 

services, overdraft lines of credit, or 

other similar products linked to prepaid 

accounts can be open-end (not homesecured) credit plans, the Bureau 

evaluated whether such arrangements 

involve use of a ‘‘credit card’’ under 

Regulation Z. TILA section 103(k) 

defines the term credit card to mean any 

card, plate, coupon book or other credit 

device existing for the purpose of 

obtaining money, property, labor, or 

services on credit. 15 U.S.C. 1602(l). In 

turn, § 1026.2(a)(15)(i) defines credit 

card to mean any card, plate, or other 

single credit device that may be used 

from time to time to obtain credit. 

The Bureau believes that prepaid 

accounts that access overdraft services, 

overdraft lines of credit, or similar 

products generally meet the definition 

of ‘‘credit card’’ and, absent an 

exemption, generally would be subject 

to the rules in Regulation Z applicable 

to credit cards. As is noted above in the 

discussion of Regulation E proposed 

1005.2(a)(3), the definition of prepaid 

account includes certain access devices 

that may not be a physical card. 

Specifically, the term prepaid account 

would include cards, codes, or other 

devices capable of being loaded with 

funds and usable at a wide variety of 

unaffiliated merchants or for person-toperson transfers. See proposed 

Regulation E 1005.2(b)(3). Thus, the 

proposed Regulation E definition would 

include physical cards—such as a GPR 

card—but also would include access 

devices that are solely online or on a 

mobile phone. With respect to 

Regulation Z, the Bureau similarly 

intends for ‘‘card, code, or other device’’ 

to apply to the panoply of different 

access devices in addition to physical 

cards on which credit may be extended 

including ‘‘hybrid’’ cards that may 

function as both a prepaid account and 

a credit card. 

The Bureau proposes not to extend 

the exclusions for debit cards and 

account numbers to prepaid accounts. 

The commentary to the definition of 

‘‘credit card’’ explains that a debit card 

is not a credit card unless there is a 

credit feature or agreement to extend 

credit, even if the creditor occasionally 

honors an inadvertent overdraft. The 

Board adopted this commentary to 

exclude bounce protection plans from 

becoming subject to Regulation Z when 

they are accessed by a debit card, 

consistent with the exclusion for 

overdraft charges from the definition of 

finance charge where there is no written 

agreement to extend credit and charge a 

fee, as described above.338 With regard 

to overdraft lines of credit and other 

open-end (not home-secured) plans 

where there is an agreement to extend 

credit, a debit card that can access the 

credit is a credit card and is subject to 

the credit card provisions in Regulation 

Z subpart B that implement the FCBA, 

such as the no-offset provision. 

However, the Board used its TILA 

exception authority to exempt debit 

cards that access open-end overdraft 

lines of credit from the Credit CARD Act 

provisions, generally set forth in subpart 

G, because it determined that the 

protections in Regulation E generally 

apply to debit cards that access an 

overdraft line of credit. In addition, the 

Board noted that overdraft lines of 

credit were not, at that time, in wide use 

and that creditors issuing such lines of 

credit generally did not engage in the 

practices addressed by the Credit CARD 

Act.339

The existing commentary to the 

definition of ‘‘credit card’’ also excludes 

an account number (where there is no 

physical device) from the definition of 

credit card, unless the account number 

can access an open-end line of credit to 

purchase goods or services. For 

example, if a creditor provides a 

consumer with an open-end line of 

credit that can be accessed by an 

account number in order to transfer 

funds into another account (such as an 

asset account with the same creditor), 

the account number is not a credit card 

for purposes of Regulation Z. However, 

if the account number can also access 

the line of credit to purchase goods or 

services (such as an account number 

that can be used to purchase goods or 

services on the internet), the account 

number is a credit card for purposes of 

Regulation Z. Relatedly, the 

commentary explains that a ‘‘hybrid’’ 

card—a card that accesses both a credit 

and an asset account (that is, a debitcredit card)—is considered a credit card. 

See comment 2(a)(15)–2.i.B. Thus, there 

is a scenario in existing Regulation Z 

when the same number (the number of 

the debit-credit card) can access both 

the credit and the asset account. 

Rather than expanding this existing 

patchwork approach, the Bureau is 

proposing to treat all credit offered on 

or in connection with a particular 

prepaid account in the same way (to the 

extent that the credit plan imposes a 

finance charge or a fee described in 

§ 1026.4(c) and is not payable in more 

than four installments)—subject to the 

specific credit card protections in 

subparts B and G. As is noted above, in 

addition to overdraft services, prepaid 

accounts may also be offered with other 

types of credit features such as linked 

lines of credit. Although a line of credit 

accessed by an account number that 

pushes credit into a checking account 

would not be considered a credit card 

under Regulation Z if the account 

number cannot be used to access an 

open-end line of credit to purchase 

goods or services, the Bureau believes it 

is appropriate to treat all lines of credit 

linked to prepaid accounts as credit 

cards when they are linked to a prepaid 

account. 

Relatedly, the Bureau also believes it 

appropriate to include as credit cards 

products involving a range of access 

devices. For example, the Bureau 

intends its proposal to apply if the 

provider offers a credit product in 

which the consumer has an account 

number that can access the line of 

credit, and the credit can be deposited 

directly only into the prepaid account 

(even if there was no physical device to 

access the line of credit). 

The Bureau believes that this is 

appropriate because of the increased 

protections offered by the credit card 

rules, discussed below, and the unique 

nature of prepaid accounts. While the 

existence of linked lines of credit and 

‘‘push’’ credit products associated with 

prepaid accounts today may be limited, 

the Bureau is concerned that were such 

products not covered by the proposed 

provisions governing credit, they would 

be offered as a means of evading the 

requirements articulated in this 

proposal. Thus, as is discussed in more 


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340This provision implements TILA section 169, 

which Congress added to TILA when it enacted the 

FCBA. The provision prohibits card issuers from 

taking any action to offset a cardholder’s 

indebtedness arising from a consumer credit card 

transaction against the cardholder’s funds held with 

the issuer, unless such action was previously 

authorized in writing by the cardholder in 

accordance with a plan whereby the cardholder 

agrees to permit the issuer periodically to deduct 

the debt from the cardholder’s deposit account. 

341As noted above, under the proposal, a prepaid 

account would not be a credit card if it only 

accesses credit that is not subject to any finance 

charge as defined in § 1026.4 or any fee described 

in § 1026.4(c) and repayment is not expected in 

more than four installments and thus the provisions 

discussed herein would not apply. 

detail below, the Bureau’s proposal also 

would cover such credit plans. 

Specifically, the proposal would 

generally provide that prepaid accounts 

are credit cards under Regulation Z, 

except where a prepaid account can 

only access credit that is not subject to 

any finance charge or fee described in 

§ 1026.4(c) (such as an application fee to 

apply for credit, late payment fee, over 

the credit limit fee or returned payment 

fee) and repayment is not expected by 

written agreement in more than four 

installments. To the extent no periodic 

rate is imposed, such as if an overdraft 

service charges a flat per transaction fee, 

then the credit product linked to a 

prepaid account would be a charge card. 

See § 1026.2(a)(15)(iii). 

The Bureau believes that the proposal 

would provide consumers with stronger 

and more consistent protections than 

would apply if the Bureau extended 

exemptions for overdraft services on 

prepaid accounts that would exempt 

them entirely from Regulation Z but did 

not subject lines of credit and products 

that push credit onto the prepaid 

account as credit cards. Thus, under the 

proposal, prepaid accounts generally 

would be credit cards when they access 

a credit feature, and generally would be 

subject to the rules in Regulation Z 

applicable to credit cards. The proposal 

also would add additional, unique 

protections to Regulation Z for prepaid 

accounts that are credit cards that access 

overdraft services or credit features. 

Where applicable, the extension of 

credit card provisions to prepaid 

accounts would mean that a variety of 

Regulation Z provisions would apply, 

such as enhanced protections for credit 

cardholders pursuant to the FCBA and 

the Credit CARD Act. Those 

requirements, in tandem with the 

proposed application of TILA’s no-offset 

provision (TILA section 169) to prepaid 

accounts subject to these credit card 

provisions, and corresponding proposed 

changes to the compulsory use 

provision in Regulation E 

§ 1005.10(e)(1), would allow consumers 

to retain control over the funds in their 

prepaid accounts if a credit card feature 

becomes associated with those accounts 

because they will be able to control 

when and how debts are repaid. See 

§ 1026.12(d).340

Specifically, proposing to apply 

TILA’s timing and due date 

requirements for periodic statements 

and the no-offset provision and 

proposing to amend Regulation E’s 

compulsory use provision would, 

respectively, mean that card issuers 

would have several restrictions. First, 

they would be required to adopt 

reasonable procedures designed to 

ensure that periodic statements are 

mailed or delivered at least 21 days 

prior to the payment due date disclosed 

on the periodic statement and the due 

date disclosed must be the same day of 

the month for each billing cycle. 

Second, card issuers could only move 

funds automatically from an asset 

account held by the card issuer to the 

credit card account held by the card 

issuer to pay some or all of the credit 

card debt no more frequently than once 

per month, such as on the payment due 

date, and only pursuant to the 

consumer’s signed, written agreement 

that the issuer may do so. Third, card 

issuers must offer consumers a means to 

repay their outstanding credit balances 

other than automatic repayment (such 

as by means of a transfer of funds from 

the prepaid asset account to the credit 

account that the consumer affirmatively 

initiates on the prepaid account’s online 

banking Web site). 

In addition, the Bureau proposes that 

by virtue of treating credit features 

offered on prepaid accounts as open-end 

credit accessed by a credit card, other 

protections of the Credit CARD Act, 

mostly implemented in subpart G of 

Regulation Z, would also apply.341

Among other things, these requirements 

would require such credit card issuers 

to perform underwriting when opening 

a credit card account for consumers in 

accordance with the Credit CARD Act’s 

ability-to-pay requirements. See 

§ 1026.51(a). Such issuers would also 

generally be required to limit fees (as 

opposed to periodic interest rates) to 25 

percent of the credit limit during the 

first year after the consumer opens the 

credit card account (i.e., the credit 

account linked to the consumer’s 

prepaid account could be opened no 

earlier than thirty calendar days after 

the consumer registered the prepaid 

account). See section-by-section 

analysis of § 1026.52(a). This limit 

would apply to any per-transaction 

fees—such as the prototypical 

‘‘overdraft fee’’—that issuers might 

assess each time they authorize a 

prepaid transaction that accesses the 

credit account. 

Consideration of Extension of Existing 

Exemptions for Overdraft Services on 

Prepaid Accounts 

In this rulemaking, the Bureau 

considered the alternative of preserving 

the existing bifurcation in regulatory 

treatment between overdraft services for 

traditional deposit accounts and other 

forms of credit that may be associated 

with such accounts, but extending 

traditional deposit account treatment to 

prepaid accounts. The Bureau believes 

instead that invoking TILA and 

Regulation Z protections prepaid 

consumers that may use prepaid 

account overdraft services and other 

credit features is appropriate for several 

reasons. 

First, the Bureau believes that 

covering overdraft services offered in 

connection with prepaid accounts under 

Regulation Z aligns with TILA’s purpose 

(TILA section 102(a))—to ‘‘assure a 

meaningful disclosure of credit terms so 

that the consumer will be able to 

compare more readily the various credit 

terms available to him and avoid the 

uninformed use of credit, and to protect 

the consumer against inaccurate and 

unfair credit billing and credit card 

practices.’’ 15 U.S.C. 1601(a). In 

addition and as discussed above, the 

provisions of the FCBA and the Credit 

CARD Act would offer additional 

protections to consumers who use 

overdraft services and other forms of 

credit offered in connection with 

prepaid accounts. In addition to the 

application of the FCBA and Credit 

CARD Act credit card provisions to 

overdraft services accessed by prepaid 

accounts that would be considered 

credit cards under the proposal, the 

Bureau believes that regulation of 

prepaid account overdraft services as 

open-end (not home-secured) credit 

would serve to accomplish the stated 

purpose of TILA by requiring creditors 

and other persons to explain the terms 

of overdraft services to consumers in the 

context of Regulation Z, protect 

consumers from high fees during the 

first year (through Regulation Z’s fee 

harvester provision) and from harms 

arising from various billing and 

improper credit card practices, and give 

consumers strong tools to manage their 

credit relationships. 

Second, the Bureau believes the 

Board’s justification of the existing 

regulatory approach is much less 

convincing as applied to prepaid 

accounts, both because the historical 

justification for checking account 

overdraft services does not apply to 


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342 77 FR 59033, 59033 (Nov. 17, 2009); see also 

generally FDIC Overdraft Payment Supervisory 

Guidance. 

343An exception is third-party ACH debits, which 

could be sent without prior authorization. However, 

an informal review by the Bureau of major GPR card 

programs indicates that most will not accept 

incoming ACH debits or that, by contract, 

cardholders are not permitted to establish them. 

The Bureau notes that, as currently structured, most 

prepaid products do not allow consumers to write 

checks that are not preauthorized. 

344The Bureau is aware that, in some instances, 

a transaction will be authorized when the account 

balance is positive but will ultimately settle when 

the account balance is negative, because for some 

types of transactions the final settlement amount 

may be higher than the authorization amount (e.g., 

at restaurants because tips are sometimes added 

after authorization). However, the Bureau believes 

that such occurrences are rare and generally only 

for marginal amounts rather than full transactions. 

345See, e.g., NBCPA, What are Prepaid Cards?, 

http://www.nbpca.com/en/What-Are-PrepaidCards/Prepaid-Card-Benefits.aspx (last visited Oct. 

28, 2014) (‘‘For many Americans, prepaid cards 

serve as a tool with which to more effectively 

budget their spending. With a prepaid card, 

consumers avoid the risk of over-spending or 

overdraft, thus avoiding the interest, fees and 

potential negative credit score implications of 

traditional credit cards. And for parents, prepaid 

cards provide tools to maintain control over their 

teens’ or college students’ spending.’’); see also 

Examining Issues in the Prepaid Card Market: 

Hearing before the Subcomm. On Fin. Inst. and 

Consumer Prot., S. Comm. on Banking, Housing and 

Urban Affairs, 112th Cong. 2 (2012) (Remarks of 

Dan Henry, Chief Executive Officer, NetSpend 

Holdings, Inc.) (‘‘Our customers are typically 

working Americans who want control . . .’’). 

prepaid accounts and because there are 

notable differences between how 

prepaid accounts and checking accounts 

function. In constructing the exemption, 

the Board relied in part on the fact that 

at that time overdraft in the checking 

account context was determined to be a 

‘‘courtesy’’ that enabled consumers to 

avoid both the embarrassment of 

bouncing checks and the attendant 

costs. The Board also relied on the fact 

that, at the time, overdraft decisions 

were made on an ad hoc basis; that is 

no longer true of automated overdraft 

programs. At the time the Board 

established the Regulation Z exemption, 

bounce-protection programs (as 

overdraft services were known) were 

necessarily check-based because checks 

and cash were—at that time— 

consumers’ only ways of accessing 

funds in their deposit accounts. Further, 

a financial institution’s decision 

whether to pay a given check that 

triggered an overdraft was at that time 

necessarily manual, or ad-hoc, because 

computers (and automated credit 

decision-making) were only in their 

infancy. Typically, a consumer’s 

institution (the ‘‘paying bank,’’ which is 

equivalent to the card-issuing bank in a 

card transaction) cannot authorize or 

decline a purchase by check when the 

consumer seeks to make payment (i.e., 

while at the merchant). As the Board 

noted in 2009, institutions that 

historically provided overdraft coverage 

for check transactions on an ad-hoc 

basis often provided a benefit to 

consumers, insofar as paying the check 

was often a preferable outcome to a 

bounced, returned check or NSF fee; 

additional fees imposed by merchants; 

and even potential criminal liability for 

passing bad checks.342

However, the account structure and 

logistics for prepaid accounts have 

never matched those for checking 

accounts that existed in 1969, because 

overdraft services in the prepaid 

account context are not structured by 

institutions or considered by consumers 

to be an occasional courtesy to avoid a 

bounced check. Checking accounts, by 

definition, allow consumers to write 

checks and present them to payees 

without first receiving authorization 

from their financial institution. 

Checking accounts also allow incoming 

debit ACH transactions without 

preauthorization. These types of 

transactions are relevant because the 

exact timing of the check clearance and 

incoming ACH process can be difficult 

for the consumer to predict. For 

instance because sometimes it may take 

several days or longer for a check to be 

presented and funds to be withdrawn 

from the consumer’s account, while 

other times checks may be presented 

faster. Uncertainty around the timing of 

check and ACH presentment and the 

substantial negative consequences of 

rejected transactions may lead to 

overdrafts for traditional accounts, but 

are extremely unlikely for prepaid 

accounts. 

Indeed, by contrast, virtually all 

prepaid account transactions are 

preauthorized, which means that the 

merchant seeks authorization from the 

financial institution before providing 

goods or services to the consumer.343 In 

such cases, the consumer is not at risk 

of having a payment rejected after a 

transaction has already occurred and the 

consumer will not be subjected to NSF 

and merchant fees; rather, the financial 

institution can simply reject the 

transaction before the purchase occurs if 

there are insufficient funds in the 

account.344 This is true for point-of-sale 

transactions as well as online bill pay 

transactions completed via ACH 

initiated from the prepaid account to the 

biller (or even with mailed, pre-debited 

checks). Thus, a consumer using a 

prepaid account is less like the checking 

account customer that the Board 

focused on in creating the exemption for 

overdraft—a consumer being extended a 

courtesy in order to avoid potentially 

harsher repercussions—and instead is 

like any other consumer using credit to 

purchase goods or services. To the 

extent offered, financial institutions’ 

ongoing and routine decisions to pay 

prepaid account transactions that will 

result in the creation of a debt and the 

deferment of payment on that debt 

function as if they are an extension of 

credit and constitute a credit plan 

(unless exempted from Regulation Z). 

Insofar as this is how most prepaid 

cards work, they have been 

distinguishable from traditional 

checking accounts. 

Third, the Bureau believes that 

treating prepaid overdraft services as 

open-end credit plans acting as credit 

cards would provide stronger 

protections that are more closely 

calibrated to how the industry has 

broadly marketed prepaid products to 

consumers and how consumers, in turn, 

expect to be able to use the products. As 

noted above, financial institutions 

deliberately market prepaid accounts to 

consumers as products that are safer and 

easier to use than comparable products 

with credit features, in particular 

checking accounts with overdraft. 

Specifically, many companies market 

prepaid accounts to consumers as 

products that increase consumers’ 

financial control by preventing 

overspending and the incurring of 

debt.345 By control, the Bureau believes 

that these companies mean that prepaid 

account users can exert control by 

limiting expenditures to the funds 

loaded onto the prepaid account and 

cannot spend funds they do not have. 

Financial institutions often market 

prepaid cards as requiring no credit 

checks, not reporting to credit bureaus 

unpaid debts (of which there are rarely 

any), and not including any credit 

features. Underscoring this marketing 

approach, many industry commenters to 

the Bureau’s ANPR repeatedly 

emphasized these unique features of 

prepaid products as a primary reason 

behind their growth in popularity. 

Many consumers have chosen prepaid 

cards specifically because the cards 

offer greater spending control in general 

and do not typically offer overdraft 

services of the same type as commonly 

found on checking accounts in 

particular. Thus, the prepaid industry 

has attracted a large number of both 

voluntary and involuntary former 

checking account customers who had 

their checking account closed. Many 

prepaid consumers previously had a 

checking account and either lost that 


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346 2014 Pew Survey, at 7–8 (Noting both that 

‘‘Most prepaid card users who have had a checking 

account in the past have paid associated overdraft 

fees for debit card usage’’ and that ‘‘Among those 

prepaid card users who have ever had a bank 

account, 41 percent of them say they have closed 

or lost a checking account because of overdraft or 

bounced check fees.’’). 347See ICF Report at 5. 348See Bretton Woods, Inc., A Comparative Cost 

Analysis of Prepaid Cards, Basic Checking 

Accounts and Check Cashing, at 4 (February 2012), 

available at http://bretton-woods.com/media/

3e145204f3688479ffff832affffd524.pdf (noting that 

74 percent of prepaid users like the fact they cannot 

overspend or overdraft the most about prepaid 

cards); 2014 Pew Survey, at 14 ex.12 (noting that 

the top two reasons consumers claim to use prepaid 

cards related to avoiding credit card debt (67 

percent) and helping them not spend more money 

than they actually have (66 percent)). 

349 2014 Pew Survey, at 7–8 (noting both that 

‘‘Most prepaid card users who have had a checking 

account in the past have paid associated overdraft 

fees for debit card usage’’ and that ‘‘Among those 

prepaid card users who have ever had a bank 

account, 41 percent of them say they have closed 

or lost a checking account because of overdraft or 

bounced check fees.’’). Separately, one large 

program manager estimates that 80 percent of its 

GPR card customers earn less than $50,000. See 

Kate Fitzgerald, Green Dot Chief Sees Prepaid 

Mobile Payments As Company’s Next Challenge 

(May 7, 2012) http://www.isoandagent.com/news/

Green-Dot-Chief-Sees-Prepaid-Mobile-Payments-AsCompanys-Next-Challenge-3010590-1.html 

(explaining that ‘‘single mothers in their late 30s 

and early 40s comprise 55 percent of [one major 

prepaid card company’s] target market, with most 

of them earning less than $50,000 annually.’’), 

while one study found that 84 percent of GPR card 

users had incomes below the nationwide median. 

Similarly, others have informed Bureau staff that 

the average credit score of prepaid account users is 

far below average. 

350 In its report on unbanked and underbanked 

consumers, the FDIC explained that households are 

identified as ‘‘unbanked’’ if they answered ‘‘no’’ to 

the question, ‘‘Do you or does anyone in your 

household currently have a checking or savings 

account?.’’ The FDIC further explained that 

‘‘underbanked households are defined as those 

households that have a checking and/or a savings 

account and had used non-bank money orders, nonbank check cashing services, non-bank remittances, 

payday loans, rent-to-own services, pawn shops, or 

refund anticipation loans (RALs) in the past 12 

months.’’ See FDIC, 2011 FDIC National Survey of 

Unbanked and Underbanked Households (2011) 

available at https://www.fdic.gov/householdsurvey/ 

2012_unbankedreport.pdf. For discussion of 

prepaid consumers’ background, see Kansas City 

Fed Study, at 12–13 (although the report also notes 

no correlation due to income or education; possibly 

due to the different types of use by prepaid 

consumers); available at https://

www.kansascityfed.org/publicat/reswkpap/pdf/

rwp14-01.pdf. 

351 2011 FDIC Survey, at 16, 18, 40; see also Nat’l 

Council of La Raza, Perspectives on Prepaid Cards 

from Low-Income Hispanic Tax Filers at 1–2 (2011) 

available at http://www.nclr.org/images/uploads/

publications/perspectives_on_prepaid_cards_

(3).pdf. 

352Relatedly, Congress has similarly sought to 

address such services on prepaid accounts. EFTA 

section 920(a), as implemented in Regulation II, 

limits interchange fees when an overdraft fee may 

be charged on the prepaid card (by, as noted above, 

carving cards that may impose overdraft fees out of 

Continued 

account or gave up that account due to 

failure to repay debts or related 

issues.346 The Bureau believes that 

many of these consumers lost their 

checking accounts because they could 

not handle repeated overdraft fees. 

Those who left voluntarily may also 

have done so due to their difficulty in 

managing to avoid overdraft fees. 

Relatedly, the Bureau also believes that 

many of these consumers, and even 

many consumers who continue to 

maintain separate checking accounts, 

chose to purchase prepaid products 

because of their promise to allow 

consumers to control their spending. 

Indeed, many participants in the 

Bureau’s consumer testing emphasized 

control as a primary reason they used 

prepaid cards.347 Participants explained 

that did not want a product with 

overdraft services because they were 

afraid they would be tempted to use 

such a service and incur debt and fees 

beyond what they could control. As 

noted above, other studies have 

similarly found that a primary reason 

consumers use prepaid cards is that 

they want increased control over their 

finances and want to avoid incurring 

debt and related fees.348

Thus, to prevent erosion of what the 

Bureau believes is a clear distinction 

regarding overdraft services in the 

current market and in the minds of 

consumers between prepaid accounts 

and checking accounts that offer 

overdraft services, and to ensure that 

credit products that are associated with 

prepaid accounts receive consistent 

treatment regardless of their particular 

structures, the Bureau is proposing to 

adopt stronger protections that would 

treat various credit features associated 

with prepaid accounts as an open-end 

credit card product subject to 

Regulation Z. By doing so, the Bureau 

believes that consumers will more 

clearly know and understand when they 

are accessing credit using a prepaid 

account and also will benefit from 

increased protections not available for 

checking accounts. The Bureau is also 

concerned that were the Bureau to 

permit overdraft services without the 

proposed protections, the approach of 

marketing prepaid accounts as a safe 

alternative to checking accounts could 

be confusing to consumers. To the 

extent that the issuer of a prepaid 

account wants to veer from current 

norms by offering overdraft services or 

other credit features, the Bureau 

believes that requiring appropriate 

markers and full protections for credit 

card products, including the Bureau’s 

proposed overdraft disclosure 

requirements in proposed § 1005.18(b) 

will help consumers recognize that they 

are taking this extra, and for prepaid 

products, perhaps unusual step of 

accessing credit and to treat that credit 

with appropriate caution. This is in 

contrast to the historical treatment of 

checking accounts, where overdraft 

services have been common across 

almost all such accounts and consumers 

expect such services to be offered in 

connection with checking accounts. 

By labeling overdraft services offered 

on prepaid products as credit subject to 

the disclosure requirements of 

Regulation Z, the Bureau believes that 

the resulting product will be better 

understood and managed as credit by 

consumers to the extent that some 

prepaid accountholders decide they 

want to access such credit. In addition, 

by not permitting financial institutions 

to accept applications for an overdraft 

service until 30 calendar days after 

registration of the prepaid account, see 

proposed § 1005.18(g)(1) and 

§ 1026.12(h)(1), the Bureau believes it 

will prevent consumers from being 

pressured to make a decision on 

overdraft or credit when acquiring the 

prepaid account, such as when they buy 

a GPR card in a retail store. It would 

also allow consumers time to decide 

whether the basic prepaid card is a good 

fit for them before deciding whether to 

layer on a credit relationship that may 

be more difficult to walk away from. 

Fourth, there is evidence that a 

significant portion of consumers with 

prepaid accounts would particularly 

benefit from the stronger protections 

that Regulation Z provides. More clearly 

defined credit features will be beneficial 

in part because of the marketing 

dynamics discussed above and because 

some consumers have experienced 

difficult managing overdraft services on 

traditional checking accounts.349 In 

general, prepaid consumers are 

disproportionately unbanked or 

underbanked,350 often have limited 

education, and are often unemployed or 

recipients of public benefits.351

Although the size of this group is not 

clear, the Bureau believes that some 

users of prepaid products do vary, in 

some degree, from users of traditional 

deposit accounts. Thus, the Bureau 

believes that they may be seeking or 

expecting different features from that of 

a traditional checking account when 

they use prepaid cards. Moreover, 

because the costs to buy prepaid 

accounts are lower than for checking 

accounts—they are often easily bought 

in retail stores for a small sum—the 

Bureau believes that it is likely that this 

product may continue to attract 

consumers who are relatively new to the 

financial system over time.352


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the exception from the rule’s fee caps). While not 

prohibiting such services outright, the Bureau 

believes that Congress, in differentiating treatment, 

acted out of concern regarding overdraft services on 

prepaid accounts (vis-a`-vis prepaid cards that 

cannot impose overdraft fees). 

353See CFPB’s Unified Agenda for Spring 2014, 

available at http://www.reginfo.gov/public/do/

eAgendaMain?operation=OPERATION_GET_

AGENCY_RULE_LIST¤tPub=true&agency

Code=&showStage

=active&agencyCd=3170&Image58.

x=58&Image58.y=5&Image58=Submit. 

354 79 FR 58602 (Sept. 29, 2014). 355 79 FR 58602 at 58619. 356 79 FR 58602 at 58638. See proposed 32 CFR 

232.4(d) of the Department’s proposal, stating that 

the exclusion the proposal provides for a bona fide 

fee applies only to the extent that the charge by the 

creditor is a bona fide fee and is reasonable and 

customary for that type of fee. The exclusion for 

bona fide fees does not apply to periodic rates. It 

also does not apply to any credit insurance 

premium, including charges for single premium 

credit insurance, fees for debt cancellation or debt 

suspension agreements, or to any fees for credit 

related ancillary products sold in connection with 

and either at or before consummation of the credit 

transaction or upon account opening, because those 

charges are expressly included in the definition of 

‘‘interest’’ in the applicable statute (10 U.S.C. 

987(i)(3)) and therefore must be included in the 

MAPR calculation. 

357 79 FR 58602 at 58638. See proposed 32 CFR 

232.4(d) of the Department’s proposal. 

To the extent some consumers may 

want to take advantage of credit features 

if offered in connection with their 

prepaid account, the Bureau further 

believes that its proposed approach 

would provide these consumers with 

stronger tools and protections that 

would appropriately limit their credit 

exposure and reduce the risk of some of 

the harms that may be associated with 

using prepaid accounts for which an 

overdraft service is offered. 

Fifth, unlike with respect to checking 

accounts where overdraft services have 

been structured to fit a unique and 

separate regulatory regime for several 

decades, the Bureau is proposing to 

regulate prepaid credit features on a 

largely blank slate. As noted above, 

deposit accounts and their pricing 

structures have evolved under 

compliance frameworks that were 

developed in accordance with existing 

regulations, exceptions to those 

regulations, and other agencies’ 

guidance. The deposit account industry 

would view any departure as 

significantly disruptive. In contrast, 

very few prepaid products offer 

overdraft services or other credit 

features. Most prepaid account 

programs do not have such a feature 

and, as a result, providers would have 

to implement a new compliance regime 

in any event were they to decide to add 

such features. 

Similarly, while many have settled 

expectations that if they write a check 

or authorize a bill payment through a 

third party for which there is 

insufficient funds; the transactions will 

be paid rather than bounced, the Bureau 

does not believe that prepaid 

accountholders expect similar treatment 

because it is so rare for check and bill 

payment services to be offered absent 

pre-authorization. Implementation costs 

for industry and the risk of disruption 

to expectations for all stakeholders is 

thus much different in the context of 

prepaid accounts. Indeed, by proposing 

to act now on prepaid accounts before 

credit features become widespread, the 

Bureau expects that credit features on 

prepaid accounts will evolve in a more 

straightforward and consumer-friendly 

manner consistent with the general 

framework and protections for credit. 

Proposal’s Treatment of Overdraft 

Services is Limited to Prepaid Accounts 

The Bureau is proposing to make 

adjustments to Regulation Z and 

Regulation E that would not extend 

existing exemptions for overdraft 

services on traditional deposit accounts 

to overdraft services on prepaid 

accounts, but it is not proposing to alter 

existing provisions that apply to deposit 

account overdraft, including exemptions 

for overdraft services from Regulation Z 

and Regulation E’s compulsory use 

provision. As described above, the 

Bureau sees significant differences in 

the underlying accounts and transaction 

types, the history of marketing and 

market segmentation, and the 

transaction costs and other disruptions 

that would be involved in shifting to a 

different regulatory framework with 

respect to checking accounts. Indeed, 

the Bureau is acting at this time to 

subject prepaid accounts to Regulation 

Z and the compulsory use provisions of 

Regulation E in part because there is no 

clearly established and predominant 

regulatory or compliance regime 

applicable to such programs, such that 

adopting the Bureau’s proposal would 

not create significant upheaval in the 

market. 

The Bureau recognizes that historical, 

operational and other factors have 

supported a different regulatory 

approach with respect to overdraft in 

the checking account context than with 

respect to prepaid accounts. The Bureau 

continues to study deposit account 

overdraft services and will propose any 

further enhancements to the existing 

regulatory framework that it deems 

appropriate as part of that separate 

endeavor in accordance with its 

rulemaking procedures.353

Other Implications of the Bureau’s 

Approach to Prepaid Credit Products 

The detailed discussion below sets 

forth the Bureau’s proposed changes to 

Subparts A, B, and G of Regulation Z to 

effectuate the approach to overdraft 

services and credit features offered in 

connection with prepaid accounts. The 

Bureau seeks comment both on its 

general approach to such credit 

products and to the specific changes 

proposed. In addition, the Bureau seeks 

comment on certain potential 

implications of its approach, as 

described immediately below: 

Military Lending Act. As discussed 

above, the Department of Defense (the 

Department) recently proposed to 

expand the scope of the coverage of its 

regulation (32 CFR part 232) that 

implements the MLA to include a broad 

range of open-end and closed-end credit 

products, including open-end (not home 

secured) credit card accounts that are 

subject to Regulation Z.354 Under the 

MLA, a creditor generally may not apply 

a military annual percentage rate 

(MAPR) greater than 36 percent in 

connection with an extension of 

consumer credit to a military service 

member or dependent. For covered 

credit card accounts, any credit-related 

charge that is a finance charge under 

Regulation Z (as well as certain other 

charges) would be included in 

calculating the MAPR for a particular 

billing cycle and the MAPR for that 

billing cycle could not exceed 36 

percent.355 However, the Department’s 

proposal provides that a credit card 

issuer does not have to include in the 

calculation of the MAPR any charge that 

is a ‘‘bona fide fee’’ if the fee is 

‘‘reasonable and customary.’’ 356 The 

Department has proposed a safe harbor 

that would determine whether fee levels 

are reasonable and customary based on 

the average amounts charged by large 

credit card issuers for substantially 

similar fees during the last three 

years.357

Thus, as with fees for other types of 

consumer credit extended to military 

service members, fees levied for credit 

features (including overdraft services) 

on prepaid accounts held by military 

service members or their dependents 

would, as a result of the Department and 

Bureau proposals in combination (if 

both proposals are finalized as 

proposed), generally be included in 

calculating the MAPR for a billing cycle 

unless excluded under the bona fide fee 

exception. The Bureau requests 

comment on the consequences, if any, 

from the combined effect of the two 

proposals (were they to be finalized) 

with respect to overdraft services and 

credit features on prepaid accounts held 

by military service members. 


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358When the Board amended comment 12(a)(1)– 

7 in 1999, it stated that the revisions clarified the 

comment’s applicability to then-recent programs 

where unsolicited cards were marketed from the 

outset as both stored-value cards and credit cards. 

See 64 FR 16614, 16615 (Apr. 6, 1999). 

359As discussed in more detail in the section-bysection analysis of § 1026.2(a)(20), with respect to 

credit accessed by a prepaid card or an account 

number where extensions of credit are permitted to 

be deposited directly only into particular prepaid 

accounts specified by the person, a person would 

not be a creditor that is extending open-end credit 

where the person is not charging a finance charge 

for the credit. Nonetheless, as discussed in more 

detail in the section-by-section analysis of 

§ 1026.2(a)(17), such persons may still be subject to 

Regulation Z in certain circumstances. 

Multipurpose Cards and Card 

Network Rules. The Bureau’s approach 

to credit features in connection with 

prepaid products would result in a 

single plastic card or other access device 

functioning either as a prepaid card or 

as a credit card, depending on the 

balance in the asset account that the 

card accesses at the time of a transaction 

that the consumer makes. For example, 

if the asset account balance is sufficient 

to fund the transaction, the card could 

function as a prepaid card; if not, the 

card could function as a credit card. The 

Bureau has proposed a number of 

provisions and sought comment as 

detailed elsewhere to promote consumer 

understanding, facilitate clear 

application of the various potentially 

applicable regulatory regimes, and 

address other challenges that may arise 

due to the multipurpose nature of the 

card product. For example, the Bureau 

is proposing to amend the provision in 

Regulation Z (§ 1026.13(i)) that 

addresses the relationship between the 

Regulation E and Z error resolution 

regimes to clarify the applicability of 

those regimes to an extension of credit 

incident to an electronic fund transfer 

when the consumer’s prepaid account is 

overdrawn. See § 1026.13(i) in the 

section-by-section analysis below. The 

Bureau is also seeking comment on (but 

not proposing) the possibility of 

requiring additional real-time 

notifications of transactions triggering 

an overdraft or the accessing of a linked 

credit feature, or requiring real-time optin by consumers in order to approve 

each overdraft or other credit 

transaction. See § 1005.18(c) in the 

Regulation E section-by-section analysis 

above. 

The Bureau seeks comment on these 

specific amendments and whether 

further amendments or guidance would 

be appropriate. For instance, while there 

is regulatory precedent for similar 

multipurpose debit/credit card 

products, these cards do not appear to 

be in wide use today. See, e.g., comment 

§ 1026.12(a)(1)–7 (stating that a credit 

feature may be added to a previously 

issued non-credit card only upon the 

consumer’s specific request).358 The 

Bureau also seeks comment on 

consumer and industry experiences 

with similar multipurpose products 

historically, and whether they may yield 

useful lessons for further refining the 

Bureau’s proposal with regard to 

prepaid cards. 

Finally, the Bureau notes that card 

network rules may treat a card 

differently depending on whether it 

accesses an asset account or a credit 

account. The Bureau’s proposal could 

result in an increase in the number of 

cards that can access both an asset 

account and a credit account, and the 

Bureau requests comment on any card 

network rule issues that might arise 

from its proposal to treat most credit 

plans accessed by prepaid cards, for 

which finance charges are imposed, as 

open-end credit accessed by a credit 

card under Regulation Z. 

Subpart A 

Section 1026.2 Definitions and Rules 

of Construction 

2(a) Definitions 

Overview of Proposed Changes to 

Definitions 

As discussed above in the Overview 

of Regulation Z Proposal section and 

below in the section-by-section analysis 

of § 1026.4, the Bureau proposes several 

amendments to the definition of 

‘‘finance charge,’’ and commentary for 

the definitions of ‘‘open-end plan’’ and 

‘‘credit card.’’ As a result of these 

proposed changes, a person that offers 

credit plans accessed by prepaid cards, 

such as overdraft services, or certain 

other credit plans linked to prepaid 

accounts that are accessed by account 

numbers, where the person charges a 

finance charge for the credit, generally 

would be extending ‘‘open-end credit’’ 

that is accessed by a ‘‘credit card’’ and 

thus would be covered by Regulation 

Z’s open-end (not home-secured) rules 

and credit card rules in subparts B and 

G.359 (The term ‘‘prepaid card’’ is 

defined in the proposal to mean any 

card, code, or other device that can be 

used to access a prepaid account as 

defined under Regulation E, see 

proposed § 1026.2(a)(15)(v) and (vi).) 

The open-end (not-home secured) rules 

in subpart B include account-opening 

disclosures, periodic statement 

disclosures, change-in-terms notices, 

provisions on promptly crediting 

payments, and billing error resolution 

procedures. The credit card rules in 

subpart B include provisions that 

restrict the unsolicited issuance of 

credit cards, limit the liability for 

unauthorized use of credit cards, and 

prohibit the offset of the credit card debt 

against funds held in asset accounts by 

the card issuer. The credit card rules in 

subpart G include provisions that 

prohibit credit card issuers from 

extending credit without assessing the 

consumer’s ability to pay and restrict 

the amount of required fees that an 

issuer can charge during the first year 

after a credit card account is opened. 

Application of the particular rules is 

discussed further below. 

The proposal would cover credit 

plans, including overdraft services and 

lines of credit, directly accessed by a 

prepaid card. This would apply where 

credit is being ‘‘pulled’’ by a prepaid 

card, such as when the consumer uses 

the prepaid card at point of sale to 

access an overdraft plan to fund a 

purchase. The proposal also would 

cover credit plans that are not accessed 

directly by a prepaid card but are 

structured as a ‘‘push’’ account. Under 

such a credit plan, a person would 

provide credit accessed by an account 

number where such extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the person, and cannot be 

deposited directly into another asset 

account, such as a deposit account. For 

example, such a credit plan may allow 

a consumer to use an account number 

to request an extension of credit be 

deposited directly into a particular 

prepaid account specified by the 

creditor when the consumer does not 

have adequate funds in the prepaid 

account to cover the full amount of a 

transaction using the prepaid card and 

the consumer is contractually obligated 

to repay the credit. A credit plan where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

person would mean that the credit plan 

allows deposits directly into particular 

prepaid accounts specified by the 

creditor but does not allow the 

consumer to deposit directly extensions 

of credit from the plan into asset 

accounts other than particular prepaid 

accounts specified by the creditor. As 

discussed in more detail below, the 

Bureau believes these types of credit 

plans could act as substitutes for credit 

plans directly accessed by a prepaid 

card. The Bureau is not, however, 

intending to cover general purpose lines 

of credit where a consumer has the 

freedom to choose where to deposit 

directly the credit funds. 

Definition of finance charge. As 

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by-section analysis of § 1026.4, under 

Regulation Z, the term ‘‘finance charge’’ 

generally is defined in § 1026.4(a) to 

mean ‘‘the cost of consumer credit as a 

dollar amount.’’ It includes any charge 

payable directly or indirectly by the 

consumer and imposed directly or 

indirectly by the creditor as an incident 

to or a condition of the extension of 

credit. It generally does not include any 

charges of a type payable in a 

comparable cash transaction. Currently, 

certain fees or charges are specifically 

excluded from the term ‘‘finance 

charge,’’ such as (1) charges imposed by 

a financial institution for paying items 

that overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing; and 

(2) fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. See 

§ 1026.4(c)(3) and (4). 

The proposal would amend § 1026.4 

and its commentary to provide that 

these two exceptions do not apply to 

credit accessed by a prepaid card or by 

an account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. In 

addition, the proposal would make 

other amendments to § 1026.4 and its 

commentary to provide additional 

clarification and guidance as to what 

types of fees and charges constitute 

‘‘finance charges’’ related to credit 

accessed by a prepaid card or credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. For such credit, any service, 

transaction, activity, or carrying charges 

imposed on the credit account, and any 

such charges imposed on a prepaid 

account if that charge is related to an 

extension of credit, carrying a credit 

balance, or credit availability, generally 

would be a finance charge. See 

§ 1026.4(a), (b)(2), (c)(3) and (4) and 

comments 4(a)–4 and 4(b)(2)–1. 

Such charges would include periodic 

participation fees for the credit plan, as 

well as transaction charges imposed in 

connection with a credit extension. For 

example, assume a $1.50 transaction 

charge is imposed on the prepaid 

account for each transaction that is 

made with the prepaid card, including 

when the prepaid card is used to access 

credit where the consumer has 

insufficient or unavailable funds in the 

prepaid account at the time of 

authorization or at the time the 

transaction is paid. The $1.50 

transaction charge would be a finance 

charge when the prepaid card accesses 

credit, notwithstanding that a $1.50 

transaction charge also is imposed on 

transactions that solely access funds in 

the prepaid account. The proposal 

would provide, however, that the term 

finance charge does not include 

transaction fees imposed on the prepaid 

account where the consumer is only 

withdrawing funds from the prepaid 

account, fees for opening or holding the 

prepaid account, and other fees, such as 

cash reload fees and balance inquiry 

fees, that are not imposed on the 

prepaid account because the consumer 

engaged in a transaction that is funded 

in whole or in part by credit, for holding 

a credit plan, or for carrying a credit 

balance. 

As a result of these proposed changes 

to the definition of finance charge and 

related commentary, a person that is 

offering credit accessed by a prepaid 

card, or other credit plan linked to 

prepaid accounts that is accessed by an 

account number as described above, that 

is charging fees that are finance charges 

would be a ‘‘creditor’’ under Regulation 

Z. The term ‘‘creditor’’ generally means 

a person who regularly extends 

consumer credit that is subject to a 

finance charge or is payable by written 

agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract. See 

§ 1026.2(a)(17)(i). As discussed above, 

the Bureau is declining to extend 

provisions that exempt financial 

institutions that offer overdraft services 

on traditional deposit accounts from the 

definition of creditor to financial 

institutions that offer overdraft services 

on prepaid accounts. 

Definition of ‘‘open-end credit.’’ As 

discussed above in the Overview of 

Regulation Z Proposal section and 

below in the section-by-section analysis 

of § 1026.2(a)(20), the Bureau believes 

that most creditors that are offering 

credit plans (including overdraft 

services, accessed by a prepaid card, or 

other credit plans linked to prepaid 

accounts that are accessed by an 

account number as discussed above) 

and that are charging finance charges for 

the credit would be creditors offering 

‘‘open-end credit’’ that is not homesecured. Such creditors must comply 

with the open-end (not home-secured) 

provisions set forth in subpart B. 

The term ‘‘open-end credit’’ is defined 

in § 1026.2(a)(20) to mean consumer 

‘‘credit’’ extended by a ‘‘creditor’’ under 

a ‘‘plan’’ in which (1) the creditor 

reasonably contemplates repeated 

transactions; (2) the creditor may 

impose a ‘‘finance charge’’ from time to 

time on an outstanding unpaid balance; 

and (3) the amount of credit that may be 

extended to the consumer during the 

term of the plan (up to any limit set by 

the creditor) is generally made available 

to the extent that any outstanding 

balance is repaid. The proposal would 

amend several of the definitions of these 

terms and provide clarifications and 

commentary to facilitate the 

classification of credit plans associated 

with prepaid accounts. 

Specifically, the proposal would 

provide that the term ‘‘credit’’ under 

§ 1026.2(a)(14) includes an authorized 

transaction on a prepaid account where 

the consumer has insufficient or 

unavailable funds in the prepaid 

account at the time of authorization. It 

also would include a paid transaction 

on a prepaid account where the 

consumer has insufficient or 

unavailable funds in the prepaid 

account at the time the transaction is 

paid. 

With respect to the term ‘‘plan,’’ the 

proposal would provide additional 

guidance on when overdraft credit is 

considered credit extended under a 

plan. In particular, the proposal would 

provide that with respect to credit 

accessed by a prepaid card or accessed 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, a 

plan means a program where the 

consumer is obligated contractually to 

repay any credit extended by the 

creditor. For example, for credit 

accessed by a prepaid card, a plan 

includes a program under which a 

creditor routinely pays transactions 

when a consumer has insufficient or 

unavailable funds in a prepaid account 

and the consumer is obligated 

contractually to repay those 

transactions. Similarly, for credit that is 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, a plan includes a program 

under which a creditor routinely will 

extend credit that is deposited directly 

into particular prepaid accounts 

specified by the creditor and the 

consumer is obligated contractually to 

repay the credit. In both cases, such 

programs constitute plans 

notwithstanding that the creditor retains 

discretion not to extend credit. Except 

as described below, the Bureau believes 

that most overdraft plans accessed by a 

prepaid card, and other credit plans 

linked to a prepaid account that are 

accessed by an account number as 

described above, generally will meet the 

other criteria for open-end credit. See 


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the discussion in the Overview of 

Regulation Z Proposal section and the 

section-by-section analysis of 

§ 1026.2(a)(17) and (a)(20). 

As described in more detail in the 

section-by-section analysis of 

§ 1026.2(a)(17), a person would not be 

extending open-end credit where the 

person is not charging a finance charge 

for the credit that is accessed by a 

prepaid card or accessed by an account 

number as described above. 

Nonetheless, the person could still be 

subject to certain provisions in 

Regulation Z in certain circumstances, 

as discussed below. 

Definition of ‘‘credit card’’ and ‘‘card 

issuer.’’ Regulation Z defines the term 

‘‘credit card’’ in § 1026.2(a)(15)(i) to 

mean ‘‘any card, plate, or other single 

credit device that may be used from 

time to time to obtain credit.’’ The term 

‘‘card issuer’’ is defined in § 1026.2(a)(7) 

to defined to mean ‘‘a person that issues 

a credit card or that person’s agent with 

respect to the card.’’ Under the 

proposal, certain devices related to 

prepaid accounts would be credit cards 

under § 1026.2(a)(15)(i). In particular, 

the proposal provides that a prepaid 

card that is a single device that may be 

used from time to time to access a credit 

plan generally is a ‘‘credit card’’ and the 

person issuing the card is a ‘‘card 

issuer.’’ As discussed above, a prepaid 

card would be accessing a credit plan 

when the consumer is obligated 

contractually to repay the credit. The 

proposal provides that a prepaid card 

would not be a credit card, however, 

where the prepaid card only accesses 

credit that is not subject to any finance 

charge as defined in § 1026.4 or fee that 

is described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. A person that 

offers a credit plan that is accessed only 

by prepaid cards that falls within the 

exclusion to the definition of ‘‘credit 

card’’ would be subject solely to the 

requirements under Regulation E. See 

section-by-section analysis of 

§ 1026.2(a)(15)(i). 

Also, as discussed in more detail in 

the section-by-section analysis of 

§ 1026.2(a)(15)(i), the proposal also 

provides that an account number that is 

not a prepaid card that may be used 

from time to time to access a credit plan 

that allows deposits directly into 

particular prepaid accounts specified by 

the creditor would be a credit card 

under § 1026.2(a)(15)(i). 

Definition of ‘‘credit card account 

under an open-end (not home secured) 

consumer credit plan.’’ Certain credit 

card rules in Regulation Z, which 

generally are set forth in subpart G, 

apply to card issuers with respect to a 

‘‘credit card account under an open-end 

(not home secured) consumer credit 

plan.’’ § 1026.1(d)(7). These credit card 

rules include provisions that prohibit 

credit card issuers from extending credit 

without assessing the consumer’s ability 

to pay and restrict the amount of 

required fees that an issuer can charge 

during the first year after a credit card 

account is opened. See, e.g., 

§§ 1026.5(b)(2)(ii), 1026.7(b)(11), and 

1026.51 through 1026.59. 

Regulation Z defines the term ‘‘credit 

card account under an open-end (not 

home-secured) consumer credit plan’’ in 

§ 1026.2(a)(15)(ii) to mean ‘‘any openend credit account that is accessed by a 

credit card, except: (A) [a] home-equity 

plan subject to the requirements of 

§ 1026.40 that is accessed by a credit 

card; or (B) [a]n overdraft line of credit 

that is accessed by a debit card or an 

account number.’’ Generally, to be a 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan,’’ the credit must be ‘‘open-end 

credit’’ as defined in § 1026.2(a)(20) that 

is not home-secured and the credit must 

be accessed by a ‘‘credit card’’ as 

defined in § 1026.2(a)(15)(i). The Bureau 

also proposes to revise the definitions of 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan’’ in § 1026.2(a)(15)(ii) and its 

commentary to include an open-end 

(not home-secured) credit plan accessed 

by a prepaid card that is a credit card 

or by an account number that is a credit 

card where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. 

2(a)(7) Card Issuer 

TILA defines the term ‘‘card issuer’’ 

as ‘‘any person who issues a credit card, 

or the agent of such person with respect 

to such card.’’ 15 U.S.C. 1602(o). 

Consistent with the TILA definition, 

Regulation Z defines the term ‘‘card 

issuer’’ in § 1026.2(a)(7) as ‘‘a person 

that issues a credit card or that person’s 

agent with respect to the card.’’ The 

Regulation further defines the term 

‘‘credit card’’ in § 1026.2(a)(15)(i) to 

mean ‘‘any card, plate, or other single 

credit device that may be used from 

time to time to obtain credit.’’ Card 

issuers must comply with certain 

provisions in Regulation Z as 

applicable. See §§ 1026.12 and .60; for 

card issuers offering a ‘‘credit card 

account under an open-end (not homesecured) consumer credit plan,’’ see, 

e.g., §§ 1026.5(b)(2)(ii), .7(b)(11), and .51 

through .59. In addition, card issuers 

that extend credit would be considered 

creditors for purposes of Regulation Z. 

See § 1026.2(a)(17)(iii) and (iv). 

As discussed in the section-by-section 

analysis of proposed § 1026.2(a)(15)(i), 

proposed comment 2(a)(15)–2.i.F would 

provide that the term ‘‘credit card’’ 

generally includes a prepaid card (as 

defined in proposed § 1026.2(a)(15)(v) to 

mean any card, code, or other device 

that can be used to access a prepaid 

account as that term is proposed to be 

defined in Regulation E) that is a single 

device that may be used from time to 

time to access a credit plan. A person 

that is issuing a prepaid card that is a 

credit card would be a ‘‘card issuer’’ 

under § 1026.2(a)(7). 

Nonetheless, under proposed 

comment 2(a)(15)–2.i.F, the term credit 

card would not include a prepaid card 

if the prepaid card only accesses credit 

that is not subject to any finance charge 

as defined in § 1026.4 or any fee 

describe in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. See section-bysection analysis of § 1026.4 for a 

discussion of the term ‘‘finance charge’’ 

and fees described in § 1026.4(c). 

If the prepaid account is accessed 

only by a prepaid card that does not 

meet the definition of credit card 

because the card only accesses credit 

that is not subject to any finance charge 

as defined in § 1026.4 or fee described 

in § 1026.4(c) and is not payable by 

written agreement in more than four 

installments, the person issuing the card 

would not be a ‘‘card issuer’’ and the 

person would not need to comply with 

the credit card rules in Regulation Z. In 

addition, the person in extending credit 

accessed by such a card would not be 

a ‘‘creditor’’ under Regulation Z because 

the person would not be charging a 

finance charge and the credit would not 

be payable by written agreement in 

more than four installments. See 

§ 1026.2(a)(17)(i). Thus, the person 

would not need to comply with the 

disclosure and other requirements in 

Regulation Z that apply to creditors. The 

person would be subject, however, to 

the requirements under Regulation E. 

See section-by-section analysis of 

§ 1026.2(a)(15)(i). 

Given that no finance charges or fees 

described in § 1026.4(c) would be 

charged in connection with the credit, 

the Bureau anticipates that the credit 

limit under such plans will be quite 

low, perhaps $10 or less. Given the 

expected-low credit limits and the fact 

that no finance charge or fees described 

in § 1026.4(c) would be charged for this 

credit, the Bureau believes that it is 

appropriate to cover these credit 

transactions under Regulation E as 

incidental to the prepaid transaction 

and exclude prepaid cards that access 

only this type of credit from the 


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definition of ‘‘credit card’’ for purposes 

of Regulation Z. 

Consistent with the proposed 

definition of ‘‘credit card,’’ proposed 

comment 2(a)(7)–2 would explain that 

with respect to credit accessed by a 

prepaid card, a person is not a card 

issuer if the card only accesses credit 

that is not subject to any finance charge 

as defined in § 1026.4 or fee described 

in § 1026.4(c) and is not payable by 

written agreement in more than four 

installments. For example, a person is 

not a card issuer if (1) the prepaid card 

only accesses credit where the person 

does not impose any finance charge as 

defined in § 1026.4 or fee described in 

§ 1026.4(c); and (2) the person expects 

repayment when funds are deposited 

into the prepaid account. In this case, 

the prepaid card is not a credit card and 

the person issuing the card is not a card 

issuer. See proposed comment 2(a)(15)– 

2.i.F. 

Prepaid Card That Accesses a Credit 

Plan Offered by a Third Party 

As noted above, under TILA and 

Regulation Z, the definition of ‘‘card 

issuer’’ means both a person who issues 

a credit card as well as the person’s 

agent with respect to the card. Comment 

2(a)(7)–1 currently provides guidance 

on the term ‘‘agent’’ for purposes of the 

definition of ‘‘card issuer.’’ Specifically, 

comment 2(a)(7)–1 provides that 

because agency relationships are 

traditionally defined by contract and by 

state or other applicable law, Regulation 

Z generally does not define agent. 

Nonetheless, comment 2(a)(7)–1 

provides that merely providing services 

relating to the production of credit cards 

or data processing for others does not 

make one the agent of the card issuer. 

In contrast, comment 2(a)(7)–1 provides 

that a financial institution may become 

the agent of the card issuer if an 

agreement between the institution and 

the card issuer provides that the 

cardholder may use a line of credit with 

the financial institution to pay 

obligations incurred by use of the credit 

card. 

The proposal would provide specific 

guidance on the term ‘‘agent’’ for 

purposes of § 1026.2(a)(7) where a credit 

plan offered by a third party is accessed 

by a prepaid card that is a credit card. 

This would apply where credit is being 

‘‘pulled’’ by a prepaid card that is a 

credit card. In this case, the prepaid 

card is being used to pull credit from a 

credit plan that is offered by a third 

party other than the prepaid card issuer. 

Under the proposal, the third party 

offering the credit plan that is accessed 

by the prepaid card would be 

considered an agent of the prepaid card 

issuer and would be a card issuer for 

purposes of § 1026.2(a)(7). Specifically, 

proposed comment 2(a)(7)–1.ii would 

build on the last sentence of the current 

comment and provide that with respect 

to a prepaid card that is a credit card 

where the card directly accesses a credit 

plan that is offered by a third party, the 

proposal would specify that a party 

offering the credit plan that is accessed 

by the card would be an agent of the 

person issuing the prepaid card and 

thus, would be a card issuer with 

respect to the prepaid card that is a 

credit card. 

The Bureau notes that current 

comment 2(a)(7)–1 provides that a 

financial institution may become the 

agent of the card issuer if an agreement 

between the institution and the card 

issuer provides that the cardholder may 

use a line of credit with the financial 

institution to pay obligations incurred 

by use of the credit card. However, the 

Bureau believes that it is important in 

this context to make clear when there is 

an agent relationship to prevent 

circumvention of the proposed rules 

applicable to credit card accounts 

directly accessed by a prepaid card. The 

Bureau is concerned that without the 

proposed provision, prepaid card 

issuers could structure arrangements 

with third parties that offer open-end 

credit plans that are accessed directly by 

the prepaid card to avoid an agency 

relationship under state law. Such a 

result could frustrate the operation of 

certain consumer protections provided 

in the proposal. 

For example, § 1026.51(a) provides 

that a card issuer must not open a credit 

card account for a consumer under an 

open-end (not home-secured) consumer 

credit plan, or increase any credit limit 

applicable to such account, unless the 

card issuer considers the consumer’s 

ability to make the required minimum 

periodic payments under the terms of 

the account based on the consumer’s 

income or assets and the consumer’s 

current obligations. In a case where the 

issuer of the prepaid card is not the 

person offering a credit card account 

under an open-end (not home-secured) 

consumer credit plan, the 

responsibilities imposed on the card 

issuer under § 1026.51(a) might be 

unclear since the card issuer will not be 

the person opening the credit card 

account. Nonetheless, the provision 

applies to a ‘‘card issuer,’’ so it is also 

unclear what responsibilities are 

imposed on the third party given that 

the third party is not a card issuer. 

Thus, the proposal would specify in 

proposed comment 2(a)(7)–1.ii that the 

third party offering the credit plan that 

is accessed directly by the prepaid card 

would be an agent of the person issuing 

the prepaid card and thus, would be a 

card issuer with respect to that prepaid 

card. As a result, in the example above 

related to § 1026.51(a), the third party 

would be a ‘‘card issuer’’ for purposes 

of that provision and would be required 

to comply with it. The Bureau also 

proposes to renumber existing comment 

2(a)(7)–1 as 2(a)(7)–1.i. 

2(a)(14) Credit 

In TILA, the term ‘‘credit’’ is defined 

to mean ‘‘the right granted by a creditor 

to a debtor to defer payment of debt or 

to incur debt and defer its payment.’’ 15 

U.S.C. 1602(f). Consistent with the 

definition of credit in TILA, under 

Regulation Z, the term ‘‘credit’’ is 

defined in § 1026.2(a)(14) to mean ‘‘the 

right to defer payment of debt or to 

incur debt and defer its payment.’’ A 

person is subject to certain disclosure 

and other requirements in Regulation Z 

if the person is a creditor. A person is 

a creditor if the person regularly extends 

consumer ‘‘credit’’ that is subject to a 

finance charge or is payable by written 

agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract. See 

§ 1026.2(a)(17)(i). The term ‘‘creditor’’ 

also includes any card issuer (which is 

a person that issues credit cards or the 

person’s agent) that extends credit even 

if no finance charge is imposed and 

repayment is not permitted in more than 

four installments. See 

§ 1026.2(a)(17)(iii). 

For the reasons discussed in the 

Overview of Regulation Z Proposal 

section, the Bureau believes it is 

reasonable to interpret ‘‘credit’’ to 

include when overdrafts are paid in 

relation to prepaid accounts. The 

proposal provides additional guidance 

that would express and effectuate this 

interpretation. In particular, proposed 

comment 2(a)(14)–3 would provide that 

credit for purposes of § 1026.2(a)(14) 

includes an authorized transaction on a 

prepaid account where the consumer 

has insufficient or unavailable funds in 

the prepaid account at the time of 

authorization. It also includes a paid 

transaction on a prepaid account where 

the consumer has insufficient or 

unavailable funds in the prepaid 

account at the time the transaction is 

paid. Thus, the definition includes a 

situation where the consumer has 

sufficient or available funds in the 

prepaid account to cover the amount of 

the transaction at the time the 

transaction is authorized, but 

insufficient or unavailable funds in the 


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prepaid account to cover the amount of 

the transaction at the time the 

transaction is paid. As discussed in 

more detail in the Overview of 

Regulation Z Proposal section, the 

Bureau believes that plain language of 

the definition of ‘‘credit’’ in TILA covers 

the situation in that a consumer makes 

a transaction which exceeds the funds 

in the consumer’s account and a person 

elects to cover the transaction by 

advancing funds to the consumer which 

the consumer must repay. Nothing in 

that part of TILA (or elsewhere in the 

statute) exempts overdraft services, 

including those that may be offered in 

connection with a prepaid account. By 

authorizing or paying a transaction 

where the consumer does not have 

sufficient or available funds in the 

prepaid account to cover the amount of 

the transaction when the transaction is 

authorized or paid, the person is 

allowing the consumer to incur a debt 

with the person where payment of that 

debt is not immediate. 

A person that authorizes or pays such 

transactions would be extending credit 

and would be subject to certain 

disclosure and other requirements in 

Regulation Z if the person is a creditor. 

As discussed above, a person is a 

creditor if the person regularly extends 

consumer ‘‘credit’’ that is subject to a 

finance charge or is payable by written 

agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract. See 

§ 1026.2(a)(17)(i). The term ‘‘creditor’’ 

also includes any card issuer (which is 

a person that issues credit cards or the 

person’s agent) that extends credit even 

if no finance charge is imposed and 

repayment is not permitted in more than 

four installments. See 

§ 1026.2(a)(17)(iii). As discussed in 

more detail in the section-by-section 

analysis of § 1026.4, with respect to 

credit accessed by a prepaid card that is 

a credit card, or by an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, a 

person generally would be charging a 

finance charge for the credit if the 

person imposes any service, transaction, 

activity, or carrying charges on the 

credit account, or imposes any such 

charges on a prepaid account if that 

charge is related to an extension of 

credit, carrying a credit balance, or 

credit availability. See § 1026.4(a), 

(b)(2), (c)(3) and (4) and comments 4(a)– 

4 and 4(b)(2)–1. Such charges would 

include periodic participation fees for 

the credit plan, and transaction charges 

imposed in connection with a credit 

extension. 

With respect to credit accessed by a 

prepaid card that is a credit card, or by 

an account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, a person also would be a 

creditor if the person is a card issuer 

that extends credit accessed by the 

credit card. With respect to such credit, 

a person would be a card issuer if the 

person issues (1) a prepaid card 

(including a prepaid card that is solely 

an account number) that is a single 

device that may be used from time to 

time to access a credit plan, except if 

that prepaid card only accesses credit 

that is not subject to any finance charge 

as defined in § 1026.4 or any fee 

described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments; or (2) an account 

number that is not a prepaid card that 

may be used from time to time to access 

a credit plan where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor, but does not 

allow the consumer to deposit directly 

extensions of credit from the plan into 

asset accounts other than particular 

prepaid accounts specified by the 

creditor. 

The Bureau notes that for credit that 

is being accessed by a prepaid card that 

is a credit card, the creditor would be 

required to disclose credit extensions on 

the periodic statement under 

§ 1026.7(b)(2), including a transaction 

where there are insufficient funds in the 

prepaid account at authorization to 

cover the amount of the transaction. The 

creditor also would be restricted under 

the offset provision in § 1026.12(d) from 

automatically applying any deposit to 

the prepaid account to repay the credit 

card balance. For example, for a 

transaction that is authorized where 

there are insufficient funds in the 

prepaid account to cover the amount of 

the transaction, the creditor could not 

use subsequent deposits received on the 

same day as the transaction to repay 

automatically that credit transaction on 

the credit card account. 

The Bureau generally solicits 

comment on the definition of credit 

with respect to prepaid accounts. As 

discussed above, under the proposal, 

credit includes (1) transactions that are 

authorized where the consumer has 

insufficient or unavailable funds in the 

prepaid account at the time of 

authorization; and (2) transactions on a 

prepaid account where the consumer 

has insufficient or unavailable funds in 

the prepaid account at the time the 

transaction is paid. Such transactions 

are credit regardless of whether the 

person establishes a separate credit 

account to extend the credit or whether 

the credit is simply reflected as a 

negative balance on the prepaid 

account. Nonetheless, the Bureau 

believes that creditors will tend to 

establish separate credit accounts to 

extend that credit accessed by the 

prepaid card, instead of having the 

credit balance be reflected as a negative 

balance on the prepaid account, because 

creditors generally will find that 

separate credit accounts aid compliance 

with the periodic statement 

requirements in §§ 1026.5(b)(2)(ii) and 

1026.7(b)(11) and the offset provisions 

in § 1026.12(d)(3) that would apply to 

credit card accounts accessed by 

prepaid cards. See section-by-section 

analysis of §§ 1026.5(b)(2)(ii), 

1026.7(b)(11) and 1026.12(d)(3). The 

Bureau solicits comment on whether 

creditors are likely to establish separate 

credit accounts, instead of having the 

credit balance be reflected as a negative 

balance on the prepaid account. The 

Bureau also solicits comment on any 

implications for compliance depending 

on how the account is structured (i.e., 

whether a separate credit account is 

created or whether the credit balance is 

reflected as a negative balance on the 

prepaid account), and whether any 

differentiation in regulation or guidance 

would be useful. 

As discussed in more detail in the 

Overview of Regulation Z Proposal 

section, with respect to overdraft 

services on checking accounts, while a 

person that is providing overdraft 

services generally would be providing 

credit under TILA and Regulation Z, the 

person generally does not meet the 

definition of ‘‘creditor’’ for purposes of 

Regulation Z because of certain 

exclusions to the definition of finance 

charge. See § 1026.4(c)(3). Thus, with 

respect to overdraft services on checking 

accounts, a financial institution that 

does not agree in writing to pay the 

items and does not structure the 

repayment of the credit by written 

agreement in more than four 

installments would not be a ‘‘creditor’’ 

under the general definition of creditor, 

even if the institution charges a fee for 

paying the overdraft item because the 

fee would not be a ‘‘finance charge.’’ In 

addition, a person does not become a 

creditor by issuing a debit card to access 

an overdraft service. See comment 

2(a)(15)–2.ii.A (explaining that the 

definition of ‘‘credit card’’ provides that 

a debit card is not a credit card if there 


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is no credit feature or agreement to 

extend credit, even if the creditor 

occasionally honors an inadvertent 

overdraft). The Bureau is not proposing 

to change how overdraft services on 

accounts other than prepaid accounts 

are treated under Regulation Z. 

2(a)(15) 

2(a)(15)(i) Credit Card 

In TILA, the term ‘‘credit card’’ is 

defined to mean ‘‘any card, plate, 

coupon book or other credit device 

existing for the purpose of obtaining 

money, property, labor, or services on 

credit.’’ 15 U.S.C. 1602(l). Under 

Regulation Z, the term ‘‘credit card’’ is 

defined in § 1026.2(a)(15)(i) to mean 

‘‘any card, plate, or other single credit 

device that may be used from time to 

time to obtain credit.’’ Current comment 

2(a)(15)(i)–2 provides examples of 

devices that are credit cards and devices 

that are not credit cards. A person that 

issues credit cards or the person’s agent 

is a ‘‘card issuer’’ and must comply with 

certain credit card provisions in 

Regulation Z as applicable. See 

§§ 1026.12 and .60; for card issuers 

offering a ‘‘credit card account under an 

open-end (not home-secured) consumer 

credit plan,’’ see, e.g., §§ 1026.5(b)(2)(ii), 

.7(b)(11), and .51 through .59. Any card 

issuer that extends credit is also a 

creditor under Regulation Z and must 

comply with certain disclosure and 

other requirements in Regulation Z, a 

discussed in the section-by-section 

analysis of § 1026.2(a)(17). 

The proposal would provide guidance 

on when the following devices related 

to prepaid accounts are ‘‘credit cards:’’ 

(1) Prepaid cards, as defined in 

proposed § 1026.2(a)(15)(v) to mean any 

card, code, or other device that can be 

used to access a prepaid account as 

defined in Regulation E; and (2) account 

numbers that may be used from time to 

time to access a credit plan that allows 

deposits directly only into particular 

prepaid accounts specified by the 

creditor but do not allow consumers to 

deposit directly extensions of credit 

from the plan into asset accounts other 

than particular prepaid accounts 

specified by the creditor, as defined in 

§ 1026.2(a)(15)(vii). 

Under the proposal, credit plans, 

including overdraft services and 

overdraft lines of credit, that are directly 

accessed by certain prepaid cards would 

be a credit card account under 

Regulation Z. In particular, proposed 

comment 2(a)(15)–2.i.F would provide 

that the term ‘‘credit card’’ includes a 

prepaid card (including a prepaid card 

that is solely an account number) that is 

a single device that may be used from 

time to time to access a credit plan, 

except if that prepaid card only accesses 

credit that is not subject to any finance 

charge as defined in § 1026.4 or any fee 

described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. A prepaid card 

that is solely an account number would 

be a credit card if it satisfies the 

requirements of proposed comment 

2(a)(15)–2.i.F. 

With respect to overdraft services or 

overdraft lines of credit, the prepaid 

card would be ‘‘pulling’’ credit from the 

credit card account where there are 

insufficient funds in the prepaid 

account to cover the amount of the 

transaction at authorization or 

settlement. An account where credit is 

pulled from a credit card account using 

a prepaid card is referred in this 

supplemental information as a ‘‘pull 

account.’’ 

As discussed further below in 

connection with § 1026.2(a)(15)(vii), the 

proposal also covers credit plans that 

are not directly accessed by a prepaid 

card, but are structured as ‘‘push’’ 

accounts. Specifically, the proposal 

would address situations where a 

separate credit plan is accessed by an 

account number where consumers are 

allowed to deposit directly credit 

extensions taken under the plan into 

particular prepaid accounts specified by 

the creditor but would not be allowed 

to deposit directly extensions of credit 

from the plan into asset accounts other 

than the specified prepaid accounts. 

Such a credit plan would still be 

covered under the proposal where a 

consumer could access the credit plan 

by use of checks or in-person 

withdrawals, so long as the credit plan 

allows deposits directly only into 

particular prepaid accounts specified by 

the creditor but does not allow the 

consumer to deposit directly extensions 

of credit into an asset account other 

than specified prepaid accounts. See 

proposed comment 2(a)(15)–5. In 

referring to account numbers that access 

credit plans linked to prepaid accounts 

as discussed above, the proposal uses 

the term ‘‘account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid account specified by the 

creditor.’’ See proposed 

§ 1026.2(a)(15)(vii). The proposal would 

provide that these credit plans would be 

credit card accounts under Regulation 

Z. See proposed comment 2(a)(15)– 

2.i.G. 

The Bureau believes that credit plans 

will either be structured as ‘‘pull’’ 

accounts where a prepaid card is used 

directly to access credit from the credit 

plan or structured as ‘‘push’’ accounts 

where an account number is used to 

access credit that typically is deposited 

directly into the prepaid account. For 

example, the Bureau does not believe 

that a prepaid card account number 

would be used to push credit into the 

prepaid account, but instead will only 

be used to pull credit from the credit 

plan, such as when a consumer uses the 

prepaid card at point of sale or at an 

ATM to access credit directly. Thus, 

under the proposal, a prepaid card 

account number would not be an 

‘‘account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

account specified by the creditor,’’ as 

that term is defined in proposed 

§ 1026.2(a)(15)(vii). Likewise, an 

account number as defined in proposed 

§ 1026.2(a)(15)(vii) would not be used to 

access funds in the prepaid account and 

thus, would not be a prepaid card under 

proposed § 1026.2(a)(15)(v). The Bureau 

solicits comment on the distinction 

between a prepaid card account number 

that is a credit card under proposed 

§ 1026.2(a)(15)(v) and comment 

2(a)(15)–2.i.F and an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

account specified by the creditor as 

defined in proposed § 1026.2(a)(15)(vii) 

and comment 2(a)(15)–2.i.G. The Bureau 

also solicits comment on whether there 

could be situations where a prepaid 

card account number could be viewed 

as pushing credit into a prepaid 

account. 

Generally, the proposal would treat 

credit card accounts that are accessed by 

a prepaid card and credit card accounts 

that are accessed by an account number 

linked to prepaid accounts as discussed 

above similarly under the rules. 

Nonetheless, for some provisions, credit 

extensions under these two types of 

credit card accounts would be treated 

differently. See proposed comments 

8(a)–2.ii, 8(b)–1.vi, 12(c)–5, 12(c)(1)–1.i, 

13(a)(3)–2.ii, 13(i)–1 and –4, 52(a)(2)–2 

and –3, 60(b)(4)–3, and 60(b)(8)–4 and 

–5. 

This proposed difference in treatment 

generally results from the fact that for a 

credit card account that is accessed by 

a prepaid card, the prepaid card can be 

used to directly access the credit to 

purchase goods or services. For 

example, credit accessed by a prepaid 

card at point of sale would be treated as 

a ‘‘sale credit’’ under § 1026.8(a) 

because the prepaid card is directly 

accessing credit to purchase goods or 

services. On the other hand, for a credit 

card account accessed by an account 

number described in proposed 

§ 1026.2(a)(15)(vii), credit that is 


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360As discussed in the section-by-section analysis 

of proposed § 1026.2(a)(20), under the proposal, a 

person would be extending credit pursuant to a 

plan where the person pays transactions using a 

prepaid card where there are insufficient funds in 

a prepaid account to fund the transactions and the 

consumer is obligated contractually to repay the 

credit. In addition, a person would be extending 

credit pursuant to a plan where the person extends 

credit to a consumer where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor and the consumer is obligated contractually 

to repay the credit. 

extended typically would be deposited 

into the prepaid account. The account 

number that accesses the credit is not 

typically viewed as directly used to 

purchase goods or services with the 

credit. For example, credit accessed by 

an account number linked to a prepaid 

account would be ‘‘nonsale credit’’ 

under § 1026.8(b) because it would not 

be used directly to purchase goods or 

services. 

The Bureau believes that these types 

of ‘‘push accounts’’ could be offered as 

substitutes for overdraft credit plans 

accessed by a prepaid card, and if they 

were not covered, creditors could be 

able to circumvent the consumer 

protections set forth in the proposal. 

Nonetheless, the Bureau is not 

attempting to cover general lines of 

credit where consumers are not 

restricted from depositing directly credit 

extensions taken under the plan into 

asset accounts of their choosing, 

including prepaid accounts. The Bureau 

believes that those types of credit plans 

are not acting as substitutes for overdraft 

credit plans because these general lines 

of credit are not designed to provide 

credit in connection with particular 

prepaid accounts. The Bureau solicits 

comment on this approach, and whether 

the proposal appropriately covers the 

types of credit plans that may act as 

substitutes for overdraft credit plans 

accessed by prepaid cards. 

The Bureau also solicits comment on 

whether there are alternative ways to 

address credit plans that may act as 

substitutes for overdraft credit plans 

accessed by prepaid cards. For accounts 

that permit deposits directly into 

accounts other than prepaid accounts 

specified by the creditor, and thus 

would not be covered above under the 

proposal, the Bureau seeks comment on 

whether it should attempt to cover such 

accounts when they are being used by 

agreement to push funds to cover 

specific negative balance purchases. For 

example, should the rule cover the 

following situation as a push account: 

where the prepaid card issuer and a 

third-party creditor have an 

arrangement where the prepaid card 

issuer will notify the consumer that 

there are insufficient funds in the 

prepaid account to complete a 

transaction and contemporaneously 

prompt the consumer to transfer funds 

to complete the transaction. The Bureau 

solicits comment on whether there are 

other types of account structures that 

the Bureau should consider covering 

under the rule, and if so, whether the 

account structure should be considered 

a ‘‘push’’ account or a ‘‘pull account’’ 

for purposes of the rule, given that in 

some cases, different rules would apply 

under the proposal depending on the 

how account is structured, as discussed 

above. 

To be a credit card, the prepaid card, 

or account number that accesses an 

account where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, must be a 

single device that may be used from 

time to time to access a credit plan.360

Current comment 2(a)(15)–1 reiterates 

that a credit card must be usable from 

time to time. The comment also 

provides that since this involves the 

possibility of repeated use of a single 

device, checks and similar instruments 

that can be used only once to obtain a 

single credit extension are not credit 

cards. 

The proposal would revise this 

comment to provide additional 

guidance on the treatment of 

preauthorized checks in relation to 

prepaid accounts. As is described above, 

preauthorized checks are checks where 

by a consumer must seek authorization 

before presenting them for payment. At 

the time of preauthorization, funds to 

pay the check are deducted from the 

account and held by the institution until 

the check is presented. The proposal 

would explain in comment 2(a)(15)–1 

that with respect to a preauthorized 

check that is issued on a prepaid 

account for which the funds are 

withdrawn at the time of 

preauthorization using the prepaid 

account number, the credit would be 

considered obtained using the prepaid 

account number and not the check. 

Under the proposal, a prepaid account 

number typically would be a credit card 

unless it qualifies for an exception, as 

discussed below. 

Nonetheless, even if the prepaid card 

is a single device that may be used from 

time to time to access a credit plan, the 

prepaid card still would not be a credit 

card under § 1026.2(a)(15)(i) if the 

prepaid card only accesses credit that is 

not subject to any finance charge as 

defined in § 1026.4 or fee described in 

§ 1026.4(c) and is not payable by written 

agreement in more than four 

installments. As discussed in the 

section-by-section analysis of § 1026.4, 

with respect to credit accessed by a 

prepaid card or credit accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, any 

service, transaction, activity, or carrying 

charges imposed on the credit account, 

and any such charges imposed on a 

prepaid account if that charge is related 

to an extension of credit, carrying a 

credit balance, or credit availability, 

generally would be a finance charge. See 

§ 1026.4(a), (b)(2), (c)(3) and (4) and 

comments 4(a)–4 and 4(b)(2)–1. Fees 

described in § 1026.4(c) that are not 

finance charges include application fees 

to apply for credit, late payment fees, 

over-the-limit fees, and returned 

payment fees. 

To the extent that a prepaid card only 

accesses credit that is not subject to any 

finance charge as defined in § 1026.4 or 

fee described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments, the prepaid card 

would not be a credit card. To effectuate 

the purpose of TILA to promote 

informed use of credit and to facilitate 

compliance, the Bureau believes it is 

necessary and proper to exercise its 

exception authority under TILA section 

105(a), to propose to exclude such 

prepaid cards from the definition of 

‘‘credit card’’ under TILA section 103(l) 

and Regulation Z § 1026.2(a)(15)(i). 15 

U.S.C. 1602(l). If the credit plan is 

accessed only by a prepaid card that 

does not meet the definition of credit 

card because the card only accesses 

credit that is not subject to any finance 

charge as defined in § 1026.4 or fee 

described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments, the person 

issuing the card would not be a ‘‘card 

issuer’’ and the person would not need 

to comply with the credit card rules in 

Regulation Z. In addition, the person in 

extending this type of credit would not 

be a ‘‘creditor’’ under Regulation Z 

because the person would not be 

charging a finance charge and the credit 

would not be payable by written 

agreement in more than four 

installments. See § 1026.2(a)(17)(i). 

Thus, the person would not need to 

comply with the disclosure and other 

requirements in Regulation Z that apply 

to creditors. 

The proposed provision would 

facilitate compliance by allowing a 

person who is providing such credit to 

comply only with Regulation E with 

respect to the prepaid account and this 

credit, instead of also complying with 

Regulation Z with respect to the 

overdraft credit. The Bureau believes 


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that the term ‘‘credit card’’ was defined 

broadly in Regulation Z to ensure that 

consumers who obtain access devices 

that access credit receive certain 

protections, such as receiving periodic 

statements, limits on liability for 

unauthorized use and billing error 

resolution rights, even if a person in 

issuing the access device would not 

have met the general definition of 

creditor in 1026.2(a)(17)(i) because no 

finance charge is imposed and the credit 

is not payable in more than four 

installments. Such access devices that 

are not linked to an asset account would 

not receive such protections, such as 

limits on liability for unauthorized use 

and billing error resolution rights, if the 

credit accessed by these access devices 

were not covered by Regulation Z. 

Nonetheless, for prepaid cards, the 

Bureau believes that the proposed 

protections in Regulation E for prepaid 

cards would be sufficient to protect 

consumers when credit extended under 

a credit plan accessed by a prepaid card 

is not subject to any finance charge as 

defined in § 1026.4 or fee described in 

§ 1026.4(c) and is not payable by written 

agreement in more than four 

installments. 

Given that no finance charges or fees 

described in § 1026.4(c) would be 

charged under the credit plan under this 

exception and that the Bureau 

anticipates that the credit limit under 

such plans would be quite low, perhaps 

$10 or less, and the credit would not be 

structured to be paid over a significant 

amount of time, the Bureau believes that 

consumers are unlikely to be become 

overextended in using this credit and 

incurring substantial fees. Thus, to 

facilitate compliance, the Bureau 

believes that this type of credit plan is 

more properly regulated under 

Regulation E as credit incidental to the 

prepaid card transaction. For example, 

as discussed in more detail in the 

section-by-section analysis of 

Regulation E proposed § 1005.12(a), 

Regulation E’s provisions in §§ 1005.11 

and 1005.18(e) regarding a consumer’s 

liability for an unauthorized electronic 

fund transfer and regarding the 

investigation of errors would apply to 

extensions of this credit. In addition, 

such credit extensions would be 

disclosed on Regulation E periodic 

statements if the financial institution 

elects to provide such statements under 

proposed § 1005.18(c)(1), or 

alternatively, would be disclosed on the 

electronic history of the consumer’s 

prepaid account transactions, such as 

through a Web site, that covers at least 

18 months preceding the date the 

consumer electronically accesses the 

account under Regulation E proposed 

§ 1005.18(c)(1)(ii). 

The Bureau also notes that the opt-in 

provision in Regulation E § 1005.17 

would not apply to credit extended 

under a credit plan accessed by a 

prepaid card that is not subject to any 

finance charge as defined in § 1026.4 or 

fee described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. Section 1005.17 

sets forth requirements that financial 

institutions must follow in order to 

provide ‘‘overdraft services’’ to 

consumers related to consumer’s 

accounts. For prepaid accounts, any fees 

or charges for ATM or one-time ‘‘debit 

card’’ transactions (as that term is used 

in Regulation E to generally include 

prepaid cards; see proposed comment 

1005.2(b)(3)(i)–8) that access an 

institution’s overdraft service would be 

considered ‘‘finance charges’’ under the 

proposal and thus would exceed the 

scope of the proposed exception 

because it is limited to credit on prepaid 

accounts for which no finance charges 

or fees described in § 1026.4(c) are 

imposed. The Bureau nevertheless seeks 

comment on whether it should apply 

Regulation Z to such credit. 

The Bureau notes that the proposal 

does not provide a similar exception for 

account numbers that are not prepaid 

cards that may be used from time to 

time to access a credit plan that allows 

deposits directly into particular prepaid 

accounts specified by the creditor but 

does not allow the consumer to deposit 

directly extensions of credit from the 

plan into asset accounts other than 

particular prepaid accounts specified by 

the creditor. See proposed 

§ 1026.2(a)(15)(vii) and comment 

2(a)(15)–2.i.G. Such a credit plan would 

be covered under the proposal even if 

the credit plan could be accessed by use 

of checks or in-person withdrawals, so 

long as the credit plan is accessed by an 

account number where extensions of 

credit are allowed to be deposited 

directly into particular prepaid accounts 

specified by the creditor and the 

consumer is not permitted to deposit 

directly extensions of credit into an 

asset account other than particular 

prepaid accounts specified by the 

creditor. See proposed comment 

2(a)(15)–5. Under the proposal, these 

account numbers would be credit cards 

regardless of whether credit extended 

under such credit plans is subject to a 

finance charge or a fee described in 

§ 1026.4(c) or is payable by written 

agreement in more than four 

installments. The Bureau believes that 

an exception is not appropriate for these 

types of credit plans because not all 

credit extensions under such credit 

plans would be subject to Regulation E 

protections if Regulation Z did not 

apply. Although Regulation E would 

apply to credit extensions that are 

deposited in a prepaid account by use 

of an electronic fund transfer, 

Regulation E would not apply to 

extensions of credit that are accessed by 

check or in person withdrawals where 

the transaction does not involve an 

electronic fund transfer to or from the 

prepaid account. The Bureau also 

believes that an exception for this type 

of credit is not necessary because 

creditors that establish a separate credit 

plan that is accessed by an account 

number that is not a prepaid card 

typically will charge a finance charge or 

fee described in § 1026.4(c) for the 

credit. The Bureau solicits comment on 

this approach. 

Under the proposal, a person that 

issues such an account number would 

be a ‘‘card issuer’’ under § 1026.2(a)(7) 

even if the account number only 

accesses credit that is not subject to a 

finance charge or fee described in 

§ 1026.4(c) and is not payable by written 

agreement in more than four 

installments. In addition, the person 

would be a ‘‘creditor’’ by issuing a 

credit card that accesses credit that is 

not subject to a finance charge and is 

not payable by written agreement in 

more than four installments. See 

§ 1026.2(a)(17)(iii). The person would be 

required to comply with rules governing 

open-end (not home-secured) credit 

plans in subpart B and the credit card 

rules set forth in subpart B. The rules 

implementing the Credit CARD Act, 

generally set forth in subpart G, would 

not apply because the person would not 

be charging a finance charge for the 

credit, and thus, would not be extending 

‘‘open-end credit.’’ For more a detailed 

discussion, see the section-by-section 

analysis of § 1026.2(a)(17). 

Prepaid Cards or Account Numbers That 

Are Credit Cards 

As discussed above, proposed 

comment 2(a)(15)–2.i.F would provide 

that the term ‘‘credit card’’ includes a 

prepaid card (including a prepaid card 

that is solely an account number) that is 

a single device that may be used from 

time to time to access a credit plan, 

except if that prepaid card only accesses 

credit that is not subject to any finance 

charge as defined in § 1026.4 or any fee 

described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. Proposed 

§ 1026.2(a)(15)(vii) and comment 

2(a)(15)–2.i.G would provide that the 

term ‘‘credit card’’ includes an account 

number that is not a prepaid card that 

may be used from time to time to access 


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361 76 FR 22948, 22949 (Apr. 25, 2011). 

362As discussed in more detail below in the 

section-by-section analysis of § 1026.2(a)(17), a 

person would not be a creditor that is extending 

open-end credit where the person extends credit 

accessed by a prepaid card but the person is not 

charging a finance charge for the credit. Similarly, 

a person extending credit accessed by an account 

number where such extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the person 

also would not be extending open-end credit if the 

person is not charging a finance charge for the 

credit. Nonetheless, as discussed in the section-bysection analysis of § 1026.2(a)(17), such persons 

may still be subject to certain Regulation Z 

requirements under certain circumstances. 

a credit plan that allows deposits 

directly into particular prepaid accounts 

specified by the creditor but does not 

allow the consumer to deposit directly 

extensions of credit from the plan into 

asset accounts other than particular 

prepaid accounts specified by the 

creditor. 

If a person issues a prepaid card or 

account number as described above that 

is a credit card, the person would be a 

‘‘card issuer’’ under § 1026.2(a)(7). The 

person would also be a ‘‘creditor’’ if the 

card issuer extends credit accessed by 

the prepaid card or account number as 

described above. See § 1026.2(a)(17)(iii) 

and (iv). If the card issuer extends openend credit, the person generally would 

need to comply with the open-end (not 

home-secured) rules set forth in subpart 

B and the credit card rules set forth in 

subparts B and G. As discussed above in 

the Overview of Regulation Z Proposal 

section and below in the section-bysection analysis of § 1026.2(a)(20), the 

Bureau believes that most creditors that 

are offering credit plans, including 

overdraft credit services, accessed by a 

prepaid card, or other credit plans 

linked to prepaid accounts that are 

accessed by an account number as 

discussed above, that are charging 

finance charges for the credit would be 

creditors offering ‘‘open-end credit’’ 

under Regulation Z. See the section-bysection analysis of § 1026.2(a)(17) for a 

discussion of situations in which a 

creditor may not be offering open-end 

credit in relation to a prepaid account. 

Account Numbers 

Comment 2(a)(15)–2.ii.C currently 

provides that the term ‘‘credit card’’ 

does not include an account number 

that accesses a credit account, unless 

the account number can access an openend line of credit to purchase goods or 

services. For example, if a creditor 

provides a consumer with an open-end 

line of credit that can be accessed by an 

account number in order to transfer 

funds into another account (such as an 

asset account with the same creditor), 

the account number is not a credit card 

for purposes of § 1026.2(a)(15)(i). 

However, if the account number can 

also access the line of credit to purchase 

goods or services (such as an account 

number that can be used to purchase 

goods or services on the Internet), the 

account number is a credit card for 

purposes of § 1026.2(a)(15)(i), regardless 

of whether the creditor treats such 

transactions as purchases, cash 

advances, or some other type of 

transaction. Furthermore, if the line of 

credit can also be accessed by a card 

(such as a debit card), that card is a 

credit card for purposes of 

§ 1026.2(a)(15)(i). 

In 2011, the Board adopted comment 

2(a)(15)–2.ii.C as part of implementing 

the Credit CARD Act provisions. In the 

supplemental information to the final 

rule, the Board stated that because most 

if not all credit accounts can be accessed 

in some fashion by an account number, 

the Board did not believe that Congress 

generally intended to treat account 

numbers that access a credit account as 

credit cards for purposes of TILA.361

However, the Board was concerned that, 

when an account number can be used to 

access an open-end line of credit to 

purchase goods or services, the Board 

believed it would be inconsistent with 

the purposes of the Credit CARD Act to 

exempt the line of credit from the 

protections provided for credit card 

accounts. For example, creditors may 

offer open-end credit accounts designed 

for online purchases that function like 

a traditional credit card account but can 

only be accessed using an account 

number. In these circumstances, the 

Board believed that TILA’s credit card 

protections should apply. 

The proposal would revise comment 

2(a)(15)–2.ii.C to indicate that the 

comment does not apply to prepaid 

cards and account numbers described in 

proposed comments 2(a)(15)–2.i.F and 

G. Comment 2(a)(15)–2.ii.C generally 

would not apply to prepaid cards 

because such cards generally could be 

used to purchase goods or services, even 

if the prepaid card was solely an 

account number. In addition, as 

discussed in the Overview of Regulation 

Z Proposal section, the Bureau is 

concerned that if lines of credit that are 

accessed by an account number are not 

considered credit cards when credit 

extensions can be deposited directly 

only into particular prepaid accounts 

specified by the creditor, they would be 

offered as a means of evading the 

requirements articulated in this 

proposal that apply to credit cards 

under TILA. Thus, the Bureau does not 

believe that such credit plans should be 

exempted from the definition of credit 

card and proposes to cover such credit 

plans as credit card accounts. 

Technical Revisions 

The proposal also provides a 

technical revision to accommodate the 

changes discussed above. Specifically, 

comment 2(a)(15)–2.i.B currently 

provides guidance on when a debit card 

is a credit card, and the comment 

provides examples of credit cards that 

include ‘‘a card that accesses both a 

credit and an asset account (that is, a 

debit-credit card).’’ Proposed 

§ 1026.2(a)(15)(iv) would define the 

term ‘‘debit card’’ for purposes of 

Regulation Z to mean ‘‘any card, plate, 

or other single device that may be used 

from time to time to access an asset 

account other than a prepaid account.’’ 

Because the term ‘‘debit card’’ under the 

proposal would not include all cards 

that access asset accounts, comment 

2(a)(15)–2.i.B would be revised to be 

consistent with the proposed definition 

of debit card. No substantive changes 

are intended to the current rules for 

when debit cards are credit cards under 

§ 1026.2(a)(15)(i). 

2(a)(15)(ii) Credit Card Account Under 

an Open-end (Not Home-secured) 

Consumer Credit Plan 

Under Regulation Z, the term ‘‘credit 

card account under an open-end (not 

home-secured) consumer credit plan’’ is 

defined in § 1026.2(a)(15)(ii) to mean 

‘‘any open-end credit account that is 

accessed by a credit card, except: (A) [a] 

home-equity plan subject to the 

requirements of § 1026.40 that is 

accessed by a credit card; or (B) [a]n 

overdraft line of credit that is accessed 

by a debit card or an account number.’’ 

Certain requirements in the Credit 

CARD Act, which are generally set forth 

in subpart G, apply to card issuers 

offering a credit card account under an 

open-end (not home-secured) consumer 

credit plan. See, e.g., §§ 1026.5(b)(2)(ii), 

.7(b)(11), .51 to .59. 

Generally, to be a ‘‘credit card account 

under an open-end (not home-secured) 

consumer credit plan,’’ the credit must 

be ‘‘open-end credit’’ as defined in 

§ 1026.2(a)(20) and the credit must be 

accessed by a ‘‘credit card’’ as defined 

in § 1026.2(a)(15)(i). As discussed above 

in the Overview of Regulation Z 

Proposal section and in the section-bysection analysis of § 1026.2(a)(20), the 

Bureau anticipates that most credit 

accessed by a prepaid card would meet 

the definition of ‘‘open-end credit’’ if 

the creditor offering the plan may 

impose a finance charge for the 

credit.362 In addition, under the 


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proposal, a prepaid card that is a single 

device that may be used from time to 

time to access such an open-end credit 

plan would be a credit card. Likewise, 

the Bureau anticipates that most credit 

that is deposited into a prepaid account 

where the extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor would meet the 

definition of ‘‘open-end credit’’ if the 

creditor offering the plan may impose a 

finance charge for the credit. Also, an 

account number that may be used from 

time to time to access such an open-end 

credit plan would be a credit card. 

Thus, an open-end credit plan accessed 

by a prepaid card that is a credit card 

or an account number that is a credit 

card (as described above) would be a 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan.’’ 

For the reasons discussed in the 

Overview of Regulation Z Proposal 

section, the proposal also would clarify 

that the exception in current 

§ 1026.2(a)(15)(ii)(B) does not apply to 

open-end credit plans accessed by a 

prepaid card or an account number as 

described above. Currently, 

§ 1026.2(a)(15)(ii)(B) provides that the 

definition of ‘‘credit card account under 

an open-end (not home-secured) 

consumer credit plan’’ does not include 

an ‘‘overdraft line of credit that is 

accessed by a debit card or an account 

number.’’ The Bureau notes that the 

proposed definition of ‘‘debit card’’ in 

§ 1026.15(a)(2)(iv) would exclude a 

prepaid card. Thus, the exception in 

§ 1026.2(a)(15)(ii)(B) does not apply to 

overdraft lines of credit that are 

accessed by a prepaid card. In addition, 

the proposal would revise 

§ 1026.2(a)(15)(ii)(B) to only include the 

exception for overdraft lines of credit 

accessed by a debit card. The proposal 

would move the exception for overdraft 

lines of credit that are accessed by 

account numbers from 

§ 1026.2(a)(15)(ii)(B) to proposed 

§ 1026.2(a)(15)(ii)(C). The proposal also 

would amend proposed 

§ 1026.2(a)(15)(ii)(C) and comment 

2(a)(15)–4 to provide that the exception 

does not apply to an overdraft line of 

credit that is accessed by an account 

number where the account number is a 

prepaid card that is a credit card, or the 

account number is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

2(a)(15)(iii) Charge Card 

Under Regulation Z, the term ‘‘charge 

card’’ is defined in § 1026.15(a)(15)(iii) 

to mean ‘‘a credit card on an account for 

which no periodic rate is used to 

compute a finance charge.’’ Current 

comment 2(a)(15)–3 provides guidance 

on how the term ‘‘charge card’’ is used 

throughout the Regulation. In particular, 

the current comment provides that 

generally, charge cards are cards used in 

connection with an account on which 

outstanding balances cannot be carried 

from one billing cycle to another and are 

payable when a periodic statement is 

received. This comment also explains 

that under the regulation, a reference to 

credit cards generally includes charge 

cards. In particular, references to credit 

card accounts under an open-end (not 

home-secured) consumer credit plan in 

subparts B and G generally include 

charge cards. The term ‘‘charge card’’ is, 

however, distinguished from ‘‘credit 

card’’ or ‘‘credit card account under an 

open-end (not home-secured) consumer 

credit plan’’ in §§ 1026.60, 

1026.6(b)(2)(xiv), 1026.7(b)(11) and 

(b)(12), 1026.9(e) and (f), 1026.28(d), 

1026.52(b)(1)(ii)(C), and Appendices G– 

10 through G–13. See also the 

discussion in § 1026.2(a)(20) relating to 

charge card accounts as open-end credit. 

The Bureau proposes to revise 

comment 2(a)(15)–3 in a number of 

ways to accommodate the proposed 

inclusion of some forms of prepaid 

cards as charge cards. First, the existing 

text of the comment would be placed in 

comment 2(a)(15)–3.i and a new 

comment 2(a)(15)–3.ii would be added. 

Specifically, proposed comment 

2(a)(15)–3.ii would explain that a 

prepaid card is a charge card if it also 

is a credit card where no periodic rate 

is used to compute the finance charge. 

Likewise, an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor would be a charge card if it is 

a credit card where no periodic rate is 

used to compute the finance charge. 

This proposed comment would also 

explain that unlike other charge cards, 

such a prepaid card or account number 

that accesses a credit card account 

under an open-end (not home-secured) 

consumer credit plan would be subject 

to the requirements in § 1026.7(b)(11), 

which implements certain protections 

in the Credit CARD Act regarding 

periodic statements and payment due 

dates. See the section-by-section 

analysis of proposed § 1026.7(b). Thus, 

under § 1026.5(b)(2)(ii), for credit card 

accounts under an open-end (not homesecured) consumer credit plan, a card 

issuer of a prepaid card or account 

number that meets the definition of a 

charge card because it does not impose 

a finance charge structured as a periodic 

rate would be required to adopt 

reasonable procedures designed to 

ensure that (1) periodic statements are 

mailed or delivered at least 21 days 

prior to the payment due date disclosed 

on the statement pursuant to 

§ 1026.7(b)(11)(i)(A), and (2) the card 

issuer does not treat as late for any 

purposes a required minimum periodic 

payment received by the card issuer 

within 21 days after mailing or delivery 

of the periodic statement disclosing the 

due date for that payment. 

Under the proposal, the existing 

language in comment 2(a)(15)–3 (which 

would be redesignated as proposed 

comment 2(a)(15)–3.i) would be revised 

to be consistent with new proposed 

comment 2(a)(15)–3.ii and the definition 

of ‘‘charge card.’’ Currently, the first 

sentence of comment 2(a)(15)–3 

provides that generally, charge cards are 

cards used in connection with an 

account on which outstanding balances 

cannot be carried from one billing cycle 

to another and are payable when a 

periodic statement is received. This 

sentence would be revised to be more 

consistent with the definition of charge 

card in § 1026.2(15)(iii) to state that 

charge cards are credit cards where no 

periodic rate is used to compute the 

finance charge; no substantive change is 

intended by this proposed revision. The 

Bureau notes that while most charge 

cards are structured such that the 

outstanding balances cannot be carried 

from one billing cycle to another and are 

payable when a periodic statement is 

received, this is not a requirement in 

order for a card to meet the definition 

of charge card in § 1026.2(a)(15)(iii). In 

addition, the last sentence of the 

existing comment would be revised to 

cross reference new proposed comment 

2(a)(15)–3.ii. The Bureau seeks 

comment on this proposed approach to 

charge cards. 

2(a)(15)(iv) Debit Card, 2(a)(15)(v) 

Prepaid Card, and 2(a)(15)(vi) Prepaid 

Account 

Although Regulation Z and its 

commentary use the term ‘‘debit card,’’ 

that term is not defined. Generally, 

under the existing regulation, this term 

refers to a card that accesses an asset 

account. See comment 2(a)(15)–2.i.B. 

Specifically, comment 2(a)(15)–2.i.B 

provides as an example of a credit card: 

‘‘A card that accesses both a credit and 

an asset account (that is, a debit-credit 

card).’’ In addition, comment 2(a)(15)– 

2.ii.A provides that the term credit card 

does not include a debit card with no 

credit feature or agreement, even if the 

creditor occasionally honors an 

inadvertent overdraft. 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77223 

363Conforming changes also might be needed 

under Regulation E if these cards became credit 

cards under Regulation Z. 

As discussed in the Overview of 

Regulation Z Proposal section, under 

the proposal, different rules generally 

would apply in Regulation Z depending 

on whether credit is accessed by a card 

or device that accesses a prepaid 

account (which would be defined in 

proposed § 1026.2(a)(15)(vi) to match 

the definition under proposed 

Regulation E § 1005.2(b)(3)) or one that 

accesses another type of asset account. 

To assist compliance with the 

regulation, the proposal would define 

‘‘debit card’’ for purposes of Regulation 

Z in § 1026.2(a)(15)(iv) to mean ‘‘any 

card, plate, or other single device that 

may be used from time to time to access 

an asset account other than a prepaid 

account.’’ The proposed definition of 

‘‘debit card’’ would specify that it does 

not include a prepaid card. Proposed 

§ 1026.2(a)(15)(v) would define 

‘‘prepaid card’’ to mean ‘‘any card, code, 

or other device that can be used to 

access a prepaid account’’ and would 

define ‘‘prepaid account’’ in proposed 

§ 1026.2(a)(15)(vi) to mean a prepaid 

account as defined in Regulation E 

proposed § 1005.2(b)(3). Proposed 

comment 2(a)(15)–6 would provide that 

the term ‘‘prepaid card’’ in 

§ 1026.2(a)(15)(v) includes any card, 

code or other device that can be used to 

access a prepaid account, including a 

prepaid account number or other code. 

The proposed comment provides that 

the phrase ‘‘credit accessed by a prepaid 

card’’ means any credit that is accessed 

by any card, code or other device that 

also can be used to access a prepaid 

account. 

The term ‘‘prepaid account’’ as 

defined in proposed Regulation E 

1005.2(b)(3) would not include gift 

cards, government benefit accounts that 

are excluded under Regulation E 

§ 1005.15(a)(2), employee flex cards, 

and HSA and other medical expense 

cards. Under current Regulation Z and 

the proposal, these cards would not be 

credit cards unless they were subject to 

a written agreement to extend credit. 

Nonetheless, the Bureau solicits 

comment on whether gift cards, 

government benefit accounts that are 

excluded under Regulation E 

§ 1005.15(a)(2), employee flex cards, 

and HSA and other medical expense 

cards should be included within the 

definition of ‘‘prepaid accounts’’ for 

purposes of Regulation Z, even if those 

accounts would not be considered 

prepaid accounts for purposes of error 

resolution, disclosure, and other 

purposes under Regulation E. By 

including these accounts into the 

definition of ‘‘prepaid account’’ for 

purposes of Regulation Z, such a card 

would be a ‘‘prepaid card’’ and the card 

would be a ‘‘credit card’’ if the card is 

a single device that may be used from 

time to time to access a credit plan, 

except if that card only accesses credit 

that is not subject to any finance charge 

as defined in § 1026.4 or any fee 

described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments.363 As a credit 

card, the person issuing the card would 

be a ‘‘card issuer’’ under Regulation Z. 

See § 1026.2(a)(7). In addition, the 

person issuing the card would be a 

‘‘creditor’’ under Regulation Z if the 

person issuing the card extends the 

credit. See § 1026.2(a)(17)(iii) and (iv). 

The specific provisions of Regulation Z 

that the person would need to comply 

with as a ‘‘card issuer’’ and ‘‘creditor’’ 

would depend on the type of credit that 

is being extended and the type of fees 

being imposed. See § 1026.2(a)(17)(iii) 

and (iv). 

The Bureau is unaware of any credit 

features currently associated with such 

cards. The Bureau solicits comment on 

current and potential credit features that 

may be offered on these types of cards, 

the nature of potential risks to 

consumers if credit features were 

offered on these types of cards, and 

incentives for the industry to offer credit 

features on these types of cards. The 

Bureau also solicits comment on any 

implications of treating these products 

as prepaid accounts under Regulation Z 

but not Regulation E. 

2(a)(15)(vii) Account Numbers Where 

Extensions of Credit Are Permitted To 

Be Deposited Directly Only Into 

Particular Prepaid Accounts Specified 

by the Creditor 

As noted above, the proposal covers 

credit plans that are not accessed 

directly by a prepaid card, but where a 

separate credit plan is accessed by an 

account number that is not a prepaid 

card that allows deposits directly into 

particular prepaid accounts specified by 

the creditor but does not allow the 

consumer to deposit directly extensions 

of credit from the plan into asset 

accounts other than particular prepaid 

accounts specified by the creditor. 

A credit plan would still be covered 

under the proposal where a consumer 

could access the credit plan by use of 

checks or in-person withdrawals, so 

long as the credit plan allows deposits 

directly into particular prepaid accounts 

specified by the creditor but does not 

allow the consumer to deposit directly 

extensions of credit into an asset 

account other than particular prepaid 

accounts specified by the creditor. See 

proposed comment 2(a)(15)–5. The 

proposal would provide that these 

credit plans would be credit card 

accounts under Regulation Z. 

The Bureau believes that these types 

of credit plans could be offered as 

substitutes for overdraft credit plans 

accessed by a prepaid card, and if they 

were not covered, creditors would be 

able to avoid the consumer protections 

set forth in the proposal. Thus, the 

Bureau believes it is reasonable to 

include account numbers that access 

these types of credit products under the 

definition of credit card. Nonetheless, 

the Bureau is not attempting to cover 

general lines of credit where consumers 

generally are not restricted from 

depositing directly credit extensions 

taken under the plan into asset accounts 

of their choosing, including prepaid 

accounts. The Bureau believes that 

those types of credit plans are not acting 

as substitutes for overdraft credit plans 

because these general lines of credit are 

not designed to provide credit in 

relation to particular prepaid accounts. 

The Bureau solicits comment on this 

approach, and whether the proposal 

appropriately covers the types of credit 

plans that may act as substitutes for 

overdraft credit plans accessed by 

prepaid cards. 

In referring to account numbers that 

access credit plans linked to prepaid 

accounts, the proposal uses the term 

‘‘account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor.’’ 

Proposed § 1026.2(a)(15)(vii) defines 

this term to mean an account number 

that is not a prepaid card that may be 

used from time to time to access a credit 

plan that allows deposits directly into 

particular prepaid accounts specified by 

the creditor but does not allow the 

consumer to deposit directly extensions 

of credit from the plan into asset 

accounts other than particular prepaid 

accounts specified by the creditor. As 

noted above, these account numbers 

would be credit cards under the 

proposal. See proposed 

§ 1026.2(a)(15)(vii), comments 2(a)(15)– 

2.i.G and –5. 

2(a)(17) Creditor 

Certain disclosure requirements and 

other requirements in TILA and 

Regulation Z generally apply to 

creditors. Under TILA section 103(g), 

the term ‘‘creditor’’ generally is defined 

to mean ‘‘a person who both (1) 

regularly extends, whether in 

connection with loans, sales of property 

or services, or otherwise, consumer 


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credit which is payable by agreement in 

more than four installments or for 

which the payment of a finance charge 

is or may be required, and (2) is the 

person to whom the debt arising from 

the consumer credit transaction is 

initially payable on the face of the 

evidence of indebtedness or, if there is 

no such evidence of indebtedness, by 

agreement.’’ 15 U.S.C. 1602(g). Also, for 

purposes of certain disclosure 

provisions in TILA that relate to credit 

card account-opening disclosures and 

periodic statement disclosures, the term 

‘‘creditor’’ includes a ‘‘card issuer[] 

whether or not the amount due is 

payable by agreement in more than four 

installments or the payment of a finance 

charge is or may be required.’’ 15 U.S.C. 

1602(g). 

Consistent with TILA, under 

Regulation Z, the term ‘‘creditor’’ is 

defined generally in § 1026.2(a)(17)(i) to 

include a ‘‘person who regularly 

extends consumer credit that is subject 

to a finance charge or is payable by 

written agreement in more than four 

installments (not including a down 

payment), and to whom the obligation is 

initially payable, either on the face of 

the note or contract, or by agreement 

when there is no note or contract.’’ 

Under § 1026.2(a)(17)(v) and comment 

2(a)(17)–4, for open-end credit, a person 

regularly extends consumer credit if it 

had more than 25 accounts outstanding 

in the preceding calendar year. If a 

person did not meet this numerical 

standard in the preceding calendar year, 

the numerical standards must be 

applied to the current calendar year. In 

addition, under § 1026.2(a)(17)(iii) and 

(iv), the term ‘‘creditor’’ includes a card 

issuer (which is a person that issues a 

credit card or its agent) that extends 

credit. For purposes of subpart B, a 

person also is a ‘‘creditor’’ if the person 

is a card issuer that extends credit that 

is not subject to a finance charge and is 

not payable by written agreement in 

more than four installments. See 

§ 1026.2(a)(17)(iii). Thus, under 

Regulation Z as generally structured, 

card issuers that only meet this narrow 

definition of creditor (i.e., extend credit 

that is not subject to a finance charge 

and is not payable in more than four 

installments) generally are subject to the 

open-end (not home-secured) rules and 

the credit card rules in subpart B but 

generally need not comply with the 

credit card rules in subpart G, except for 

the credit card disclosures required by 

§ 1026.60. 

Except as described below, the 

Bureau’s proposal generally would 

apply this existing framework to the 

prepaid context. Thus, a card issuer that 

extends open-end credit would meet the 

general definition of ‘‘creditor’’ because 

the person charges a finance charge and 

would be subject to the rules governing 

open-end (not home-secured) credit 

plans in subpart B and the credit card 

rules set forth in subparts B and G. A 

card issuer that extends closed-end 

credit, and meets the general definition 

of ‘‘creditor’’ because the person charges 

a finance charge or extends credit 

payable by written agreement in more 

than four installments generally would 

be subject to the closed-end provisions 

in subpart C and certain open-end 

disclosure (not home-secured) rules and 

the credit card rules in subpart B. See 

§ 1026.2(a)(17)(iv). 

With respect to account numbers 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, card issuers that meet only 

the special definition of ‘‘creditor’’ 

because they extend credit accessed by 

the account number where the credit is 

not subject to a finance charge and is 

not payable by written agreement in 

more than four installments would 

generally be subject to the rules 

governing open-end (not home-secured) 

credit plans in subpart B and the credit 

card rules set forth in subpart B, but not 

the rules implementing the Credit CARD 

Act, generally set forth in subpart G. 

Although a credit plan accessed by such 

an account number would not be openend credit because it is not subject to a 

finance charge, the person generally 

would be subject to the provisions in 

subpart B even if the credit is not 

subject to any fees, including finance 

charges. See § 1026.2(a)(17)(iii). 

However, the Bureau is clarifying in 

proposed comment 2(a)(17)(iii)–2 that 

§ 1026.2(a)(17)(iii) does not apply to a 

person that is extending credit that is 

accessed by a prepaid card where the 

credit (1) is not subject to a finance 

charge, (2) is not subject to fees 

described in § 1026.4(c), and (3) is not 

payable by written agreement in more 

than four installments. As discussed in 

the section-by-section analysis of 

§ 1026.2(a)(15)(i), in this case, the 

prepaid card is not a credit card and 

therefore the person issuing the card is 

not a card issuer. Prepaid card issuers 

that satisfy this exclusion would still be 

subject to Regulation E’s requirements, 

such as error resolution, and limits on 

liability for unauthorized use. 

Proposed comment 2(a)(17)(iii)–2 

would specify that a person is not a 

creditor where a prepaid card only 

accesses credit that is not subject to any 

finance charge as defined in § 1026.4 or 

fee described in § 1026.4(c) and is not 

payable by written agreement in more 

than four installments. 

The Bureau notes, however, that with 

respect to a credit plan that is accessed 

by a prepaid card, the person would be 

a card issuer if the prepaid card accesses 

a credit plan that is subject to a fee that 

is not a finance charge that is described 

in § 1026.4(c), such as a fee for applying 

for a credit plan, a late payment fee, an 

over-the-limit fee, or a returned 

payment fee. In this case, the person 

would not be extending open-end credit 

because the credit is not subject to a 

finance charge. Nonetheless, the person 

would be a card issuer under 

§ 1026.2(a)(7) and would be a creditor 

under § 1026.2(a)(17)(iii). As a result, 

the person would be required to comply 

generally with the rules governing openend (not home-secured) credit plans in 

subpart B and the credit card rules set 

forth in subpart B, but not the rules 

implementing the Credit CARD Act, 

generally set forth in subpart G. 

2(a)(20) Open-End Credit 

Under TILA section 103(j), the term 

‘‘open-end credit plan’’ is defined to 

mean a ‘‘plan under which the creditor 

reasonably contemplates repeated 

transactions, which prescribes the terms 

of such transactions, and which 

provides for a finance charge which may 

be computed from time to time on the 

outstanding unpaid balance.’’ See 15 

U.S.C. 1602(j). Under Regulation Z, the 

term ‘‘open-end credit’’ is defined in 

§ 1026.2(a)(20) to mean consumer 

‘‘credit’’ extended by a ‘‘creditor’’ under 

a ‘‘plan’’ in which (1) the creditor 

reasonably contemplates repeated 

transactions; (2) the creditor may 

impose a ‘‘finance charge’’ from time to 

time on an outstanding unpaid balance; 

and (3) the amount of credit that may be 

extended to the consumer during the 

term of the plan (up to any limit set by 

the creditor) is generally made available 

to the extent that any outstanding 

balance is repaid. Thus, to have openend credit under Regulation Z, there 

must be (1) consumer ‘‘credit;’’ (2) that 

is extended under a ‘‘plan;’’ (3) where 

the person extending the credit may 

impose a ‘‘finance charge’’ from time to 

time on an outstanding unpaid balance; 

(4) the person extending the credit is a 

‘‘creditor;’’ (5) the person extending 

credit reasonably contemplates repeated 

transactions; and (6) the amount of 

credit that may be extended to the 

consumer during the term of the plan 

(up to any limit set by the creditor) is 

generally made available to the extent 

that any outstanding balance is repaid. 

As discussed above in the Overview 

of Regulation Z Proposal section, with 

narrow exceptions discussed below, the 

Bureau anticipates that most credit 

accessed by a prepaid card will 


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constitute credit extended under a 

‘‘credit plan’’ and will meet the 

definition of ‘‘open-end credit’’ if the 

creditor offering the plan may impose a 

finance charge for the credit. Likewise, 

the Bureau anticipates that most credit 

that is deposited into a prepaid account 

where the extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor will constitute 

credit extended under a ‘‘credit plan’’ 

and will meet the definition of ‘‘openend credit’’ if the creditor offering the 

plan may impose a finance charge for 

the credit. 

The proposal would provide 

additional guidance on the meaning of 

three terms used in the definition of 

‘‘open-end credit:’’ (1) ‘‘credit;’’ (2) 

‘‘plan;’’ and (3) ‘‘finance charge.’’ For a 

discussion of the proposed revisions 

related to the term ‘‘credit,’’ see the 

section-by-section analysis of proposed 

§ 1026.2(a)(14) above. The term ‘‘plan’’ 

is discussed below. The term ‘‘finance 

charge’’ is discussed below and in the 

section-by-section analysis of § 1026.4. 

Plan 

The term ‘‘plan’’ currently is 

discussed in comment 2(a)(20)–2, which 

provides in relevant part that the term 

‘‘plan’’ connotes a contractual 

arrangement between the creditor and 

the consumer. For the reasons described 

in the Overview of Regulation Z 

Proposal section, the proposal would 

revise comment 2(a)(20)–2 to provide 

additional guidance on what constitutes 

a plan with respect to credit extended 

through paying overdrafts in connection 

with prepaid accounts. A new comment 

2(a)(20)–2.ii would be added that would 

provide that with respect to credit 

accessed by a prepaid card, a plan 

would mean a program where the 

consumer is obligated contractually to 

repay any credit extended by the 

creditor. For example, a plan includes a 

program under which a creditor 

routinely pays transactions when a 

consumer has insufficient or 

unavailable funds in a prepaid account 

and the consumer is obligated 

contractually to repay those 

transactions. Under the proposal, such a 

program constitutes a plan 

notwithstanding that the creditor retains 

discretion not to pay such transactions, 

the creditor does not pay transactions 

once the consumer has exceeded a 

certain amount of credit, or the creditor 

only pays transactions where there were 

sufficient or available funds to cover the 

amount of the transaction at the time the 

transaction was authorized but not 

sufficient or available funds to cover the 

amount of the transaction at the time the 

transaction is paid. 

In addition, for the reasons discussed 

in the Overview of Regulation Z 

Proposal section, a similar new 

proposed comment 2(a)(20)–2.iii would 

be added to provide guidance on when 

depositing credit proceeds into a 

prepaid account would be considered 

extending credit under a plan. In 

particular, this proposed comment 

would provide that with respect to 

credit accessed by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, a plan means a program 

where the consumer is obligated 

contractually to repay any credit 

extended by the creditor. For example, 

a plan includes a program under which 

a creditor routinely will extend credit 

that is deposited directly into particular 

prepaid accounts specified by the 

creditor and the consumer is obligated 

contractually to repay the credit. Such 

a program constitutes a plan 

notwithstanding that the creditor retains 

discretion not to extend credit, or the 

creditor does not extend credit once the 

consumer has exceeded a certain 

amount of credit. For example, a 

program constitutes a plan where a 

creditor will routinely extend credit that 

is deposited directly into a particular 

prepaid account specified by the 

creditor when the consumer requests an 

extension because the consumer does 

not have adequate funds in the prepaid 

account to cover the full amount of a 

transaction using the prepaid card. 

As discussed in more detail in the 

Overview of Regulation Z Proposal 

section, with respect to the programs 

described above, the Bureau believes 

these programs are plans 

notwithstanding that the person offering 

the program reserves the right not to 

extend credit on individual 

transactions. The Bureau believes that 

the person’s reservation of such 

discretion in connection with credit 

extended with respect to prepaid 

accounts does not connote the absence 

of an open-end credit plan. Consumers 

using overdraft programs, or linked 

lines of credit, in connection with 

prepaid accounts must agree to repay 

the debt created by an overdraft or 

advance, indicating that a contractual 

arrangement between the creditor and 

the consumer exists. The Bureau notes 

that credit card issuers similarly reserve 

the right to reject individual 

transactions, and thus the Bureau 

believes that automated overdrafts 

services are comparable. 

To accommodate the proposed 

changes, the proposal also would make 

several technical revisions to comment 

2(a)(20)–2. Specifically, the first 

sentence of the existing language in 

comment 2(a)(20)–2 would be moved to 

proposed comment 20(a)(20)–2.i, and 

the remaining language of the existing 

comment would be moved to proposed 

comment 2(a)(20)–2.iv. 

Finance Charge Imposed From Time to 

Time on an Outstanding Unpaid 

Balance 

In Regulation Z, credit will not meet 

the definition of ‘‘open-end credit’’ 

unless the person extending the credit 

may impose a ‘‘finance charge’’ from 

time to time on an outstanding unpaid 

balance. Comment 2(a)(20)–4 provides 

that the requirement that a finance 

charge may be computed and imposed 

from time to time on the outstanding 

balance means that there is no specific 

amount financed for the plan for which 

the finance charge, total of payments, 

and payment schedule can be 

calculated. This comment also provides 

that a plan may meet the definition of 

open-end credit even though a finance 

charge is not normally imposed, 

provided the creditor has the right, 

under the plan, to impose a finance 

charge from time to time on the 

outstanding balance. The term ‘‘finance 

charge’’ generally is defined in § 1026.4 

to mean ‘‘the cost of consumer credit as 

a dollar amount’’ and it includes any 

charge payable directly or indirectly by 

the consumer and imposed directly or 

indirectly by the creditor as an incident 

to or a condition of the extension of 

credit. The term does not include any 

charge of a type payable in a comparable 

cash transaction. 

The proposal would add 2(a)(20)–4.ii 

to note that with respect to credit 

accessed by a prepaid card (including a 

prepaid card that is solely an account 

number) or credit accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, any 

service, transaction, activity, or carrying 

charges imposed on a credit account, 

and any such charges imposed on a 

prepaid account if that charge is related 

to an extension of credit, carrying a 

credit balance, or credit availability, 

generally would be a finance charge. See 

§ 1026.4(a), (b)(2), (c)(3) and (4) and 

comments 4(a)–4 and 4(b)(2)–1. In 

addition, proposed comment 2(a)(20)– 

4.ii would provide that with respect to 

that credit, such service, transaction, 

activity or carrying charges would 

constitute finance charges imposed from 

time to time on an outstanding unpaid 

balance if there is no specific amount 

financed for the plan for which the 

finance charge, total of payments, and 

payment schedule can be calculated. 


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The Bureau does not anticipate that 

there will be a specific amount financed 

for credit plans accessed by prepaid 

cards, or credit plans that are linked to 

prepaid accounts and accessed by 

account numbers as discussed above, at 

the time the credit plan is established. 

Instead, the Bureau anticipates that the 

credit lines on these credit plans 

generally will be replenishing. In such 

cases, an amount financed for the plan 

could not be calculated because the 

creditor will not know at the time the 

plan is established the amount of credit 

that will be extended under the plan. 

Thus, to the extent that any finance 

charge may be imposed on such credit 

plans, the credit plan will meet this 

criterion. 

As discussed in the section-by-section 

analysis of § 1026.4, the Bureau is 

proposing to expand the types of fees 

that would be finance charges for 

purposes of credit linked to prepaid 

accounts. Currently, certain fees or 

charges are specifically excluded from 

the term ‘‘finance charge,’’ such as (1) 

charges imposed by a financial 

institution for paying items that 

overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing; and 

(2) fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. See 

§ 1026.4(c)(3) and (4). The proposal 

would amend § 1026.4 and its 

commentary that relates to the 

definition of ‘‘finance charge’’ to 

provide that these two exceptions do 

not apply to credit accessed by a 

prepaid card or an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. In addition, the proposal 

would make additional amendments to 

§ 1026.4 and related commentary related 

to credit accessed by a prepaid card or 

credit accessed by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. For such credit, any 

service, transaction, activity, or carrying 

charges imposed on the credit account, 

and any such charges imposed on a 

prepaid account if that charge is related 

to an extension of credit, carrying a 

credit balance, or credit availability, 

generally would be a finance charge. See 

§ 1026.4(a), (b)(2), (c)(3) and (4) and 

comments 4(a)–4 and 4(b)(2)–1. Such 

charges would include periodic 

participation fees for the credit plan, 

and transaction charges imposed in 

connection with a credit extension. 

As a result of the proposal to expand 

the definition of finance charge for 

credit linked to prepaid accounts, the 

Bureau believes that charge card 

accounts accessed by prepaid cards or 

account numbers as discussed above 

would be open-end credit when 

transaction fees, participation fees, or 

other finance charges may be imposed 

on the account. If the Bureau were to 

read the criterion of open-end credit 

that a finance charge may be imposed 

time to time on an outstanding unpaid 

balance narrowly, there is a chance that 

some types of charge card accounts 

offered in connection with prepaid 

accounts would constitute closed-end 

credit. A person offering such a charge 

card account would be required to 

comply with the closed-end provisions 

in subpart C as well as certain open-end 

(not home-secured) rules and the credit 

card rules in subpart B. See 

§ 1026.2(a)(17)(iv). The Bureau believes 

that receiving closed-end disclosures for 

these types of accounts would be 

confusing to consumers, because the 

disclosures would be different from 

their other credit card accounts. Where 

the transactions otherwise would seem 

to fit an open-end plan based on 

repeated transactions and replenishing 

credit, the Bureau believes that 

consumers would be better protected 

and better informed if such transactions 

were treated as open-end plans in the 

same way as their other credit card 

accounts. In addition, with respect to 

credit accessed by prepaid cards, the 

Bureau believes that complying with the 

closed-end credit rules would be 

difficult for card issuers (for example, at 

point of sale) because closed-end 

disclosures specific to each credit 

extension would need to be provided 

prior to each transaction. Thus, the 

Bureau proposes to retain the current 

interpretation of the finance charge 

criterion for the term ‘‘open-end credit’’ 

which would result in most charge card 

accounts meeting the definition of 

‘‘open-end credit’’ if a transaction fee, 

participation fee or other finance charge 

may be imposed on the credit plan. The 

Bureau solicits comment on this 

approach. 

The Bureau also notes that persons 

that offer charge card accounts where no 

finance charge is imposed may still be 

subject to certain Regulation Z 

provisions. See the section-by-section 

analysis of § 1026.2(a)(17). 

As a technical revision, the proposal 

would move the existing language of 

comment 2(a)(20)–4 to proposed 

comment 20(a)(20)–4.i. 

Section 1026.4 Finance Charge 

Under TILA section 106(a), the term 

‘‘finance charge’’ generally provides that 

‘‘the amount of the finance charge in 

connection with any consumer credit 

transaction shall be determined as the 

sum of all charges, payable directly or 

indirectly by the person to whom the 

credit is extended, and imposed directly 

or indirectly by the creditor as an 

incident to the extension of credit.’’ The 

finance charge does not include charges 

of a type payable in a comparable cash 

transaction. 15 U.S.C. 1605(a). 

Under Regulation Z, the term ‘‘finance 

charge’’ generally is defined in 

§ 1026.4(a) to mean ‘‘the cost of 

consumer credit as a dollar amount.’’ It 

includes any charge payable directly or 

indirectly by the consumer and imposed 

directly or indirectly by the creditor as 

an incident to or a condition of the 

extension of credit. It does not include 

any charge of a type payable in a 

comparable cash transaction. However, 

certain fee or charges are specifically 

excluded from the current definition of 

‘‘finance charge,’’ including (1) charges 

imposed by a financial institution for 

paying items that overdraw an account, 

unless the payment of such items and 

the imposition of the charge were 

previously agreed upon in writing; and 

(2) fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. See 

§ 1026.4(c)(3) and (4). 

The proposal would amend § 1026.4 

and its commentary that relates to the 

definition of ‘‘finance charge’’ in two 

ways. First, it would provide that the 

exception regarding overdrafts would 

not apply to credit accessed by a 

prepaid card or by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, as discussed further below 

and in the Overview of Regulation Z 

Proposal section. Second, it would 

provide that the second exception 

regarding participation fees does not 

apply to credit accessed by prepaid card 

or by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. The proposal also would make 

certain other additional amendments to 

§ 1026.4 and related commentary related 

to credit accessed by a prepaid card or 

credit accessed by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor to clarify which types of 

charges are finance charges and which 

are not. As discussed below, this 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77227 

364 74 FR 5244, 5263 (Jan. 29, 2009). 

365To illustrate: A $5 service charge is imposed 

on a checking or transaction account with an 

overdraft line of credit (where the institution has 

agreed in writing to pay an overdraft), while a $3 

service charge is imposed on an account without a 

credit feature; the $2 difference is a finance charge. 

(If the difference is not related to account activity, 

however, it may be excludable as a participation 

fee. See the commentary to § 1026.4(c)(4)). As 

another example, assume a $5 service charge is 

imposed for each item that results in an overdraft 

on a checking or transaction account with an 

Continued 

portion of the proposal is designed to 

ensure proposed protections for prepaid 

accounts. 

4(a) Definition 

Under Regulation Z, the term ‘‘finance 

charge’’ generally is defined in 

§ 1026.4(a) to mean ‘‘the cost of 

consumer credit as a dollar amount.’’ It 

includes any charge payable directly or 

indirectly by the consumer and imposed 

directly or indirectly by the creditor as 

an incident to or a condition of the 

extension of credit. It does not include 

any charge of a type payable in a 

comparable cash transaction. Comment 

4(a)–4 provides guidance on when 

transaction charges imposed on credit 

card accounts are finance charges under 

§ 1026.4(a). (Transaction charges that 

are imposed on checking accounts or 

other transaction accounts are discussed 

in the section-by-section analysis of 

§ 1026.4(b).) 

Specifically, comment 4(a)–4 provides 

that any transaction charge imposed on 

a cardholder by a card issuer is a 

finance charge, regardless of whether 

the issuer imposes the same, greater, or 

lesser charge on withdrawals of funds 

from an asset account such as a 

checking or savings account. For 

example, any charge imposed on a 

credit cardholder by a card issuer for the 

use of an ATM to obtain a cash advance 

(whether in a proprietary, shared, 

interchange, or other system) is a 

finance charge regardless of whether the 

card issuer imposes a charge on its debit 

cardholders for using the ATM to 

withdraw cash from a consumer asset 

account, such as a checking or savings 

account. In addition, any charge 

imposed on a credit cardholder for 

making a purchase or obtaining a cash 

advance outside the United States with 

a foreign merchant, or in a foreign 

currency, is a finance charge, regardless 

of whether a charge is imposed on debit 

cardholders for such transactions. This 

comment essentially provides that debit 

card transactions are not considered 

‘‘comparable cash transactions’’ to 

credit card transactions with respect to 

transaction charges imposed by a card 

issuer on a credit cardholder when 

those fees are imposed on the credit 

card account. 

In the supplemental information 

accompanying the rule that adopted this 

comment, the Board noted the inherent 

complexity of seeking to distinguish 

transactions that are ‘‘comparable cash 

transactions’’ to credit card transactions 

from transactions that are not.364 For 

example, the Board discussed the 

situation of a transaction fee imposed by 

a card issuer on the credit card account 

for a cash advance through an ATM. A 

transaction fee for a cash advance 

through an ATM would not always be 

a finance charge if the ‘‘comparable cash 

transaction’’ exception considered fees 

that are imposed on debit cards offered 

by the credit card issuer in determining 

whether a transaction fee for a cash 

advance through an ATM imposed on 

the credit account is a finance charge. 

Instead, whether this fee is a finance 

charge would depend on whether the 

credit card issuer provides asset 

accounts and offers debit cards on those 

accounts and whether the fee exceeds 

the fee imposed for a cash advance 

transaction through an ATM on the 

asset account. The Board believed this 

type of distinction is not helpful for 

consumers in understanding transaction 

fees that are imposed on credit card 

accounts. Thus, the Board adopted 

comment 4(a)–4, which provides that 

any transaction charge imposed on a 

cardholder by a card issuer is a finance 

charge, regardless of whether the issuer 

imposes the same, greater, or lesser 

charge on withdrawals of funds from an 

asset account such as a checking or 

savings account. The Board noted that it 

was not revising comment 4(b)(2)–1, 

which states that if a checking or 

transaction account charge imposed on 

an account with a credit feature does 

not exceed the charge for an account 

without a credit feature, the charge is 

not a finance charge. The Board further 

noted that comment 4(b)(2)–1 addresses 

different situations as comment 4(a)–1, 

as discussed below in the section-bysection analysis of § 1026.4(b)(2). 

The Bureau proposes to add two new 

examples to this comment to provide 

guidance on how this comment applies 

to prepaid cards that are credit cards 

and to account numbers that are credit 

cards where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. In particular, 

proposed comment 4(a)–4.iii would 

provide that any transaction charge 

imposed on a cardholder by a card 

issuer for credit accessed by a prepaid 

card that also is a credit card is a 

finance charge regardless of whether the 

card issuer imposes the same, greater or 

lesser charge on the withdrawal of funds 

from a prepaid account. For example, 

assume a prepaid card issuer charges 

$15 for each transaction accessing credit 

with a prepaid card. This $15 fee would 

be a finance charge regardless of 

whether the prepaid card issuer charges 

the same, greater or lesser fee to the 

consumer to access funds in the prepaid 

account using the prepaid card. 

In addition, proposed comment 4(a)– 

4.iv would provide that any transaction 

charge imposed on a cardholder by a 

card issuer for credit accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor is a finance charge 

regardless of whether the card issuer 

imposes the same, greater or lesser 

charge on the withdrawal of funds from 

a prepaid account. For example, assume 

a card issuer charges a $15 fee each time 

a consumer uses an account number to 

access credit that is deposited into a 

prepaid account where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. This 

$15 fee is a finance charge regardless of 

whether the card issuer charges the 

same, greater or lesser fee to the 

consumer to access funds in the prepaid 

account using a prepaid card. 

4(b) Examples of Finance Charges 

4(b)(2) 

Section 1026.4(b) provides examples 

of the types of charges that are finance 

charges, except if those charges are 

specifically excluded under § 1026.4(c) 

through (e). In particular, § 1026.4(b)(2) 

provides that examples of finance 

charges generally include service, 

transaction, activity, and carrying 

charges. However, the Board added a 

partial exception to this example stating 

that for any charge imposed on a 

checking or other transaction account, 

such service or transaction account 

charge is only a finance charge to the 

extent that the charge exceeds the 

charge for a similar account without a 

credit feature. Comment 4(b)(2)–1 

similarly provides that a checking or 

transaction account charge imposed in 

connection with a credit feature is a 

finance charge under § 1026.4(b)(2) to 

the extent the charge exceeds the charge 

for a similar account without a credit 

feature. If a charge for a checking or 

transaction account with a credit feature 

does not exceed the charge for an 

account without a credit feature, the 

charge is not a finance charge under 

§ 1026.4(b)(2).365


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overdraft line of credit, while a $25 service charge 

is imposed for paying or returning each item on a 

similar account without a credit feature. The $5 

charge is not a finance charge. 

The Bureau believes that the Board 

adopted this partial exception to 

exclude certain overdraft lines of credit 

from coverage under Regulation Z. As 

discussed in the Overview of Regulation 

Z Proposal section, overdraft lines of 

credit where a financial institution 

agrees in writing to pay overdrafts and 

impose a fee generally would be subject 

to Regulation Z if the financial 

institution is imposing a finance charge. 

Nonetheless, under § 1026.4(b)(2), a 

person would not be imposing a finance 

charge on an overdraft line of credit if 

the fee for the overdraft is imposed on 

the checking or transaction account and 

does not exceed the amount of the fee 

that is imposed on the checking or 

transaction account if the financial 

institution returns the item unpaid (NSF 

fee) or does not exceed the amount of 

the fee the financial institution would 

impose if a courtesy overdraft service 

applied to the account instead of an 

overdraft line of credit. The Bureau 

believes that the Board adopted this 

partial exception as an expansion of the 

‘‘comparable cash transaction’’ 

exception to the definition of ‘‘finance 

charge,’’ which excludes charges 

imposed uniformly in cash and credit 

transactions from the definition of 

‘‘finance charge.’’ See § 1026.4(a) and 

comment 4(a)–1; see also 15 U.S.C. 

1605(a). 

For the reasons discussed in the 

Overview of Regulation Z Proposal 

section, the Bureau proposes not to 

extend this partial exclusion to credit 

extended in connection with a prepaid 

account. The proposal would add 

proposed § 1026.4(b)(2)(ii), and 

proposed comment 4(b)(2)–1.ii through 

.iv, to clarify that prepaid accounts are 

not subject to this partial exception from 

the definition of finance charge. 

Specifically, the proposed language 

would provide that any charge imposed 

in connection with an extension of 

credit, for carrying a credit balance, or 

for credit availability is a finance charge 

where that fee is imposed on a prepaid 

account in connection with credit 

accessed by a prepaid card or accessed 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, 

regardless of whether the creditor 

imposes the same, greater or lesser 

charge on the withdrawal of funds from 

the prepaid account, to have access to 

the prepaid account, or when credit is 

not extended. 

To illustrate, assume a $15 transaction 

charge is imposed on the prepaid 

account each time a consumer uses a 

prepaid card or an account number 

described above to access an open-end 

credit plan. The $15 charge is a finance 

charge regardless of whether the 

creditor imposes the same, greater or 

lesser charge to withdraw funds from 

the prepaid account. As another 

example, assume a $1.50 transaction 

charge is imposed on the prepaid 

account for each transaction that is 

made with the prepaid card, including 

when the prepaid card is used to access 

credit where the consumer has 

insufficient or unavailable funds in the 

prepaid account at the time of 

authorization or at the time the 

transaction is paid. The $1.50 

transaction charge is a finance charge 

when the prepaid card accesses credit, 

notwithstanding that a $1.50 transaction 

charge also is imposed on transactions 

that solely access funds in the prepaid 

account. As a third example, assume a 

$5 monthly service charge is imposed 

on the prepaid account for the 

availability of an open-end plan that is 

accessed by a prepaid card or an 

account number described above. The 

$5 monthly service charge is a finance 

charge regardless of whether the 

creditor imposes the same, greater or 

lesser monthly service charge to hold 

the prepaid account. 

Proposed comment 4(b)(2)–1.iii 

would provide that examples of charges 

imposed on a prepaid account in 

connection with an extension of credit, 

for carrying a credit balance, or for 

credit availability include (1) 

transaction fees for credit extensions; (2) 

fees for transferring funds from a credit 

account to a prepaid account; (3) a 

daily, weekly, or monthly (or other 

periodic) fee assessed each period a 

prepaid account is in ‘‘overdraft’’ status, 

or would be in overdraft status but for 

funds supplied by a linked line of 

credit; (4) a daily, weekly, or monthly 

(or other periodic) fee assessed each 

period a line of credit accessed by a 

prepaid card or account number 

described in § 1026.4(b)(2)(ii) has an 

outstanding balance; and (5) 

participation fees or other fees that the 

consumer is required to pay for the 

issuance or availability of credit. 

Proposed comment 4(b)(2)–1.iv would 

provide that proposed § 1026.4(b)(2)(ii) 

would not apply to transaction fees 

imposed on the prepaid account that are 

imposed only on transactions that solely 

access funds in the prepaid account 

(and are not imposed on transactions 

that either are funded in whole or in 

part from credit), fees for opening or 

holding the prepaid account, and other 

fees, such as cash reload fees and 

balance inquiry fees, that are not 

imposed on the prepaid account 

because the consumer engaged in a 

transaction that is funded in whole or in 

part by credit, for holding a credit plan, 

or for carrying a credit balance. These 

fees would not be considered charges 

imposed on a prepaid account in 

connection with an extension of credit, 

for carrying a credit balance, or for 

credit availability even if there are not 

sufficient funds in the prepaid account 

to pay the fees at the time they are 

imposed on the prepaid account. 

Nonetheless, any negative balance on 

the prepaid account, whether from fees 

or other transactions would be a credit 

extension and if a fee is imposed for 

such credit extension, the fee would be 

a finance charge under § 1026.4(b)(2)(ii). 

For example, if a cash-reload fee is 

imposed on the prepaid account, there 

are not sufficient funds in the prepaid 

account to pay the fee at the time it is 

imposed on the prepaid account, and an 

additional charge is imposed on the 

prepaid account for this credit 

extension, the additional charge would 

be a transaction charge imposed on a 

prepaid account in connection with an 

extension of credit and would be a 

finance charge under § 1026.4(b)(2)(ii). 

The Bureau believes that this 

approach is most reasonable and 

consistent with the general definition of 

finance charge because where a prepaid 

account lacks sufficient funds to pay a 

transaction completely, a transaction fee 

imposed in the course of processing the 

transaction with credit funds is payable 

directly or indirectly by the consumer as 

an incident to or condition of the 

extension of credit. That is why 

comment 4(a)–4 for credit card 

transactions covers transaction charges, 

regardless of whether the issuer imposes 

the same, greater, or lesser charges on 

withdrawals on funds from an asset 

account. 

As discussed above, the Bureau 

believes that the Board based the partial 

exemption in § 1026.4(b)(2) on the 

comparable cash transaction exception, 

which excludes charges imposed 

uniformly in cash and credit 

transactions from the definition of 

‘‘finance charge.’’ The Bureau believes 

that the Board expanded this exception 

in connection with asset accounts to 

include situations where a consumer is 

using a cash-like product, such as a 

debit card that is accessing an asset 

account. The Bureau further believes 

that it is reasonable not to expand the 

comparable cash transaction exception 

in connection with prepaid accounts, 

for the reasons discussed below. In 

retail transactions, the comparable cash 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77229 

transaction to which the credit 

transaction is compared could only 

include retail transactions where the 

goods or services are paid for with 

‘‘cash’’ as opposed to being paid for by 

a check or a prepaid card that accesses 

funds in a checking or transaction 

account. When a consumer pays for 

goods or services with ‘‘cash,’’ the 

consumer does not pay these fees. 

Therefore, the Bureau believes that the 

‘‘comparable cash’’ exception is 

reasonably interpreted not to apply to 

these types of fees that are imposed on 

prepaid accounts with respect to credit 

extended in connection with prepaid 

accounts, as described above. First, the 

Bureau believes that the best approach 

with respect to credit extended in 

connection with prepaid accounts is to 

provide a clear line about which fees 

that are imposed on the prepaid account 

are finance charges, rather than basing 

that decision on the fees that a prepaid 

card issuer charges to access the funds 

in the prepaid account or to hold the 

account. Otherwise, the same type of 

fee, such as a transaction or service 

charge imposed in connection with an 

extension of credit, for carrying a credit 

balance, or for credit availability will 

not always be a finance charge for each 

prepaid account, but instead would 

depend on the other fees that are 

charged on that particular prepaid 

account. This may make it more 

difficult for compliance purposes to 

determine whether a fee is a finance 

charge. 

The Bureau also believes that it is 

necessary to include in the definition of 

finance charge fees that are imposed on 

the prepaid account if those fees are in 

connection with an extension of credit, 

for carrying a credit balance, or for 

credit availability. Otherwise, a person 

could avoid the protections set forth in 

the proposal by charging fees for credit 

on the prepaid account rather than on 

the credit account. The Bureau believes 

that the proposed approach will ease 

compliance and make it easier for 

consumers to compare total costs of 

accessing credit. 

The proposal would cause issuers 

who are trying to fit within certain 

exceptions to the regime to waive 

certain transaction fees in connection 

with overdraft transactions. For 

example, if a financial institution wants 

to take advantage of the exception from 

Regulation Z where a credit plan is 

accessed by a prepaid card and the 

credit plan only allows extension of 

credit that are not subject to a finance 

charge or fees subject to § 1026.4(c) and 

are not payable by written agreement in 

more than four installments, the 

financial institution would need to 

waive transaction fees where the 

transaction is funded in whole or in part 

by credit. For example, assume a $1.50 

transaction charge is imposed on the 

prepaid account for each transaction 

that is made with the prepaid card, 

including when the prepaid card is used 

to access credit where the consumer has 

insufficient or unavailable funds in the 

prepaid account at the time of 

authorization or at the time the 

transaction is paid. The $1.50 

transaction charge is a finance charge 

when the prepaid card accesses credit, 

notwithstanding that a $1.50 transaction 

charge also is imposed on transactions 

that solely access funds in the prepaid 

account. In this case, the prepaid card 

issuer would need to waive the $1.50 

transaction charge on any transaction 

that accesses credit. Otherwise, the 

$1.50 transaction fee charged for a 

transaction that accesses credit would 

be a finance charge. The Bureau believes 

that the cost imposed in waiving fees 

would be outweighed by benefits to 

consumers in understanding the costs of 

credit transactions. 

The Bureau believes the best 

approach is to treat such fees consistent 

with the provision in comment 4(a)–4 

for transaction fees imposed on credit 

card accounts. This means that fees that 

are imposed to access the funds in a 

prepaid account or to hold the prepaid 

account are not relevant in deciding 

whether transaction or service charges 

imposed on a prepaid account for credit 

are ‘‘finance charges’’ under § 1026.4(a). 

However, the Bureau seeks comment on 

this approach and its benefit and costs 

for consumers, industry, and alternative 

approaches if any. 

For the reasons discussed in the 

Overview of Regulation Z Proposal 

section, to preserve the existing rules so 

that they remain applicable to other 

types of credit, the Bureau proposes to 

move the existing rule to 

§ 1026.4(b)(2)(i) and move the existing 

language in comment 4(b)(2)–1 to 

proposed comment 4(b)(2)–1.i. 

4(c) 

Section 1026.4(c) provides a list of 

certain charges that are excluded from 

the definition of finance charge under 

§ 1026.4. The charges listed in 

§ 1026.4(c) include (1) Application fees 

charged to all applicants for credit, 

whether or not credit is actually 

extended; (2) Charges for actual 

unanticipated late payment, for 

exceeding a credit limit, or for 

delinquency, default, or a similar 

occurrence; (3) Charges imposed by a 

financial institution for paying items 

that overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing; and 

(4) Fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. As 

discussed in more detail below, the 

proposal would provide that the 

following charges are not excluded from 

the definition of finance charge in 

connection with credit accessed by 

prepaid card, or credit accessed by 

account numbers where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor: (1) 

Charges imposed by a financial 

institution for paying items that 

overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing; and 

(2) Fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. 

4(c)(3) 

Section 1026.4(c)(3) provides that the 

term ‘‘finance charge’’ does not include 

charges imposed by a financial 

institution for paying items that 

overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing. As 

discussed above in the Overview of 

Regulation Z Proposal section, the 

Board developed this exception to the 

term ‘‘finance charge’’ in order to carve 

out fees imposed by financial 

institutions for checks or other items 

that overdraw an account so that ad hoc 

overdraft plans would not be subject to 

Regulation Z. As discussed in the 

Overview of Regulation Z Proposal 

section, the Bureau intends generally 

that, under its proposal, Regulation Z 

will apply to credit accessed by prepaid 

cards or by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. Thus, the Bureau proposes to 

revise § 1026.4(c)(3) to specify that this 

provision does not apply to credit 

accessed by a prepaid card or by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. As a 

result, charges imposed by a financial 

institution for paying items that 

overdraw a prepaid account will be 

finance charges even if the payment of 

the item and the imposition of the 

charge were not previously agreed upon 

in writing, and the financial institution 

extending the credit represented by the 

overdraft will be a creditor. 


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77230 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

366 46 FR 20848, 20855 (Apr. 7, 1981). 

367 36 FR 16050 (Aug. 19, 1971). 

4(c)(4) 

Section 1026.4(c)(4) provides that the 

term ‘‘finance charge’’ does not include 

fees charged for participation in a credit 

plan, whether assessed on an annual or 

other periodic basis. Comment 4(c)(4)– 

1 explains that the participation fees 

described in § 1026.4(c)(4) do not 

necessarily have to be formal 

membership fees, nor are they limited to 

credit card plans. The provision applies 

to any credit plan in which payment of 

a fee is a condition of access to the plan 

itself, but it does not apply to fees 

imposed separately on individual 

closed-end transactions. The fee may be 

charged on a monthly, annual, or other 

periodic basis; a one-time, non-recurring 

fee imposed at the time an account is 

opened is not a fee that is charged on 

a periodic basis, and may not be treated 

as a participation fee. 

The Bureau proposes to amend 

§ 1026.4(c)(4) to provide that this 

exception does not apply to credit 

accessed by a prepaid card or to credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. The Bureau believes that this 

exception is not dictated by TILA’s 

definition of ‘‘finance charge.’’ Rather, 

the Board added this exception to 

§ 1026.4(c)(4) in 1981 based on an 

interpretation letter that the Board has 

previously issued.366 In the 

interpretation letter, the Board excluded 

annual fees for membership in a credit 

plan from the definition of ‘‘finance 

charge’’ because these fees are not 

imposed incident or as a condition to 

any specific extension of credit.367

Nonetheless, the Bureau believes that 

the term ‘‘finance charge’’ in TILA is 

broad enough to reasonably include 

periodic fees for participation in a credit 

plan under which a consumer may 

obtain credit because those fees would 

be ‘‘incident to the extension of credit.’’ 

Without paying the periodic fees for 

access to the credit plan, the consumer 

could not use the credit plan to access 

credit. 

As discussed in the Overview of 

Regulation Z Proposal section, the 

Bureau intends generally to cover credit 

accessed by a prepaid card, or by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, as 

‘‘open-end credit’’ under Regulation Z. 

The Bureau believes these credit plans 

should be ‘‘open-end credit’’ even if the 

only fees charged for the plan are 

annual or other periodic fees for 

participation in the credit plan. See the 

section-by-section analysis of 

§ 1026.2(a)(20) for a discussion of the 

finance charge criterion for the 

definition of ‘‘open-end credit.’’ The 

Bureau believes that annual or other 

periodic fees that are charged for 

participation in credit plans linked to 

prepaid accounts (as discussed above) 

could be significant costs to consumers, 

even if interest or transaction fees are 

not charged with respect to the plan, 

and thus the protections in Regulation 

Z that apply to open-end credit, 

including those in subpart G, should 

apply to credit plans linked to prepaid 

accounts as discussed above that charge 

an annual or other periodic fee to access 

the plan and otherwise meet the 

definition of ‘‘open-end credit.’’ 

The Bureau especially believes that 

the protections in Regulation Z subpart 

G that generally apply to open-end 

credit that is accessed by a credit card 

would be beneficial to consumers for 

such credit plans. For example, 

§ 1026.51 prohibits credit card issuers 

from extending credit without assessing 

the consumer’s ability to pay, with 

special rules regarding the extension of 

credit to persons under the age of 21. In 

addition, § 1026.52(a) restricts the 

amount of fees (including annual or 

other periodic fees to access the plan) 

that an issuer can charge during the first 

year after an account is opened, such 

that the fees generally cannot exceed 25 

percent of the initial credit limit. These 

provisions would provide important 

protections to consumers to help ensure 

that consumers accessing credit plans 

linked to prepaid accounts as discussed 

above where only annual or other 

periodic fees are imposed do not 

become overextended in using credit, 

and that the periodic fees imposed 

during the first year generally do not 

exceed more than 25 percent of the 

initial credit line. Thus, the Bureau 

would revise § 1026.4(c)(4) and 

comment 4(c)(4)–1 to provide that the 

exception for participation fees from the 

definition of ‘‘finance charge’’ does not 

apply to credit accessed by a prepaid 

card or to credit accessed by an account 

number where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. 

Subpart B 

The provisions in subpart B generally 

apply to a ‘‘creditor’’ as defined in 

§ 1026.17 that is extending ‘‘open-end 

credit’’ as defined in § 1026.2(a)(20). 

They also generally apply to card 

issuers that are extending credit. See 

§ 1026.2(a)(17)(iii) and (iv). These 

provisions generally require that 

account-opening disclosures and 

periodic statement disclosures be 

provided, as well as set forth rules for 

the treatment of payments and credit 

balances, and procedures for resolving 

credit billing errors. While most of the 

provisions in subpart B apply generally 

to open-end credit, as described below, 

some of the provisions only apply to a 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan,’’ as that term is defined in 

§ 1026.2(a)(15)(ii). In addition, subpart B 

also sets forth, in § 1026.12, provisions 

applicable to credit card transactions; 

those provisions generally apply to a 

‘‘card issuer’’ as defined in 

§ 1026.2(a)(7). 

As discussed above in the Overview 

of Regulation Z Proposal section, the 

Bureau anticipates that most credit 

accessed by a prepaid card, or accessed 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, will 

meet the definition of ‘‘open-end credit’’ 

if the creditor may impose a finance 

charge. See the section-by-section 

analysis of the definition of ‘‘credit’’ in 

§ 1026.2(a)(14), the definition of ‘‘openend-credit’’ in proposed § 1026.2(a)(20), 

and the definition of ‘‘finance charge’’ 

in § 1026.4. 

In addition, as discussed above in the 

section-by-section analysis of 

§ 1026.2(a)(7), (a)(15)(i) and (a)(15)(ii), 

an open-end credit plan accessed by a 

prepaid card that is a credit card, or by 

an account number that is a credit card 

where the extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, would be a 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan’’ and the person issuing the 

prepaid card or account number would 

be a ‘‘card issuer.’’ For a discussion of 

card issuers that would still be subject 

to certain provisions in subpart B if they 

are extending credit that is not ‘‘openend credit,’’ see the section-by-section 

analysis of § 1026.2(a)(17). 

As discussed below, the proposal 

would revise subpart B to provide 

guidance on how certain provisions in 

subpart B apply to open-end credit 

plans or credit card accounts that are 

accessed by a prepaid card (such as 

overdraft credit) or to open-end credit 

plans or credit card accounts where 

extensions of credit are deposited into a 

prepaid account where the extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77231 

368 75 FR 7658 at 7672–7673, Feb. 22, 2010. 

Specifically, the proposal would 

provide additional guidance regarding: 

(1) Disclosure requirements applicable 

to periodic statements in § 1026.5, 

1026.7 and 1026.8; (2) treatment of 

payment requirements as set forth in 

§ 1026.10; and (3) billing error 

procedures in § 1026.13. 

The proposal also would revise 

certain provisions that apply to credit 

card transactions in § 1026.12 to provide 

guidance on how those provisions apply 

to credit card transactions that are made 

using a prepaid card that is a credit card 

or using an account number that is a 

credit card where the extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Specifically, the proposal would 

provide additional guidance on: (1) 

Unsolicited issuance in § 1026.12(a); (2) 

the right of a cardholder to assert claims 

or defenses against a card issuer in 

§ 1026.12(c); and (3) the prohibition on 

offsets by a card issuer in § 1026.12(d). 

In addition, the proposal would add a 

new § 1026.12(h) that would impose a 

new requirement on card issuers that 

offer prepaid cards that are credit cards 

or account numbers that are credit cards 

where the extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. Under 

proposed § 1026.12(h), these card 

issuers would be prevented from 

opening a credit card account for, or 

providing a solicitation or application to 

open a credit or charge card account to, 

a consumer who holds a prepaid card 

until at least 30 days after the consumer 

has registered the prepaid account. 

Section 1026.5 General Disclosure 

Requirements 

5(b) Time of Disclosures 

5(b)(2) Periodic Statements 

5(b)(2)(ii) Timing Requirements 

TILA sections 127(b) and 163, which 

are implemented in § 1026.5(b)(2), set 

forth the timing requirements for 

providing periodic statements for openend credit accounts and credit card 

accounts. 15 U.S.C. 1637(b) and 1666b. 

Section 1026.5(b)(2)(i) provides that a 

creditor that extends open-end credit or 

credit accessed by a credit card account 

generally is required to provide a 

periodic statement as required by 

§ 1026.7 for each billing cycle at the end 

of which an account has a debit or 

credit balance of more than $1 or on 

which a finance charge has been 

imposed. Section 1026.5(b)(2)(ii)(A) 

provides that for credit card accounts 

under an open-end (not home-secured) 

consumer credit plan, a card issuer must 

adopt reasonable procedures designed 

to ensure that: 

(1) Periodic statements are mailed or 

delivered at least 21 days prior to the 

payment due date disclosed on the 

statement pursuant to 

§ 1026.7(b)(11)(i)(A); and 

(2) The card issuer does not treat as 

late for any purpose a required 

minimum periodic payment received by 

the card issuer within 21 days after 

mailing or delivery of the periodic 

statement disclosing the due date for 

that payment. See the section-by-section 

analysis of § 1026.2(a)(15)(ii) for a 

discussion of the term ‘‘credit card 

accounts under an open-end (not homesecured) consumer credit plan.’’ 

TILA sections 127(b)(12) and (o), 

which are implemented in 

§ 1026.7(b)(11)(i)(A), set forth 

requirements related to the disclosure of 

payment due dates on periodic 

statements in the case of a credit card 

account under an open-end consumer 

credit plan. 15 U.S.C 1637(b)(12), (o). 

Section 1026.7(b)(11)(i)(A) provides that 

for a credit card account under an openend (not home-secured) consumer credit 

plan, a card issuer must provide on each 

periodic statement the due date for a 

payment. The due date disclosed must 

be the same day of the month for each 

billing cycle. 

Although TILA sections 127(b)(12) 

and (o) do not, on their face, exclude 

charge card accounts that are accessing 

open-end credit, the Board in 

implementing these provisions, as 

explained in comment 5(b)(2)(ii)–4.i, 

determined that the payment due date 

requirement in § 1026.7(b)(11)(i)(A) 

does not apply to periodic statements 

provided solely for charge card 

accounts. See § 1026.7(b)(11)(ii)(A). 

Thus, the requirement in 

§ 1026.5(b)(2)(ii)(A)(1) to adopt 

reasonable procedures designed to 

ensure that periodic statements are 

mailed or delivered at least 21 days 

prior to the payment due date disclosed 

on the periodic statement does not 

apply to charge card accounts. In the 

supplemental information to the final 

rule adopting the exclusion for charge 

cards from the due date disclosure 

requirement, the Board noted that 

charge cards are typically products 

where outstanding balances cannot be 

carried over from one billing cycle to 

the next and are payable when the 

periodic statement is received.368

Therefore, the contractual payment due 

date for a charge card account is the 

date on which the consumer receives 

the periodic statement (although charge 

card issuers generally request that the 

consumer make payment by some later 

date). If the due date disclosure 

requirement and the 21-day rule for 

delivery of periodic statements applied 

to charge card account, the card issuer 

could no longer require payment upon 

delivery of the statement. Thus, the 

Board concluded that it would not be 

appropriate to apply the payment due 

date disclosure in § 1026.7(b)(11)(i)(A) 

to periodic statements provided solely 

for charge card accounts. 

As discussed in more detail in the 

section-by-section analysis of 

§ 1026.7(b)(11), the proposal would 

provide that the due date disclosure set 

forth in § 1026.7(b)(11)(A) does apply to 

periodic statements provided solely for 

charge card accounts where the charge 

card account is accessed by a charge 

card that is a prepaid card; or where the 

charge card account is accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. See 

proposed § 1026.7(b)(11)(ii)(A). Thus, as 

a technical revision, comment 

5(b)(2)(ii)–4.i would be revised to reflect 

the proposed changes to § 1026.7(b)(11) 

that the due date requirement does 

apply to charge card accounts accessed 

by prepaid cards or by account numbers 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. The Bureau is not 

proposing to adjust the payment due 

date requirement in § 1026.7(b)(11)(i)(A) 

for charge cards that are neither prepaid 

cards nor account numbers where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

As discussed in more detail in the 

section-by-section analysis of 

§§ 1026.7(b)(11) and 12(d)(3), the 

Bureau believes that it is important to 

provide strong protections to prepaid 

accountholders to ensure that they can 

control when and if funds are swept 

from their accounts to repay previous 

overdrafts. In particular, the Bureau 

believes that for all credit card accounts 

under an open-end (not home-secured) 

consumer credit plan, including charge 

card accounts, accessed by prepaid 

cards or by account numbers where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, the card issuer should be 

required to adopt reasonable procedures 

designed to ensure that periodic 

statements are mailed or delivered at 

least 21 days prior to the payment due 

date disclosed on the statement 


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pursuant to § 1026.7(b)(11)(i)(A). As 

discussed in more detail in the sectionby-section analysis of proposed 

§ 1026.7(b)(11) and 12(d), the Bureau 

believes that this requirement, along 

with proposed changes to the offset 

prohibition in § 1026.12(d), will ensure 

that the due date of the credit card 

account is not so closely aligned with 

the timing of when funds are deposited 

into the prepaid account that card 

issuers can circumvent TILA’s offset 

prohibition. 

Section 1026.7 Periodic Statement 

7(b) Rules Affecting Open-End (not 

Home-Secured) Plans 

TILA section 127(b), implemented in 

§ 1026.7, identifies information about an 

open-end account or credit card account 

that must be disclosed when a creditor 

is required to provide periodic 

statements. 15 U.S.C. 1637(b). Section 

1026.7(b) sets forth the content 

requirements for periodic statements 

given with respect to open-end (not 

home-secured) plans or credit card 

accounts that are not home secured. 

Generally, under § 1026.7(b), such 

periodic statements must include, 

among other things, information about 

(1) the amount of the balance 

outstanding at the beginning of the 

billing cycle; (2) any credit to the 

account during the billing cycle, such as 

payments; (3) any credit transactions 

that occurred during a billing cycle 

described in accordance with § 1026.8; 

(4) the annual percentage rates (APRs) 

that may be used to compute interest 

charges during the billing cycle; (5) the 

amount of the balance to which an APR 

was applied and an explanation of how 

that balance was determined; (6) the 

amount of interest charges that was 

incurred during the billing cycle, 

itemized by type of transaction, as well 

as the total interest charges that were 

imposed during the billing cycle and 

year to date; (7) the amount of each fee 

that was incurred during the billing 

cycle, itemized by type, as well as the 

total fee charges that were imposed 

during the billing cycle and year to date; 

(8) the date by which or the time period 

within which the new balance or any 

portion of the new balance must be paid 

to avoid additional finance charges; (9) 

the closing date of the billing cycle and 

the account balance outstanding on that 

date; and (10) the due date for a 

payment with respect to a credit card 

account under an open-end (not homesecured) consumer credit plan. 

As discussed in the section-by-section 

analysis of proposed § 1026.7(b)(11), the 

proposal would amend the due date 

disclosure requirements in 

§ 1026.7(b)(11) with respect to credit 

card accounts under an open-end (not 

home-secured) consumer credit plan 

that are accessed by a prepaid card, or 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. See 

the section-by-section analysis of 

§ 1026.2(a)(15)(ii) for a discussion of the 

term ‘‘credit card account under an 

open-end (not home-secured) consumer 

credit plan.’’ 

The periodic statement requirements 

in § 1026.7(b) generally would apply to 

open-end plans or credit card accounts 

that are accessed by a prepaid card, or 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. The 

Bureau notes that under Regulation E, 

periodic statements would separately be 

required under § 1005.9(b) to disclose 

non-credit transactions on the prepaid 

account, but that proposed § 1005.18(c) 

would create an exception. Specifically, 

proposed § 1005.18(c) would permit the 

financial institution to make available to 

the consumer (1) the consumer’s 

account balance, through a readily 

available telephone line; (ii) an 

electronic history of the consumer’s 

account transactions, such as through a 

Web site, that covers at least 18 months 

preceding the date the consumer 

electronically accesses the account; and 

(iii) a written history of the consumer’s 

account transactions that is provided 

promptly in response to an oral or 

written request and that covers at least 

18 months preceding the date the 

financial institution receives the 

consumer’s request. 

If a financial institution elects to 

provide a periodic statement under 

Regulation E § 1005.9(b) to a holder of 

the prepaid account and a periodic 

statement is required under Regulation 

Z § 1026.7, the financial institution may 

combine the two periodic statements, so 

long as the requirements of both 

Regulation E and Regulation Z are met 

in providing the combined statement. If 

a financial institution instead elects to 

provide account access pursuant to 

Regulation E proposed § 1005.18(c), the 

financial institution must also provide 

periodic statements pursuant to 

Regulation Z § 1026.7. The financial 

institution may provide the Regulation 

Z periodic statements in electronic 

form, subject to compliance with the 

consumer consent and other applicable 

provisions of the Electronic Signatures 

in Global and National Commerce Act 

(E-Sign Act) (15 U.S.C. 7001 et seq.). See 

§ 1026.5(a)(1)(iii). 

As discussed in the section-by-section 

analysis of §§ 1026.8 and 1026.13(i), the 

Bureau recognizes that with respect to 

transactions made with a prepaid card 

that accesses an overdraft credit plan, a 

single transaction may involve both a 

withdrawal of funds from the prepaid 

account and a credit extension. For 

example, assume that a cardholder 

makes a $50 purchase with the prepaid 

card but only has $20 in funds in the 

prepaid account. The transaction would 

involve both a withdrawal of $20 from 

the prepaid account and an extension of 

credit of $30. For these types of 

transactions, the Bureau recognizes that 

the part of the transaction that accesses 

the prepaid funds will be shown on the 

periodic statement or account history 

under Regulation E and the part of the 

transaction that accesses credit will be 

shown as a credit transaction on the 

Regulation Z periodic statement. The 

Bureau solicits comment on whether 

this situation currently presents itself in 

relation to transactions on overdraft 

lines of credit accessed by debit cards 

and if so, how creditors typically 

disclose these transactions on periodic 

statements under Regulation E and Z. 

The Bureau also solicits comment on 

whether, for these types of transactions, 

the Bureau should consider a disclosure 

that would appear on the Regulation Z 

periodic statement that would notify 

consumers when a particular 

transaction is funded partially through 

the prepaid account and partially 

funded through credit so that consumers 

would know to look at the Regulation E 

periodic statement or account history 

for additional information related to that 

transaction. 

7(b)(11) Due Date; Late Payment Costs 

TILA sections 127(b)(12) and (o), 

which are implemented in 

§ 1026.7(b)(11)(i), set forth requirements 

related to the disclosure of payment due 

dates on periodic statements in the case 

of a credit card account under an openend consumer credit plan. 15 U.S.C. 

1637(b)(12), (o). Under 

§ 1026.7(b)(11)(i), for a credit card 

account under an open-end (not homesecured) consumer credit plan, a card 

issuer generally must provide on each 

periodic statement: (1) The due date for 

a payment and the due date disclosed 

must be the same day of the month for 

each billing cycle; and (2) The amount 

of any late payment fee and any 

increased periodic rate(s) (expressed as 

an APR(s)) that may be imposed on the 

account as a result of a late payment. 

Section 1026.7(b)(11)(ii) provides, 

however, that the requirements of 

§ 1026.(b)(11)(i) do not apply to the 

following: (1) Periodic statements 


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369 75 FR 7658 at 7672–7673, Feb. 22, 2010. 

provided solely for charge card 

accounts; and (2) Periodic statements 

provided for a charged-off account 

where payment of the entire account 

balance is due immediately. 

As also noted in the section-bysection analysis of proposed 

§ 1026.5(b)(2)(ii), although TILA 

sections 127(b)(12) and (o) do not, on 

their face, exclude charge card accounts 

that are accessing open-end credit from 

the requirement to disclose the due date 

on each periodic statement, the Board in 

implementing these provisions 

determined that the payment due date 

requirement in § 1026.7(b)(11)(i)(A) 

does not apply to periodic statements 

provided solely for charge card 

accounts. See § 1026.7(b)(11)(ii)(A). In 

the supplemental information to the 

final rule adopting the exclusion for 

charge cards from the due date 

disclosure requirement, the Board noted 

that charge cards are typically products 

where outstanding balances cannot be 

carried over from one billing cycle to 

the next and are payable when the 

periodic statement is received.369

Therefore, the contractual payment due 

date for a charge card account is the 

date on which the consumer receives 

the periodic statement (although charge 

card issuers generally request that the 

consumer make payment by some later 

date). If the due date disclosure 

requirement and the 21-day rule for 

delivery of periodic statements applied 

to charge card accounts, the card issuer 

could no longer require payment upon 

delivery of the statement. Thus, the 

Board concluded that it would not be 

appropriate to apply the payment due 

date disclosure in § 1026.7(b)(11)(i)(A) 

to periodic statements provided solely 

for charge card accounts. 

The proposal would amend 

§ 1026.7(b)(11)(ii)(A) to provide that the 

due date disclosure does apply to 

periodic statements provided solely for 

charge card accounts where the charge 

card account is accessed by a charge 

card that is a prepaid card; or where the 

charge card account is accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. Thus, 

the due date disclosure in 

§ 1026.7(b)(11)(i)(A) would apply to 

periodic statements provided for a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan, including a charge card account, 

where the account is accessed by a 

charge card that is a prepaid card; or 

where the charge card account is 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

As discussed in more detail in the 

section-by-section analysis of 

§§ 1026.5(b)(2)(ii) and 12(d)(3), the 

Bureau believes that it is important to 

provide strong protections to prepaid 

accountholders to ensure that they can 

control when and if funds are swept 

from their accounts to repay previous 

overdrafts. In particular, as discussed in 

the section-by-section analysis of 

proposed § 1026.5(b)(2)(ii), by requiring 

the due date in these instances, the card 

issuer would be required under 

§ 1026.5(b)(2)(ii)(A) to adopt reasonable 

procedures designed to ensure that 

periodic statements are mailed or 

delivered at least 21 days prior to the 

payment due date disclosed on the 

statement pursuant to 

§ 1026.7(b)(11)(i)(A). As discussed in 

more detail in the section-by-section 

analysis of proposed § 1026.12(d), the 

Bureau believes that this proposed 

requirement, along with proposed 

changes to the timing requirement for a 

periodic statement in § 1026.5(b)(2)(ii), 

the offset prohibition in § 1026.12(d) 

and the compulsory-use provisions in 

Regulation E (proposed § 1005.10(e)(1)), 

would allow consumers to retain control 

over the funds in their prepaid accounts 

even when a credit card feature becomes 

associated with that account, which is 

consistent with the prohibition on 

offsets. 

The Bureau believes that this 

proposed requirement, the proposed 

requirement in § 1026.5(b)(2)(ii) and the 

proposed changes to the offset 

prohibition in § 1026.12(d), will ensure 

that the due date of the credit card 

account is not so closely aligned with 

the timing of when funds are deposited 

into the prepaid account that card 

issuers can circumvent the offset 

prohibition. As discussed in more detail 

in the section-by-section analysis of 

proposed § 1026.12(d)(3), the Bureau is 

concerned that, with respect to credit 

card accounts that are accessed by 

prepaid cards or by account numbers 

where extensions of credit are permitted 

to be deposited directly only in 

particular prepaid accounts specified by 

the creditor, some card issuers may 

attempt to circumvent the prohibition 

on offsets by specifying that each 

transaction on the credit card account 

linked to the prepaid account (as 

described above) is due on the date on 

which funds are subsequently deposited 

into the account, and obtaining a 

consumer’s written authorization to 

deduct all or part of the cardholder’s 

credit card debt when deposits are 

received into the prepaid account to 

help ensure that the debt is repaid. The 

Bureau believes that card issuers that 

offer credit card accounts linked to a 

prepaid account may rely significantly 

on obtaining a consumer’s written 

authorization of daily or weekly debits 

to the prepaid account to repay the 

credit card debt given the overall 

creditworthiness of prepaid 

accountholders. The Bureau also 

believes that card issuers that offer 

credit card accounts linked to a prepaid 

account may be able to obtain a 

consumer’s written authorization to 

debit the prepaid account for the credit 

card debt more easily than for other 

types of credit card accounts because 

consumers may believe that, in order to 

obtain credit, they have no alternative 

but to provide written authorization to 

allow a card issuer to deduct all or part 

of the cardholder’s credit card debt from 

the linked prepaid account. 

The proposed revisions to 

§ 1026.7(b)(11), along with the proposed 

changes to § 1026.5(b)(2)(ii), to the 

§ 1026.12(d) offset prohibition and to 

the compulsory-use provisions in 

Regulation E (proposed § 1005.10(e)(1)), 

would mean, respectively, that with 

respect to credit card accounts related to 

prepaid accounts as discussed above, 

card issuers (1) would be required to 

adopt reasonable procedures designed 

to ensure that periodic statements are 

mailed or delivered at least 21 days 

prior to the payment due date disclosed 

on the periodic statement and the due 

date disclosed must be the same day of 

the month for each billing cycle; (2) 

could move funds automatically from 

the asset account held by the card issuer 

to the credit card account held by the 

card issuer to pay some or all of the 

credit card debt no more frequently than 

once per month, such as on the payment 

due date, (pursuant to the consumer’s 

signed, written agreement that the issuer 

may do so), and (3) would be required 

to offer consumers a means to repay 

their outstanding credit balances other 

than automatic repayment (such as by 

means of a transfer of funds from the 

asset account to the credit account that 

the consumer initiates on the prepaid 

account’s online banking Web site 

following a cash reload to the asset 

account). 

Section 1026.8 Identifying 

Transactions on Periodic Statements 

TILA section 127(b)(2) requires 

creditors to identify on periodic 

statements credit extensions that 

occurred during a billing cycle. 15 

U.S.C. 1637(b)(2). The statute calls for 

the Bureau to implement requirements 

that are sufficient to identify the 


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370 46 FR 20848, 20861 (Apr. 7, 1981). 

transaction or to relate the credit 

extension to sales vouchers or similar 

instruments previously furnished. 

Section 1026.8 sets forth the 

requirements for how issuers must 

describe each credit transaction on the 

periodic statement. Section 1026.8 

generally provides that a creditor must 

identify credit transactions on or with 

the first periodic statement that reflects 

the transaction by furnishing certain 

information. Section 1026.8(a) sets forth 

the requirements for describing a ‘‘sale 

credit’’ transaction on the periodic 

statement. A ‘‘sale credit’’ generally 

means a credit transaction involving the 

sale of property or services. Section 

1026.8(b) sets forth the requirements for 

describing a ‘‘nonsale credit’’ 

transaction on the periodic statement. A 

‘‘nonsale credit’’ transaction generally 

means a credit transaction that does not 

involve the sale of property or services. 

The proposal would provide guidance 

on how creditors may comply with the 

requirements in §§ 1026.8(a) and (b) 

with respect to open-end credit plans or 

credit card accounts accessed by 

prepaid cards or by account numbers 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

8(a) Sale Credit 

Section 1026.8(a) provides that for 

each credit transaction involving the 

sale of property or services, the creditor 

generally must disclose the amount and 

date of the transaction, and either: (i) A 

brief identification of the property or 

services purchased, for creditors and 

sellers that are the same or related; or 

(ii) The seller’s name; and the city and 

state or foreign country where the 

transaction took place. The creditor may 

omit the address or provide any suitable 

designation that helps the consumer to 

identify the transaction when the 

transaction took place at a location that 

is not fixed; took place in the 

consumer’s home; or was a mail, 

Internet, or telephone order. Comment 

8(a)–1 provides that the term ‘‘sale 

credit’’ refers to a purchase in which the 

consumer uses a credit card, or 

otherwise directly accesses an open-end 

line of credit to obtain goods or services 

from a merchant, whether or not the 

merchant is the card issuer or creditor. 

Thus, under comment 8(a)–1, sale credit 

would include credit transactions where 

a prepaid card that is a credit card is 

used to obtain goods or services from a 

merchant. 

Comment 8(a)–2 provides guidance 

on how to disclose the amount of the 

credit transaction if sale transactions are 

not billed in full on any single 

statement. The proposal would move 

the existing language of comment 8(a)– 

2 to proposed comment 8(a)–2.i. The 

proposal also would add comment 8(a)– 

2.ii to provide guidance on how to 

disclose the amount of the credit 

transaction for purposes of certain 

prepaid transactions. First, it would 

explain that the term ‘‘sale credit’’ 

includes a purchase in which the 

consumer uses a prepaid card that is a 

credit card to obtain goods or services 

from a merchant and the transaction is 

wholly or partially funded by credit, 

regardless of whether the merchant is 

the card issuer or creditor. Proposed 

comment 8(a)–2.ii also would provide 

that if a prepaid card that is a credit 

card is used to obtain goods or services 

from a merchant and the transaction is 

partially funded by the consumer’s 

prepaid account, and partially funded 

by credit, the amount to be disclosed 

under § 1026.8(a) is the amount of the 

credit extension, not the total amount of 

the purchase transaction. Because 

§ 1026.7(b)(2) requires that credit 

transactions be disclosed on periodic 

statements in accordance with § 1026.8, 

the Bureau believes it is appropriate to 

only consider the credit portion of the 

transaction as ‘‘sale credit’’ that would 

be disclosed on the Regulation Z 

periodic statement. Under the 

Regulation E proposal, as discussed in 

the section-by-section analysis of 

Regulation E proposed § 1005.18(c), the 

amount of the transaction that is funded 

from the prepaid account would be 

disclosed either on the Regulation E 

periodic statement if the financial 

institution elects to provide one under 

Regulation E proposed § 1005.18(c)(1), 

or alternatively, on the electronic 

history of the consumer’s prepaid 

account transactions, such as through a 

Web site, that covers at least 18 months 

preceding the date the consumer 

electronically accesses the account 

under Regulation E proposed 

§ 1005.18(c)(1)(ii). For a discussion of 

issues related to disclosures of these 

transactions on periodic statements 

under Regulation Z and E, see the 

section-by-section analysis of 

§ 1026.7(b). 

The Bureau recognizes that for 

purchases of goods or services that 

involve overdrafts on asset accounts that 

are executed via debit cards, the credit 

transaction may be disclosed as nonsale 

credit. In particular, comment 8(b)–1.iii 

provides that nonsale credit includes 

the use of the overdraft credit plan 

accessed by a debit card, even if such 

use is in connection with a purchase of 

goods or services. In a 1981 rulemaking 

implementing the Truth in Lending 

Simplification and Reform Act, the 

Board indicated that several 

commenters asked the Board to clarify 

whether a creditor should identify a 

transaction as sale or nonsale credit 

when a consumer uses a debit card with 

an overdraft feature to purchase goods, 

and in doing so, activates the overdraft. 

The Board expressed its belief that the 

credit portions of such transactions 

could be viewed as cash advances, and 

therefore permitted them to be disclosed 

as nonsale credit at the creditor’s option 

even though a purchase is involved.370

As discussed in the Overview of 

Regulation Z Proposal section, the 

Bureau is not intending to revise rules 

in Regulation Z that apply to overdraft 

plans accessed by debit cards. 

Nonetheless, for credit plans accessed 

by prepaid cards that are credit cards, 

the Bureau believes that disclosing the 

credit transaction as sale credit would 

be more helpful to consumers than 

disclosing the transaction as nonsale 

credit because the consumer would 

receive the seller’s name, and the city 

and state or foreign country where the 

transaction took place. If the credit 

transaction were treated as a nonsale 

credit, the consumer would not receive 

the information about the seller’s name 

and address. The Bureau believes that 

the information about the seller’s name 

and address may be useful to consumers 

in identifying the credit transactions 

where a prepaid card that is a credit 

card is used to obtain goods or services 

from a merchant. The Bureau also notes 

that under Regulation E, on the periodic 

statement, or the alternative account 

history, a transaction that involves a 

withdrawal from the prepaid account at 

point of sale must include the 

merchant’s name and location. See 

Regulation E § 1005.9(b)(1)(iv) and (v) 

and proposed § 1005.18(c)(2). Thus, 

with respect to a single transaction that 

involves both a withdrawal from the 

prepaid account and an extension of 

credit, disclosing such credit transaction 

as a sale credit when the prepaid card 

accesses credit at point of sale also 

could help consumers match up the part 

of the transaction that appears on the 

Regulation Z periodic statement with 

the part of the transaction that appears 

on the Regulation E periodic statement 

or account history. 

Comment 8(a)–2.ii also would set 

forth guidance on how to disclose a 

transaction at point of sale where credit 

is accessed by a prepaid card that is a 

credit card, and that transaction 

partially involves the purchase of goods 

or services and partially involves other 

credit such as cash back given to the 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77235 

cardholder. In this situation, new 

proposed comment 8(b)–1.vi provides 

that the creditor must disclose the 

amount of credit as ‘‘sale credit’’ under 

§ 1026.8(a), including the portion of the 

transaction that involves credit that is 

not for a purchase of goods or services. 

The Bureau understands that creditors 

may not be able to identify the amount 

of the credit transaction the relates to 

the purchase of goods or services at a 

merchant and the amount of the credit 

transaction that relates to other types of 

credit, such as cash back given to the 

cardholder. In this case, the card issuer 

may only be able to determine the total 

amount of credit extended for that 

transaction. To ensure that consumers 

are more able to recognize credit 

transactions disclosed on periodic 

statements, the proposal would require 

a creditor to disclose the entire amount 

of the credit transaction as ‘‘sale credit’’ 

under § 1026.8(a). When using this 

proposed approach, a creditor would 

disclose the entire amount of the credit 

transaction, the date of the transaction, 

the seller’s name, and the city and state 

or foreign country where the transaction 

took place. The Bureau believes such 

information would be sufficient to allow 

a consumer to identify a transaction, 

even where part of the amount of the 

transaction was for cash back or other 

forms of credit given to the cardholder 

at point of sale. For these types of 

transactions, the Bureau anticipates that 

the cardholder will associate the entire 

credit transaction, including the cash 

back portion of the credit, with the 

seller’s name. The Bureau solicits 

comment on this approach. 

8(b) Nonsale Credit 

Section 1026.8(b) provides that for 

each credit transaction not involving the 

sale of property or services, the creditor 

generally must disclose a brief 

identification of the transaction; the 

amount of the transaction; and at least 

one of the following dates: (1) The date 

of the transaction; (2) the date the 

transaction was debited to the 

consumer’s account; or (3) if the 

consumer signed the credit document, 

the date appearing on the document. 

Comment 8(b)–1 provides that the term 

‘‘nonsale credit’’ refers to any form of 

loan credit including, for example: (1) A 

cash advance; (2) an advance on a credit 

plan that is accessed by overdrafts on a 

checking account; (3) the use of a 

‘‘supplemental credit device’’ in the 

form of a check or draft or the use of the 

overdraft credit plan accessed by a debit 

card, even if such use is in connection 

with a purchase of goods or services; 

and (4) miscellaneous debits to remedy 

mispostings, returned checks, and 

similar entries. 

The proposal would add two 

additional examples to comment 8(b)–1 

to provide guidance on when credit 

transactions are ‘‘nonsale credit’’ when 

credit is accessed by a prepaid card. 

First, new proposed comment 8(b)–1.v 

would explain that ‘‘nonsale credit’’ 

includes an advance at an ATM on a 

credit plan that is accessed by a prepaid 

card that is a credit card. This proposed 

comment also would clarify that if a 

prepaid card that is a credit card is used 

to obtain an advance at an ATM and the 

transaction is partially funded by the 

consumer’s prepaid account, and 

partially funded by a credit extension, 

the amount to be disclosed under 

§ 1026.8(b) is the amount of the credit 

extension, not the total amount of the 

ATM transaction. 

The proposal would also add a new 

comment 8(b)–1.vi to explain that 

‘‘nonsale credit’ includes an advance on 

a credit plan accessed by an account 

number where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. This example 

is designed to address situations where 

(1) a separate line of credit is linked to 

a prepaid account where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor; (2) 

the consumer requests an advance on 

the account using an account number; 

and (3) the advance is deposited into the 

prepaid account. In this situation, the 

advance taken on the line of credit 

would be ‘‘nonsale credit’’ even if the 

consumer subsequently uses the 

deposited funds to purchase goods or 

services at a merchant. This provision 

would not apply to open-end credit or 

a credit card account that is accessed 

directly by a prepaid card. As discussed 

above, the ‘‘sale credit’’ rules in 

§ 1026.8(a) would apply where a 

prepaid card accesses credit to obtain 

goods or services from a merchant. 

The proposal also would make 

technical revisions to two comments— 

comment 8(b)–1.ii and comment 8(b)– 

2—which provide guidance regarding 

overdraft credit plans in order to make 

clear that these comments do not apply 

to overdraft credit plans related to a 

prepaid accounts. 

Section 1026.10 Payments 

10(a) General Rule 

TILA section 164(a), which is 

implemented in § 1026.10(a), provides 

that payments received from an obligor 

under an open-end consumer credit 

plan or a credit card account by the 

creditor shall be posted promptly to the 

obligor’s account as specified in 

regulations of the Bureau. 15 U.S.C. 

1666c. Section 1026.10(a) generally 

provides that a creditor for open-end 

credit or a credit card account shall 

credit a payment to the consumer’s 

account as of the date of receipt, except 

when a delay in crediting does not 

result in a finance or other charge or 

except as provided in § 1026.10(b). 

Comment 10(a)–2 provides guidance on 

the term ‘‘date of receipt’’ as used in 

§ 1026.10(a). Specifically, comment 

10(a)–2 provides that the ‘‘date of 

receipt’’ is the date that the payment 

instrument or other means of 

completing the payment reaches the 

creditor. Comment 10(a)–2.ii provides 

an example illustrating when the date of 

receipt is for payments related to payroll 

deduction plans. Specifically, comment 

10(a)–2.ii provides that in a payroll 

deduction plan in which funds are 

deposited to an asset account held by 

the creditor, and from which payments 

are made periodically to an open-end 

credit account, payment is received on 

the date when it is debited to the asset 

account (rather than on the date of the 

deposit), provided the payroll deduction 

method is voluntary and the consumer 

retains use of the funds until the 

contractual payment date. 

The proposal would amend this 

comment to reference proposed changes 

that would be added to § 1026.12(d) 

related to the prohibition on offsets. As 

discussed in more detail in the sectionby-section analysis of § 1026.12(d), 

§ 1026.12(d)(1) provides that a card 

issuer may not take any action, either 

before or after termination of credit card 

privileges, to offset a cardholder’s 

indebtedness arising from a consumer 

credit transaction under the relevant 

credit card plan against funds of the 

cardholder held on deposit with the 

card issuer. Nonetheless, § 1026.12(d)(3) 

provides that the prohibition on offsets 

does not prohibit a plan, if authorized 

in writing by the cardholder, under 

which the card issuer may periodically 

deduct all or part of the cardholder’s 

credit card debt from a deposit account 

held with the card issuer (subject to the 

limitations in § 1026.13(d)(1)). With 

respect to credit cards that are also 

prepaid cards or credit cards that are 

also account numbers where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, the 

proposal would add § 1026.12(d)(3)(ii) 

to define ‘‘periodically’’ to mean no 

more frequently than once per calendar 

month. Thus, under proposed 

§ 1026.12(d)(3), with respect to such 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77236 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

371The Bureau notes that a prepaid card would 

be an access device under Regulation E, as that term 

is defined in Regulation E § 1005.2(a)(1), and would 

be subject to the issuance rules set forth in 

Regulation E § 1005.5 when it is issued. 

credit card accounts linked to a prepaid 

account, a card issuer may deduct 

automatically all or a part of the 

cardholder’s credit card debt from the 

prepaid account or other deposit 

account held by the card issuer no more 

frequently than once per month, 

pursuant to a signed, written 

authorization by the cardholder to do 

so. 

The proposal would revise comment 

10(a)–2.ii to explain that 

§ 1026.12(d)(3)(ii) prevents card issuers, 

with respect to credit card accounts 

accessed by prepaid cards that are credit 

cards or for account numbers that are 

credit cards where the extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, from 

automatically deducting credit card 

account payments from a prepaid 

account or other deposit account held 

by the card issuer more frequently than 

once per calendar month. In a payroll 

deduction plan in which funds are 

deposited to a prepaid account held by 

the creditor, and from which payments 

are made on a monthly basis to a credit 

card account accessed by a prepaid card 

that is a credit card, or by account 

numbers that are credit cards where the 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, payment is received on the 

date when it is debited to the prepaid 

account (rather than on the date of the 

deposit), provided the payroll deduction 

method is voluntary and the consumer 

retains use of the funds until the 

contractual payment date. 

Section 1026.12 Special Credit Card 

Provisions 

Section 1026.12 contains special rules 

applicable to credit cards and credit 

card accounts, including conditions 

under which a credit card may be 

issued, liability of cardholders for 

unauthorized use, cardholder rights to 

assert merchant claims and defenses 

against the card issuer, and the 

prohibition on offsets by issuers. 

The proposal would revise certain 

provisions that apply to credit card 

transactions in § 1026.12 to provide 

guidance on how those provisions apply 

to credit card transactions that are made 

using a prepaid card that is a credit 

card, or using an account number that 

is a credit card where the extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Specifically, the proposal would 

provide additional guidance on: (1) 

Unsolicited issuance in § 1026.12(a); (2) 

the right of a cardholder to assert claims 

or defenses against a card issuer in 

§ 1026.12(c); and (3) the prohibition on 

offsets by a card issuer in § 1026.12(d). 

In addition, the proposal would add 

a new provision to § 1026.12(h) that 

would impose a new requirement on 

card issuers that offer prepaid cards that 

are credit cards, or account numbers 

that are credit cards where the 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. Under proposed § 1026.12(h), 

these card issuers would be prevented 

from opening a credit card account for, 

or providing a solicitation or application 

to open a credit or charge card account 

to, a consumer who holds a prepaid 

card until at least 30 calendar days after 

the consumer has registered the prepaid 

account. 

12(a) Issuance of Credit Cards 

TILA section 132, which is 

implemented by § 1026.12(a) of 

Regulation Z, generally prohibits 

creditors from issuing credit cards 

except in response to a request or 

application. Section 132 explicitly 

exempts from this prohibition credit 

cards issued as renewals of or 

substitutes for previously accepted 

credit cards. 15 U.S.C. 1642. 

Section 1026.12(a) provides that 

regardless of the purpose for which a 

credit card is to be used, including 

business, commercial, or agricultural 

use, no credit card shall be issued to any 

person except: (1) In response to an oral 

or written request or application for the 

card; or (2) As a renewal of, or substitute 

for, an accepted credit card. The 

proposal would provide guidance on 

how the prohibition on issuing 

unsolicited credit cards applies to 

prepaid cards that are credit cards, and 

account numbers that are credit cards 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

12(a)(1) 

Addition of a Credit Feature 

Under current § 1026.12(a), a prepaid 

card cannot access automatically a 

credit card feature at the time the card 

is purchased by the consumer at point 

of sale. A card issuer could add a credit 

card feature to a prepaid card only in 

response to a consumer’s explicit 

request or application. 

Comment 12(a)(1)–2 would be 

modified specifically to explain that the 

addition of a credit card feature to an 

existing prepaid card constitutes 

‘‘issuance’’ for purposes of unsolicited 

issuance under § 1026.12(a). 

Specifically, the existing comment 

12(a)(1)–2 provides that if the consumer 

has a non-credit card, the addition of 

credit features to the card (for example, 

the granting of overdraft privileges on a 

checking account when the consumer 

already has a check guarantee card) 

constitutes issuance of a credit card. 

The proposal would revise comment 

12(a)(1)–2 to provide guidance relating 

to prepaid cards. Specifically, proposed 

comment 12(a)(1)–2 would provide that 

if the consumer has a non-credit card, 

including a prepaid card, the addition of 

a credit feature or plan to the card that 

would make the card into a credit card 

under § 1026.2(a)(15)(i) constitutes 

issuance of a credit card. The proposal 

also adds an example related to prepaid 

cards. Specifically, the proposal would 

add proposed comment 12(a)(1)–2.ii to 

provide that allowing a prepaid card to 

access a credit plan that would make the 

card into a credit card under 

§ 1026.2(a)(15)(i) would constitute 

issuance of a credit card. The existing 

example relating to check guarantee 

cards would be moved to proposed 

comment 12(a)(1)–2.i. 

In addition, as discussed in more 

detail in the section-by-section analysis 

of proposed § 1026.12(h), the Bureau is 

proposing to require a card issuer to 

wait at least 30 calendar days after the 

prepaid account has been registered 

before the card issuer may open a credit 

card account for the holder of the 

prepaid account, or provide a 

solicitation or an application to the 

holder of the prepaid account to open a 

credit or charge card account, that will 

be accessed by the prepaid card. 

Issuance of a Non-Credit Card 

Comment 12(a)(1)–7.i explains that a 

non-credit card may be sent on an 

unsolicited basis by an issuer that does 

not propose to connect the card to any 

credit plan.371 The comment notes that 

a credit feature may be added to a 

previously issued non-credit card only 

upon the consumer’s specific request. 

Comment 12(a)(1)–7.ii provides as an 

example, that a purchase-price discount 

card may be sent on an unsolicited basis 

by an issuer that does not propose to 

connect the card to any credit plan. The 

comment further explains that an issuer 

demonstrates that it proposes to connect 

the card to a credit plan by, for example, 

including promotional materials about 

credit features or account agreements 

and disclosures required by § 1026.6. 

The comment also states that the issuer 


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violates the rule against unsolicited 

issuance if, for example, at the time the 

card is sent a credit plan can be 

accessed by the card or the recipient of 

the unsolicited card has been 

preapproved for credit that the recipient 

can access by contacting the issuer and 

activating the card. 

Under the proposal, the current 

language of comment 12(a)(1)–7.i and .ii 

would be moved to proposed comment 

12(a)(1)–7.i.A and .B respectively and 

would be limited to the issuance of noncredit cards that are not prepaid cards. 

The proposal also would add a new 

comment 12(a)(1)–7.ii to provide 

guidance on when the issuance of a 

prepaid card would be viewed as the 

issuance of a credit card. The proposal 

would add proposed comment 12(a)(1)– 

7.ii to provide that § 1026.12(a)(1) 

would not apply to the issuance of a 

prepaid card where an issuer does not 

connect the card to any credit plan that 

would make the prepaid card into a 

credit card at the time the card is issued 

and only opens a credit card account, or 

provides an application or solicitation, 

to open a credit or charge card account, 

that would be accessed by that card in 

compliance with proposed § 1026.12(h). 

As discussed in more detail in the 

section-by-section analysis of proposed 

§ 1026.12(h), the Bureau is proposing to 

require a card issuer to wait at least 30 

calendar days after the prepaid account 

has been registered before the card 

issuer may open a credit card account 

for the holder of the prepaid account, or 

provide a solicitation or an application 

to the holder of the prepaid account, to 

open a credit or charge card account 

that will be accessed by the prepaid 

card. Proposed comment 12(a)(1)–7.ii 

also would explain that a credit feature 

may be added to a previously issued 

prepaid card only upon the consumer’s 

specific request and only in compliance 

with § 1026.12(h). 

Proposed comment 12(a)(1)–7.ii 

further explains, however, that an issuer 

does not connect a prepaid card to a 

credit plan that would make the card 

into a credit card simply by providing 

the disclosures required by Regulation E 

§ 1005.18(b)(2)(i)(B)(9) and 

18(b)(2)(ii)(B) with the prepaid card. As 

discussed above under the Regulation E 

section-by-section analysis of proposed 

§ 1005.18(b), a financial institution 

would be required to provide certain 

disclosures about credit card accounts 

that may be offered in connection with 

prepaid accounts. As discussed in more 

detail in the section-by-section analysis 

of Regulation E § 1005.18(b), a financial 

institution would be required to 

disclose in the short and long form 

disclosures provided in connection with 

the prepaid card information about any 

credit plan that may be offered at any 

point to the holder of the prepaid 

account where the credit plan would be 

accessed by a credit card that also is a 

prepaid card, or the credit plan would 

be accessed by an account number that 

is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor 

offering the plan. These disclosures 

would be provided to consumers so that 

they can shop more effectively for 

prepaid cards by informing them 

whether a credit card account may be 

offered in connection with the prepaid 

account and some of the terms of the 

credit card account that may be offered. 

The Bureau is proposing to provide 

guidance that providing these 

disclosures does not violate the rule 

against unsolicited issuance of a credit 

card because, otherwise, the inclusion 

of these required disclosures with the 

prepaid card would make it a violation 

of Regulation Z to sell such cards in 

retail locations or otherwise provide 

them on an unsolicited basis to 

consumers. The Bureau notes that the 

issuance rules set forth in Regulation E 

§ 1005.5 would apply to the issuance of 

a prepaid card that does not access a 

credit card account when issued. 

The proposal also would make two 

technical revisions to comment 

12(a)(1)–7. First, the current language of 

comment 12(a)(1)–7.i and .ii would be 

moved to proposed comment 12(a)(1)– 

7.i.A and .B respectively. Second, the 

language in proposed comment 

12(a)(1)–7.i also would be revised to 

indicate that it applies only to the 

issuance of non-credit cards other than 

prepaid cards. 

12(a)(2) 

Section 1026.12(a) provides that 

regardless of the purpose for which a 

credit card is to be used, including 

business, commercial, or agricultural 

use, no credit card shall be issued to any 

person except: (1) In response to an oral 

or written request or application for the 

card; or (2) As a renewal of, or substitute 

for, an accepted credit card. Comments 

12(a)(2)–5 and –6 provide guidance on 

the exception to the unsolicited 

issuance rule when a card is issued as 

a renewal of, or substitute for, an 

accepted credit card. 

Specifically, comment 12(a)(2)–5 (the 

so-called ‘‘one for one’’ rule) provides 

that an accepted card generally may be 

replaced by no more than one renewal 

or substitute card. For example, the card 

issuer may not replace a credit card 

permitting purchases and cash advances 

with two cards, one for the purchases 

and another for the cash advances. 

Comment 12(a)(2)–6 provides, however, 

two exceptions to this general ‘‘one for 

one’’ rule. First, comment 12(a)(2)–6.i 

provides that the unsolicited issuance 

rule in § 1026.12(a) does not prohibit 

the card issuer from replacing a debit/ 

credit card with a credit card and 

another card with only debit functions 

(or debit functions plus an associated 

overdraft capability), since the latter 

card could be issued on an unsolicited 

basis under Regulation E. Comment 

12(a)(2)–6.ii also provides that 

§ 1026.12(a) does not prohibit a card 

issuer from replacing an accepted card 

with more than one renewal or 

substitute card, provided that (1) no 

replacement card accesses any account 

not accessed by the accepted card; (2) 

for terms and conditions required to be 

disclosed in account-opening 

disclosures under § 1026.6, all 

replacement cards are issued subject to 

the same terms and conditions, except 

that a creditor may vary terms for which 

no change in terms notice is required 

under § 1026.9(c); and (3) under the 

account’s terms the consumer’s total 

liability for unauthorized use with 

respect to the account does not increase. 

Under the proposal, the example in 

existing comment 12(a)(2)–6.ii would be 

moved to proposed comment 12(a)(2)– 

6.iii. The proposal also would add new 

proposed comment 12(a)(2)–6.ii to 

explain that the one-for-one rule would 

not prevent an issuer from replacing a 

single card that is both a prepaid card 

and a credit card with a credit card and 

a separate prepaid card where the latter 

card is not a credit card. The Bureau 

notes that the issuance rules set forth in 

Regulation E § 1005.5 would apply to 

the issuance of a prepaid card that does 

not access a credit card account when 

issued. For example, the one-for-one 

rule would not prevent a card issuer 

from replacing a prepaid card that is a 

credit card (for example, where the 

prepaid card accesses an overdraft 

feature) with a prepaid card that is not 

a credit card (where the prepaid card 

does not access an overdraft feature) and 

an account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

In addition, the proposal would also 

make two technical revisions to 

comment 12(a)(2)–6. First, the example 

in comment 12(a)(2)–6.i related to debit 

cards would be revised for clarity; no 

substantive changes are intended. In 

addition, the example in existing 

comment 12(a)(2)–6.ii would be moved 

to proposed comment 12(a)(2)–6.iii. 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77238 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

372 46 FR 20848, 20865 (Apr. 7, 1981); see also 

46 FR 50288, 50313 (Oct. 9, 1981). 

12(c) Right of Cardholder to Assert 

Claims or Defenses Against Card Issuer 

Under TILA section 170, as 

implemented in § 1026.12(c) of 

Regulation Z, a cardholder may assert 

against the card issuer a claim or 

defense for disputes as to goods or 

services purchased in a consumer credit 

transaction with a credit card. The claim 

or defense applies only as to unpaid 

balances for the goods or services and 

any finance or other charges imposed on 

that amount, if the merchant honoring 

the card fails to resolve the dispute. The 

right is further limited generally to 

disputes exceeding $50 for purchases 

made in the consumer’s home state or 

within 100 miles of the cardholder’s 

address. See 15 U.S.C. 1666i. The 

proposal would revise commentary to 

§ 1026.12(c) to provide guidance on how 

this provisions applies to prepaid cards 

that are credit cards, or account 

numbers that are credit cards where the 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

Comment 12(c)(1)–1 and comment 

12(c)–3 provides guidance on the types 

of transactions that are covered by 

§ 1026.12(c) and the types of 

transactions that are not covered. 

Comment 12(c)(1)–1 provides that the 

consumer may assert claims or defenses 

only when the goods or services are 

‘‘purchased with the credit card.’’ This 

could include mail, Internet or 

telephone orders, if the purchase is 

charged to the credit card account. The 

proposal would amend this comment 

and add proposed comment 12(c)–5 to 

explain that § 1026.12(c) would apply 

when goods or services are purchased 

by a consumer using credit accessed by 

a credit card that also is a prepaid card. 

The Bureau notes that the provisions 

in 1026.12(c) generally do not apply to 

purchases effected by use of either a 

check guarantee card or a debit card 

when used to draw on overdraft credit 

plans. See comments 12(c)–3 and 

12(c)(1)–1.iv. In addition, comment 

12(c)(1)–1.ii also provides that the 

provisions in § 1026.12(c) do not apply 

to the purchase of goods or services by 

use of a check accessing an overdraft 

account and a credit card used solely for 

identification of the consumer. On the 

other hand, if the credit card is used to 

make partial payment for the purchase 

and not merely for identification, the 

right to assert claims or defenses would 

apply to credit extended via the credit 

card, although not to the credit 

extended on the overdraft line. The 

Board adopted these exceptions in 1981 

as part of implementing the Truth in 

Lending Simplification and Reform 

Act.372 In the supplemental information 

provided with that rulemaking, the 

Board indicated that it had decided to 

exempt check guarantee cards and debit 

cards when used to draw on an 

overdraft line because of serious 

operational problems cited by 

commenters as arising from applying 

the claims and defenses provisions to 

check guarantee and debit card 

transactions. 

The Bureau proposes not to exempt 

from the provisions of § 1026.12(c) 

purchases made with prepaid cards that 

are credit cards, including when the 

prepaid cards are used to draw on 

overdraft credit plans. For the reasons 

set forth in the Overview of Regulation 

Z Proposal section, the Bureau believes 

that prepaid cards that are credit cards 

generally should be subject to the 

provisions in Regulation Z that apply to 

credit cards. The Bureau solicits 

comment, however, on what, if any, 

operational issues might arise from 

applying the protections in § 1026.12(c) 

to overdraft credit plans that are 

accessed by prepaid cards. 

Proposed comment 12(c)–5 also 

would provide guidance on how 

§ 1026.12(c) applies to transactions at 

point of sale where a prepaid card that 

is a credit card is used to obtain goods 

or services from a merchant and the 

transaction is partially funded by the 

consumer’s prepaid account, and 

partially funded by credit. Proposed 

comment 12(c)–5.ii provides that the 

amount of the purchase transaction that 

is funded by credit generally would be 

subject to the requirements of 

§ 1026.12(c), and provides that the 

amount of the transaction funded from 

the prepaid account would not be 

subject to the requirements of 

§ 1026.12(c). The Bureau notes that 

§ 1026.12(c) applies only to disputes as 

to property or services purchased with 

a credit card in a consumer credit 

transaction. The portion of the 

transaction that is funded from the 

prepaid account would not be credit 

and thus, under the proposal, this 

amount of the transaction would not be 

subject to § 1026.12(c). The Bureau 

solicits comment on what operational 

issues, if any, might arise as a result of 

applying § 1026.12(c) to transactions 

that are partially funded from the 

prepaid account and partially funded 

with credit. 

Comment 12(c)(1)–1.i through .iv 

provides examples of transactions that 

are not covered by the provisions in 

§ 1026.12(c). Comment 12(c)(1)–1.i 

provides that § 1026.12(c) does not 

apply to the use of a credit card to 

obtain a cash advance, even if the 

consumer then uses the money to 

purchase goods or services. The 

comment explains that such a 

transaction would not involve ‘‘property 

or services purchased with the credit 

card.’’ 

The proposal would revise comment 

12(c)(1)–1.i to clarify that § 1026.12(c) 

does not apply to an advance on a credit 

plan accessed by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. This example is designed 

to address situations where (1) a 

separate line of credit is linked to a 

prepaid account where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, (2) 

the consumer requests an advance on 

the account using an account number 

other than a prepaid card, and (3) the 

advance is deposited into the prepaid 

account. In this situation, the advance 

taken on the line of credit would not be 

a transaction covered by § 1026.12(c) 

even if the consumer subsequently uses 

the deposited funds to purchase goods 

or services at a merchant. This proposed 

provision would not apply to open-end 

credit or a credit card account that is 

directly accessed by a prepaid card. As 

discussed above, the provisions in 

§ 1026.12(c) would apply where a 

prepaid card that is a credit card 

accesses credit to obtain goods or 

services from a merchant. 

For the reasons discussed in the 

Overview of Regulation Z Proposal 

section, the proposal would retain the 

exemptions from the provisions from 

§ 1026.12(c) for purchases effected by 

use of either a check guarantee card or 

a debit card when used to draw on 

overdraft credit plans that are currently 

contained in comments 12(c)–3 and 

12(c)(1)–1.ii and iv. The proposal, 

however, would revise the example in 

comment 12(c)(1)–1.ii to specify that the 

comment does not apply to overdraft 

plans that are accessed by a prepaid 

card. 

12(d) Offsets by Card Issuer Prohibited 

TILA section 169 generally prohibits 

card issuers from taking any action to 

offset a cardholder’s credit card 

indebtedness against funds of the 

cardholder held on deposit with the 

card issuer. Nonetheless, a card issuer 

would not violate this provision if the 

card issuer periodically deducts all or a 

portion of a consumer’s credit card debt 

from the consumer’s deposit account, if 

the periodic deductions are in 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77239 

373Public Law 93–495, 88 Stat. 1500. 

374S. Rep. No. 93–278, at 9 (June 28, 1973). 

accordance with a preauthorized written 

authorization by the consumer and the 

card issuer does not deduct payment for 

any portion of the outstanding balance 

that is in dispute. 15 U.S.C. 1666h(a). 

This TILA section also provides that the 

prohibition described above does not 

alter or affect the right under State law 

of a card issuer to attach or otherwise 

levy upon funds of a cardholder held on 

deposit with the card issuer if that 

remedy is constitutionally available to 

creditors generally. 15 U.S.C. 1666h(b). 

TILA section 169 is implemented by 

§ 1026.12(d). 

Section 1026.12(d)(1) provides that a 

card issuer may not take any action, 

either before or after termination of 

credit card privileges, to offset a 

cardholder’s indebtedness arising from a 

consumer credit transaction under the 

relevant credit card plan against funds 

of the cardholder held on deposit with 

the card issuer. Section 1026.12(d)(2) 

provides that the prohibition on offsets 

in § 1026.12(d)(1) does not alter or affect 

the right of a card issuer acting under 

state or Federal law to do any of the 

following with regard to funds of a 

cardholder held on deposit with the 

card issuer if the same procedure is 

constitutionally available to creditors 

generally: Obtain or enforce a 

consensual security interest in the 

funds; attach or otherwise levy upon the 

funds; or obtain or enforce a court order 

relating to the funds. Section 

1026.12(d)(3) provides that the 

prohibition on offsets set forth in 

§ 1026.12(d)(1) does not prohibit a plan, 

if authorized in writing by the 

cardholder, under which the card issuer 

may periodically deduct all or part of 

the cardholder’s credit card debt from a 

deposit account held with the card 

issuer (subject to the limitations in 

§ 1026.13(d)(1)). 

The offset provision in TILA section 

169 was added to TILA as part of the 

Fair Credit Billing Act.373 In adding this 

offset provision, Congress was 

concerned that 

Funds in these accounts can be attached 

without any recourse to the courts and in 

spite of any valid legal defense the 

cardholder may have against the bank. Banks 

which issue cards and also have the 

cardholder’s funds on deposit may thus 

obtain a unique leverage over the consumer. 

Other creditors would have to apply to a 

court before being permitted to attach funds 

in a borrowers’ deposit account.374

As discussed in more detail below, 

the proposal would enhance the offset 

protections in § 1026.12(d) for credit 

card accounts linked to prepaid 

accounts to ensure that card issuers are 

not able to obtain unfair leverage over 

the consumer or over other creditors 

with respect to these accounts. First, the 

proposal would provide that with 

respect to credit card accounts linked to 

prepaid accounts, a card issuer would 

be permitted to deduct all or a part of 

the cardholder’s credit card debt 

automatically from the prepaid account 

or other deposit account held by the 

card issuer no more frequently than 

once per month, pursuant to a signed, 

written authorization by the cardholder 

to do so. Second, the proposal would 

enhance the requirements that card 

issuers of credit card accounts linked to 

prepaid accounts must follow in order 

to obtain a security interest in a prepaid 

account. 

Without these additional protections, 

the Bureau is concerned that given the 

overall creditworthiness of prepaid 

accountholders, some card issuers may 

attempt to circumvent the prohibition 

on offsets by obtaining a consumer’s 

written authorization to deduct all or 

part of the cardholder’s credit card debt 

on a daily or weekly basis from the 

prepaid account to help ensure that the 

debt is repaid. Because the card issuer 

holds the prepaid account, the card 

issuer may know the patterns of when 

consumers are likely to be depositing 

funds into the prepaid accounts. These 

prepaid card issuers could take 

advantage of this knowledge to set up 

preauthorized withdrawals to 

correspond to when the consumer is 

likely to be depositing funds. In 

addition, the Bureau believes prepaid 

consumers may grant the authorization, 

or a security interest, more readily than 

other credit card holders because 

consumers may believe that they must 

provide written authorization, or a 

security interest, to allow a card issuer 

to deduct all or part of the cardholder’s 

credit card debt from the linked prepaid 

account. 

The Bureau believes that these 

proposed requirements, along with 

proposed changes to the timing 

requirement for a periodic statement in 

§ 1026.5(b)(2)(ii), and the compulsoryuse provisions in Regulation E 

(proposed § 1005.10(e)(1)), are 

reasonable interpretations that are 

necessary to fully effectuate the intent of 

these provisions and would allow 

consumers to retain control over the 

funds in their prepaid accounts even 

when a credit card feature becomes 

associated with that account, which is 

consistent with the prohibition on 

offsets. 

In particular, with these proposed 

changes, such card issuers (1) would be 

required to adopt reasonable procedures 

designed to ensure that periodic 

statements are mailed or delivered at 

least 21 days prior to the payment due 

date disclosed on the periodic statement 

and to ensure that the due date that is 

disclosed on the periodic statement 

must be the same day of the month for 

each billing cycle; (2) could move funds 

automatically from the asset account 

held by the card issuer to the credit card 

account held by the card issuer to pay 

some or all of the credit card debt no 

more frequently than once per month, 

such as on the payment due date 

(pursuant to the consumer’s signed, 

written agreement that the issuer may 

do so); and (3) would be required to 

offer consumers a means to repay their 

outstanding credit balances other than 

automatic repayment (such as by means 

of a transfer of funds from the asset 

account to the credit account that the 

consumer initiates on the prepaid 

account’s online banking Web site). 

12(d)(1) General Rule 

Section 1026.12(d)(1) provides that a 

card issuer may not take any action, 

either before or after termination of 

credit card privileges, to offset a 

cardholder’s indebtedness arising from a 

consumer credit transaction under the 

relevant credit card plan against funds 

of the cardholder held on deposit with 

the card issuer. The proposal would add 

comment 12(d)–1 to make clear that for 

purposes of the prohibition on offsets in 

§ 1026.12(d), funds of the cardholder 

held on deposit include funds in a 

consumer’s prepaid account and the 

term deposit account includes a prepaid 

account. 

Comment 12(d)(1)–2 provides that if 

the consumer tenders funds as a deposit 

(to a checking account, for example) 

held by the card issuer, the card issuer 

may not apply the funds to repay 

indebtedness on the consumer’s credit 

card account. The proposal would 

amend this comment to provide 

guidance on the tender of funds as a 

deposit to a prepaid account. 

Specifically, this comment would be 

revised to specify that if the card issuer 

receives funds designated for the 

consumer’s prepaid account with the 

issuer, such as by means of an ACH 

deposit or cash reload, the card issuer 

may not automatically apply the funds 

to repay indebtedness on the 

consumer’s credit card account. 

12(d)(2) Rights of the Card Issuer Under 

Other Law 

TILA section 169(a) generally 

prohibits card issuers from taking any 

action to offset a cardholder’s credit 

card indebtedness against funds of the 

cardholder held on deposit with the 


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375 46 FR 20848 (Apr. 7, 1981). 376 46 FR 20848, 20866 (Apr. 7, 1981). 

card issuer. 15 U.S.C. 1666h(a). TILA 

section 169(b) provides, however, that 

the prohibition on offset does not alter 

or affect the right under State law of a 

card issuer to attach or otherwise levy 

upon funds of a cardholder held on 

deposit with the card issuer if that 

remedy is constitutionally available to 

creditors generally. 15 U.S.C. 1666h(b). 

Implementing TILA section 169, 

§ 1026.12(d)(2) provides that the 

prohibition on offsets in § 1026.12(d)(1) 

does not alter or affect the right of a card 

issuer acting under state or Federal law 

to attach or otherwise levy upon the 

funds of a cardholder held on deposit 

with the card issuer if the same 

procedure is constitutionally available 

to creditors generally. Section 

1026.12(d)(2) also provides two 

additional methods for obtaining funds 

that the Board found were not 

prohibited by the prohibition on offsets 

in TILA section 169. Specifically, 

§ 1026.12(d)(2) provides that the 

prohibition on offsets in § 1026.12(d)(1) 

does not alter or affect the right of a card 

issuer acting under state or Federal law 

to obtain or enforce a consensual 

security interest in the funds or obtain 

or enforce a court order relating to the 

funds. 

The Board adopted these additional 

two methods in 1981 as part of its 

rulemaking to implement the Truth in 

Lending Simplification and Reform 

Act.375 In the supplemental information 

to that rulemaking, with respect to the 

method related to security interests, the 

Board stated its belief that TILA section 

169 was not intended to apply to the 

granting of security interests in 

cardholders’ deposit accounts. In 

addition, the Board imposed certain 

limitations on the use of security 

interests that it believed would prevent 

circumvention of the offset prohibition 

because (1) only consensual security 

interests are permitted, and thus the 

cardholder must affirmatively agree to 

grant the security interest; (2) the 

security interest can be enforced only 

through procedures by which other 

creditors could enforce their security 

interests in the same funds; and (3) any 

security interest granted to secure credit 

card indebtedness will be disclosed in 

the card issuer’s initial disclosures to 

the cardholder. The Board considered 

but rejected limiting the amount of the 

security interest to a specified amount, 

reasoning that other third-party 

creditors are not required to do so. The 

Board believed that these requirements 

should eliminate the possibility of 

unfair surprise to consumers, and of 

unfair advantage for depository 

institutions over other creditors that 

Congress sought to avoid in enacting 

TILA section 169.376

Current comment 12(d)(2)–1 is 

intended to ensure that the security 

interest is consensual. Specifically, 

comment 12(d)(2)–1 provides that the 

security interest must not be the 

functional equivalent of a right of offset; 

as a result, routinely including in 

agreements contract language indicating 

that consumers are giving a security 

interest in any deposit accounts 

maintained with the issuer does not 

result in a security interest that falls 

within the exception in § 1026.12(d)(2). 

In addition, for a security interest to 

qualify for the exception under 

§ 1026.12(d)(2) the following conditions 

must be met: (1) The consumer must be 

aware that granting a security interest is 

a condition for the credit card account 

(or for more favorable account terms) 

and must specifically intend to grant a 

security interest in a deposit account; 

and (2) The security interest must be 

obtainable and enforceable by creditors 

generally. If other creditors could not 

obtain a security interest in the 

consumer’s deposit accounts to the 

same extent as the card issuer, the 

security interest is prohibited by 

§ 1026.12(d)(2). 

Comment 12(d)(2)–1.i provides that 

indicia of the consumer’s awareness and 

intent to provide a security interest 

must include at least one of the 

following (or a substantially similar 

procedure that evidences the 

consumer’s awareness and intent): (1) 

Separate signature or initials on the 

agreement indicating that a security 

interest is being given; (2) Placement of 

the security agreement on a separate 

page, or otherwise separating the 

security interest provisions from other 

contract and disclosure provisions; or 

(3) Reference to a specific amount of 

deposited funds or to a specific deposit 

account number. 

The Bureau believes, however, that 

additional protections may be needed to 

ensure that consumers understand that 

they are giving a security interest when 

a credit card account is directly linked 

to a prepaid account through an 

overdraft feature or through a separate 

account where extensions of credit are 

permitted to be deposited directly only 

in particular prepaid accounts specified 

by the creditor. The Bureau believes that 

prepaid account issuers may have 

significant interest in securing credit 

card debt by means of the prepaid 

account. These credit cards will always 

be associated with this linked asset 

account, and prepaid card users who 

use the cards to obtain consumer credit 

are likely to have lower credit ratings 

than credit card users overall. Unlike 

traditional secured credit cards, these 

prepaid cards likely would not be 

marketed as secured credit cards and 

would not require consumers to 

establish a new separate account or to 

set aside specific funds. As a result, 

prepaid consumers are less likely than 

secured credit card users to understand 

that they are required to provide a 

security interest in the prepaid account 

in order to receive the credit card 

account, and have a need to be able to 

manage their prepaid accounts very 

carefully to cover both daily expenses 

and any overdraft repayments. 

Thus, to prevent the security interest 

from becoming the functional 

equivalent to an offset, the proposal 

would set forth in proposed comment 

12(d)(2)–1.iii the steps that card issuers 

must take in order for a consumer to 

show awareness and intent to grant a 

security interest in a prepaid account. 

Specifically, a card issuer would be 

required to meet all the following 

conditions: (1) In addition to being 

disclosed in the issuer’s accountopening disclosures under § 1026.6, the 

security agreement must be provided to 

the consumer in a document separate 

from the prepaid account agreement and 

the credit card account agreement; (2) 

The separate document setting forth the 

security agreement must be signed by 

the consumer; (3) The separate 

document setting forth the security 

agreement must refer to the prepaid 

account number and to a specific 

amount of funds in the prepaid account 

in which the card issuer is taking a 

security interest and these two elements 

of the document must be separately 

signed or initialed by the consumer; and 

(4) The separate document setting forth 

the security agreement must specifically 

enumerate the conditions under which 

the card issuer will enforce the security 

interest and each of those conditions 

must be separately signed or initialed by 

the consumer. 

The Bureau believes that all of the 

indicia in proposed comment 12(d)(2)– 

2.ii, including delineating a specific 

dollar amount as being subject to the 

security interest, will help to ensure that 

a security interest arrangement does not 

circumvent the offset provision in TILA 

section 169 by ensuring that consumers 

focus careful attention on the 

consequences of granting the security 

interest so that consumers are better 

prepared to manage their accounts to 

both cover daily expenses and repay any 

credit extensions. The Bureau solicits 

comment on this approach. The Bureau 

also solicits comment on whether the 


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Bureau should engage in consumer 

testing of disclosures that describe 

security interests in connection with 

prepaid accounts to develop model 

language or model forms for presenting 

this information. 

The Bureau also solicits comment on 

whether these additional protections are 

sufficient to ensure that security 

interests do not become the functional 

equivalent to an offset when a credit 

card account is directly linked to a 

prepaid account through an overdraft 

feature or through a separate account 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. If these additional 

protections are not sufficient, the 

Bureau seeks comment on what 

additional protections would be 

sufficient to ensure that the security 

interests taken in prepaid accounts are 

consensual. Alternatively, the Bureau 

seeks comment on whether it should 

prohibit a card issuer from obtaining or 

enforcing any consensual security 

interest in the funds of a cardholder 

held in a prepaid account with the card 

issuer, to ensure that card issuers cannot 

circumvent the prohibition on offsets by 

taking routinely a security interest in 

the prepaid account funds without 

consumers being aware that the security 

interest is being taken. 

For security interests related to other 

types of deposit accounts, the proposal 

would retain the current guidance in 

comment 12(d)(2)–1.i detailing indicia 

of the consumer’s awareness and intent 

to provide a security interest. The 

proposal would move this guidance to 

comment 12(d)(2)–1.ii. In addition, 

under the proposal, the requirement in 

current 12(d)(2)–1.ii that the security 

interest must be one that other creditors 

could obtain in the consumer’s deposit 

accounts to the same extent as the card 

issuer would be moved to proposed 

comment 12(d)(2)–1.iv; no substantive 

change is proposed. 

12(d)(3) Periodic Deductions 

Implementing TILA section 169, 

§ 1026.12(d)(3) of Regulation Z provides 

that the prohibition on offsets set forth 

in § 1026.12(d)(1) does not prohibit a 

plan, if authorized in writing by the 

cardholder, under which the card issuer 

may periodically deduct all or part of 

the cardholder’s credit card debt from a 

deposit account held with the card 

issuer (subject to the limitations in 

§ 1026.13(d)(1)). 

Neither TILA section 169 nor 

§ 1026.12(d)(3) defines ‘‘periodically’’ 

for purposes of § 1026.12(d)(3). The 

Bureau is concerned that, with respect 

to credit card accounts that are accessed 

by prepaid cards or by account numbers 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, some card issuers may 

attempt to circumvent the prohibition 

on offsets by obtaining a consumer’s 

written authorization to deduct all or 

part of the cardholder’s credit card debt 

on a daily or weekly basis from the 

prepaid account to help ensure that the 

debt is repaid. If ‘‘periodically’’ is not 

defined for purposes of § 1026.12(d)(3), 

the Bureau believes that card issuers 

that offer credit card accounts linked to 

a prepaid account may obtain a 

consumer’s written authorization to 

daily or weekly debits to the prepaid 

account to repay the credit card debt 

given the overall creditworthiness of 

prepaid accountholders. In addition, the 

Bureau believes prepaid consumer may 

grant the authorization more readily 

than other credit card holders because 

consumers may believe that they must 

provide written authorization to allow a 

card issuer to deduct all or part of the 

cardholder’s credit card debt from the 

linked prepaid account. 

An appropriate interval for 

‘‘periodic[ ]’’ deduction plans may 

depend on the facts and circumstances 

of the particular credit plan, but because 

of the above reasons, the Bureau 

believes that an appropriate interval for 

credit cards linked to prepaid cards is 

no more frequently than once per 

calendar month. The proposal would set 

forth a new proposed § 1026.12(d)(3)(ii) 

that provides that, with respect to credit 

cards that are also prepaid cards or 

credit cards that are also account 

numbers where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, for purposes of 

§ 1026.12(d)(3), ‘‘periodically’’ means 

no more frequently than once per 

calendar month. For example, a 

deduction could be scheduled for each 

monthly due date disclosed on the 

applicable periodic statement in 

accordance with the requirements of 

§ 1026.7(b)(11)(i) or on an earlier date in 

each calendar month in accordance with 

a written authorization signed by the 

consumer. Thus, under proposed 

§ 1026.12(d)(3), with respect to such 

credit card accounts linked to a prepaid 

account, a card issuer may deduct all or 

a part of the cardholder’s credit card 

debt automatically from the prepaid 

account or other deposit account held 

by the card issuer no more frequently 

than once per month, pursuant to a 

signed, written authorization by the 

cardholder to do so. The Bureau 

believes that allowing a card issuer to 

execute a preauthorized transfer once 

per calendar month to repay all or some 

of a consumer’s credit card balance is 

appropriate because card issuers of 

credit cards linked to prepaid accounts 

are prohibited from providing periodic 

statements more frequently than on a 

monthly basis and the due date must be 

the same day of the month for each 

billing cycle. As discussed in the 

section-by-section analysis of 

§§ 1026.5(b)(2)(ii) and .7(b)(11), the card 

issuer must adopt reasonable 

procedures to ensure that periodic 

statements are mailed or delivered at 

least 21 days prior to the payment due 

date disclosed on the periodic statement 

and the due date must be the same day 

of the month for each billing cycle. 

Proposed comment 12(d)(3)–3 would 

provide an example to illustrate when 

card issuers could deduct automatically 

all or part of the cardholder’s credit card 

debt from a deposit account (such as a 

prepaid account) held with the card 

issuer under § 1026.12(d)(3) with 

respect to credit cards that are also 

prepaid cards or credit cards that are 

also account numbers where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Proposed comment 12(d)(3)–3 would 

provide that with respect to those types 

of credit cards, a card issuer would not 

be prohibited under § 1026.12(d) from 

periodically deducting all or part of the 

cardholder’s credit card debt from a 

deposit account (such as a prepaid 

account) held with the card issuer 

(subject to the limitations of 

§ 1026.13(d)(1)) under a plan that is 

authorized in writing by the cardholder, 

so long as the creditor does not deduct 

all or part of the cardholder’s credit card 

debt from the deposit account (such as 

a prepaid account) more frequently than 

once per calendar month, pursuant to 

such a plan. The proposed comment 

would provide the following example: 

With respect to credit cards that are also 

prepaid cards or credit cards that are 

also account numbers where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, 

assume that a periodic statement is sent 

out each month to a cardholder on the 

first day of the month and the payment 

due date for the amount due on that 

statement is the 25th day of each month. 

In this case, the card issuer would not 

be prohibited under § 1026.12(d) from 

automatically deducting the amount due 

on the periodic statement on the 25th of 

each month, or on an earlier date in 

each calendar month, from a deposit 

account held by the card issuer, if the 


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deductions are pursuant to a plan that 

is authorized in writing by the 

cardholder (as discussed in comment 

12(d)(3)–1) and comply with the 

limitations in § 1026.13(d)(1). Proposed 

comment 12(d)(3)–3 also would explain 

that the card issuer would be prohibited 

under § 1026.12(d) from automatically 

deducting all or part of the cardholder’s 

credit card debt from a deposit account 

(such as a prepaid account) held with 

the card issuer more frequently than 

once per calendar month, such as on a 

daily or weekly basis, or whenever 

deposits are made to the deposit 

account. 

The Bureau solicits comment on 

situations where at the time a 

preauthorized payment is set to occur, 

the prepaid account does not have 

sufficient funds to cover the amount of 

the credit card payment. How do issuers 

anticipate handling this situation, 

including cases where the prepaid 

account contains funds sufficient to pay 

some but not all of the credit card 

payment due? Do issuers anticipate 

charging a specific fee because the 

preauthorized payment could not be 

completed, in addition to any late fee 

that might be charged if the credit card 

balance was not paid by the due date? 

Should the Bureau adopt any specific 

rules to address these issues? If so, what 

rules should the Bureau adopt? 

The Bureau believes that the proposed 

requirement in § 1026.12(d)(3), along 

with proposed changes to the timing 

requirement for a periodic statement in 

§ 1026.5(b)(2)(ii), and the compulsoryuse provision in Regulation E (proposed 

§ 1005.10(e)(1)), are necessary to fully 

effectuate the intent of the provisions 

and would allow consumers to retain 

control over the funds in their prepaid 

accounts even when a credit card 

feature becomes associated with that 

account, which is consistent with the 

prohibition on offsets. In particular, 

with these proposed changes, such card 

issuers (1) would be required to adopt 

reasonable procedures designed to 

ensure that periodic statements are 

mailed or delivered at least 21 days 

prior to the payment due date disclosed 

on the periodic statement and the due 

date disclosed must be the same day of 

the month for each billing cycle; (2) 

could move funds automatically from 

the asset account held by the card issuer 

to the credit card account held by the 

card issuer to pay some or all of the 

credit card debt no more frequently than 

once per month, such as on the payment 

due date (pursuant to the consumer’s 

signed, written agreement that the issuer 

may do so); and (3) would be required 

to offer consumers a means to repay 

their outstanding credit balances other 

than automatic repayment (such as by 

means of a transfer of funds from the 

asset account to the credit account that 

the consumer initiates on the prepaid 

account’s online banking Web site). 

The proposal would also make two 

technical revisions to § 1026.12(d)(3) 

and related commentary. First, 

§ 1026.12(d)(3) would be moved to 

proposed § 1026.12(d)(3)(i). Second, the 

proposal would revise comment 

12(d)(3)–1.iii, which references EFTA 

section 913 to also reference Regulation 

E § 1005.10(e), which implements that 

section of EFTA. 

12(h) Timing Requirement for 

Solicitation or Application With 

Respect to a Prepaid Cardholder 

As discussed in more detail in the 

section-by-section analysis of 

§ 1026.12(a), credit cards generally may 

not be issued on an unsolicited basis. 

Thus, TILA section 132 and § 1026.12(a) 

prevent a card issuer from issuing on an 

unsolicited basis a prepaid card that 

also is a credit card at the time of 

issuance. For example, prepaid cards 

that are sold in retail locations could not 

access automatically an overdraft credit 

feature that would make the prepaid 

card into a credit card at the time the 

prepaid card is sold. Under TILA 

section 132 and § 1026.12(a), a card 

issuer could add a credit card feature to 

a prepaid card only in response to a 

consumer’s explicit request or 

application. 

The Bureau proposes to use its 

authority in TILA section 105(a) and 

Dodd-Frank Act section 1032(a) to add 

new proposed § 1026.12(h)(1) that 

would require card issuers to wait at 

least 30 calendar days after a prepaid 

card is registered before the card issuer 

may make a solicitation or provide an 

application to the holder of the prepaid 

account to open a credit or charge card 

account. In addition, card issuers would 

be required to wait until at least 30 

calendar days after registration to open 

a credit card account for the holder the 

prepaid account that would be accessed 

by the prepaid card or by an account 

number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. Moreover, if a card issuer has 

established an existing credit or charge 

card account with a holder of a prepaid 

card that is accessed by a prepaid card 

or an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, the 

card issuer would be prevented from 

allowing an additional prepaid card 

obtained by the consumer from the card 

issuer to access the credit or charge card 

account, or permitting credit from the 

credit or charge card account to be 

deposited into an additional prepaid 

account, until at least 30 calendar days 

after the consumer has registered the 

additional prepaid account. 

Proposed § 1026.12(h)(2) would 

define ‘‘solicitation’’ for purposes of 

§ 1026.12(h)(1) to mean an offer by the 

card issuer to open a credit or charge 

card account that does not require the 

consumer to complete an application. 

This proposed definition of 

‘‘solicitation’’ is the same as one used 

with respect to credit card disclosures 

set forth in § 1026.60 that must be 

provided on or with credit card 

applications and solicitations. See the 

section-by-section analysis of § 1026.60. 

Consistent with § 1026.60, proposed 

§ 1026.12(h)(2) also would specify that a 

‘‘firm offer of credit’’ as defined in 

section 603(l) of the Fair Credit 

Reporting Act (15 U.S. C. 1681a(l)) for 

a credit or charge card would be a 

solicitation for purposes of proposed 

§ 1026.12(h). Comment 12(h)–1 would 

explain that a prepaid card or prepaid 

account is registered, such that the 30- 

day interval required by § 1026.12(h) 

begins, when the issuer of the prepaid 

card or prepaid account successfully 

completes its collection of consumer 

identifying information and identity 

verification in accordance with the 

requirements of applicable Federal and 

state law. The beginning of the required 

30-day interval would be triggered by 

successful completion of collection of 

consumer identifying information and 

identity verification, not by the 

consumer’s mere purchase or obtaining 

of the card. Comment 12(h)–2 would 

provide a cross-reference to 

§ 1026.12(a)(1) and comment 12(a)(1)–7 

for additional rules that would apply to 

the addition of a credit or charge card 

account to a previously-issued prepaid 

account. As discussed in the section-bysection of § 1026.12(a)(1), comment 

12(a)(1)–7 would provide that a credit 

card feature may be added to a 

previously issued prepaid card only 

upon the consumer’s specific request 

and only in compliance with 

§ 1026.12(h). Proposed comment 12(h)– 

2 also would cross-reference § 1026.60 

and related commentary for disclosures 

that generally must be provided on or 

with applications or solicitations to 

open a credit or charge card account. 

The Bureau notes that if the prepaid 

card issuer offers the credit plan 

accessed by the prepaid card, the 

prepaid card issuer is the ‘‘card issuer’’ 

for purposes of Regulation Z, including 

§ 1026.12(h). This is because the 

prepaid card accessing the credit plan is 


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a credit card and § 1026.2(a)(7) defines 

‘‘card issuer’’ as a person that issues a 

credit card or that person’s agent with 

respect to the card. See § 1026.2(a)(7). If 

a third party offers the credit plan that 

is accessed by a prepaid card, both the 

person offering the credit plan and the 

prepaid card issuer are card issuers for 

purposes of § 1026.12(h). In this case, 

the person offering the credit plan 

would be an agent of the prepaid card 

issuer. See proposed comment 2(a)(7)– 

1.ii. For credit plans accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, the 

person extending the credit and issuing 

the account number would be a card 

issuer for purposes of § 1026.12(h). For 

those types of credit plans, the prepaid 

card issuer would not be a card issuer 

for purposes of § 1026.12(h). 

Nonetheless, the prepaid card issuer 

would be covered under Regulation E 

proposed § 1005.18(g)(1), which would 

prevent the financial institution from 

allowing credit extensions from a credit 

plan subject to Regulation Z to be 

deposited in the prepaid account, where 

the credit plan is accessed by an 

account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. See 

the section-by-section analysis of 

Regulation E proposed § 1005.18(g)(1). 

The Bureau believes that covering both 

the prepaid card issuer and the person 

extending credit under the credit card 

account (if different from the prepaid 

card issuer) would help avoid 

circumvention of the provisions in 

§ 1026.12(h). The Board solicits 

comment on whether additional 

provisions are needed to avoid 

circumvention, such as requiring card 

issuers to adopt policies and procedures 

reasonably designed to ensure that its 

affiliates, service providers, or 

commercial entities with whom the card 

issuer has a contractual relationship do 

not make a solicitation or provide an 

application as described in 

§ 1026.12(h)(1) to the consumer during 

the 30-day interval. 

The Bureau believes that use of its 

authority under TILA section 105(a) to 

add the proposed provisions in 

§ 1026.12(h) is necessary and proper to 

effectuate the purposes of TILA to help 

ensure the informed use of the credit or 

charge card account when it is opened. 

Specifically, TILA section 102 provides 

that one of the main purposes of TILA 

is to promote the informed use of credit 

by ensuring meaningful disclosure of 

credit terms so that consumer will be 

able to compare more readily the 

various credit terms available to him or 

her and avoid the uninformed use of 

credit. 15 U.S.C. 1601. Furthermore, 

TILA section 132 requires that ‘‘[n]o 

credit card shall be issued except in 

response to a request or application 

therefor.’’ 15 U.S.C. 1642. In addition, 

the Bureau believes that the proposed 

waiting period will, consistent with 

Dodd-Frank section 1032(a), ensure that 

the features of the credit card connected 

to the prepaid account are fully, 

accurately, and effectively disclosed to 

consumers in a manner that permits the 

consumers to understand the costs, 

benefits, and risks associated with the 

account. 

The Bureau believes that the 

requirement in proposed § 1026.12(h) of 

a 30-day waiting period for prepaidlinked credit cards would promote the 

informed and voluntary use of credit. 

Under § 1026.12(h)(1), a card issuer 

would be required to wait 30 calendar 

days after a prepaid account has been 

registered by the consumer holding the 

prepaid account before the card issuer 

may open a credit or charge card 

account, or may provide a solicitation or 

application to open a credit or charge 

card account, that will be accessed by 

the prepaid card, or by an account 

number where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the card issuer. The Bureau 

believes that it would promote the 

informed use of the credit to separate 

the decision to purchase and register a 

prepaid account from the decision to 

accept an offer to add a credit card 

account to that prepaid account. The 

Bureau believes that without this 

proposed provision, prepaid card 

issuers would be likely to provide 

solicitations or applications to open 

credit card accounts linked to prepaid 

accounts to prepaid cardholders at the 

time the prepaid accounts are registered 

because prepaid card issuers will 

already be collecting information from 

the cardholders in order to register the 

prepaid accounts. 

As discussed in the section-by-section 

analysis of § 1005.18(g)(1), the Bureau 

believes that separating these decisions 

would better allow consumers to focus 

on the terms and conditions that apply 

to the prepaid account at the time of 

purchase and registration which may 

enable the consumer to better 

understand those terms and conditions, 

consistent with EFTA section 905(a) 

which requires financial institutions to 

disclose the terms and conditions of 

electronic fund transfers involving a 

consumer’s account. The Bureau also 

believes that requiring at least 30 

calendar days to elapse between the 

registration of a prepaid account and 

any offer of a linked credit or charge 

card account would enhance consumer 

understanding of the terms of the 

prepaid account and would help 

consumers to make more informed 

decisions regarding linking a credit or 

charge card account to the prepaid 

account. 

In addition, as discussed in the 

section-by-section analysis of 

Regulation E proposed § 1005.18(e)(3), 

the registration process is critical to 

application of full Regulation E 

protections. Specifically, Regulation E 

proposed § 1005.18(e)(3) provides that 

for all prepaid accounts other than 

payroll card accounts and government 

benefit accounts, a financial institution 

is not required to provide error 

resolution and limited liability 

protections for unverified prepaid 

accounts, so long as the financial 

institution discloses to consumers in 

advance the risks of not registering a 

prepaid account. If a consumer asserts 

an error on an unregistered account, the 

financial institution must collect 

identifying information and verify the 

consumer’s identity, and then 

investigate the error. If a card issuer 

were allowed to market credit card 

accounts to consumers at the time of 

prepaid account registration, the Bureau 

fears that that consumers could believe 

that they are required to request that the 

credit or charge card account be linked 

to the prepaid account in order to 

register or access the prepaid account. 

This could cause some consumers to not 

register their prepaid accounts and lose 

important protections under Regulation 

E. 

Moreover, the Bureau believes that 

the 30-day time period between the 

registration of a prepaid account, and 

when a linked credit or charge card 

account can be offered to the holder of 

the prepaid account, would help 

consumers to make more informed 

decisions about whether to request that 

the credit or charge card account be 

linked to the prepaid account. The 

Bureau believes that consumers may be 

able to focus more effectively on the 

credit terms of the linked credit feature, 

and make a more informed decision 

whether to request such a credit card 

account, if the decision to accept the 

linked credit card account occurs apart 

from the process to register the card. 

Without these protections, card issuers 

may attempt to market the credit card 

account to prepaid cardholders at the 

time they purchase the prepaid card or 

at registration. Consumers may feel 

pressured to make decisions on whether 


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77244 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

to add the credit card accounts without 

the time to fully consider the terms of 

the credit card accounts and the 

consequences of obtaining the accounts. 

The Bureau believes that a consumer’s 

decision to add a credit card account to 

the prepaid account should be a distinct 

phase from the decision to obtain or 

register the prepaid card so that 

consumers have the time to consider 

fully the terms of the credit card 

account and consider the consequences 

of obtaining the credit card account. 

Section 1026.13 Billing Error 

Resolution 

TILA section 161, as implemented in 

§ 1026.13 of Regulation Z, sets forth 

error resolution procedures for billing 

errors that relate to any extension of 

credit that is made in connection with 

an open-end account or credit card 

account. Specifically, it requires a 

consumer to provide written notice of 

an error within 60 days after the first 

periodic statement reflecting the alleged 

error is sent. 15 U.S.C. 1666. The 

written notice triggers a creditor’s duty 

to investigate the claim within 

prescribed time limits. The proposal 

would revise certain provisions that 

apply to the resolution procedures for 

billing errors set forth in § 1026.13 to 

provide guidance on how those 

provisions apply to open-end plans or 

credit card account accessed by a 

prepaid card or an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

Specifically, as discussed in more 

detail below, the proposal would 

address issues related to the definition 

of ‘‘billing error’’ in § 1026.13(a)(3) 

related to disputes about property or 

services that are not delivered to the 

consumer as agreed. The proposal 

would amend commentary to 

§ 1026.13(a)(3) to address the 

circumstances in which a consumer 

may assert a billing error under 

§ 1026.13(a)(3) with respect to 

purchases that are made with funds that 

have been deposited into a prepaid 

account and those funds were credit 

from a credit plan where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. In 

addition, the proposal would revise 

§ 1026.13(i), which sets forth rules on 

whether billing error procedures set 

forth in Regulation E or Regulation Z 

apply if an extension of credit is 

incident to an electronic fund transfer. 

13(a) Definition of Billing Error 

13(a)(3) 

Section 1026.13(a) defines a ‘‘billing 

error’’ for purposes of the error 

resolution procedures. Under 

§ 1026.13(a)(3), the term ‘‘billing error’’ 

includes disputes about an extension of 

credit for property or services not 

accepted by the consumer or not 

delivered to the consumer as agreed. 

Comment 13(a)(3)–2 explains that, in 

certain circumstances, a consumer may 

assert a billing error under 

§ 1026.13(a)(3) with respect to property 

or services obtained through any 

extension of credit made in connection 

with a consumer’s use of a third-party 

payment service. 

Specifically, comment 13(a)(3)–2 

provides that § 1026.13(a)(3) generally 

applies to disputes about goods and 

services that are purchased using a 

third-party payment intermediary, such 

as a person-to-person Internet payment 

service, funded through use of a 

consumer’s credit plan when the goods 

or services are not accepted by the 

consumer or not delivered to the 

consumer as agreed. However, the 

extension of credit must be made at the 

time the consumer purchases the good 

or service and match the amount of the 

transaction to purchase the good or 

service (including ancillary taxes and 

fees). Under these circumstances, the 

property or service for which the 

extension of credit is made is not the 

payment service, but rather the good or 

service that the consumer has purchased 

using the payment service. Thus, for 

example, § 1026.13(a)(3) does not apply 

to purchases using a third party 

payment intermediary that is funded 

through use of a credit plan if: (1) The 

extension of credit is made to fund the 

third-party payment intermediary 

‘‘account,’’ but the consumer does not 

contemporaneously use those funds to 

purchase a good or service at that time; 

or (2) The extension of credit is made 

to fund only a portion of the purchase 

amount, and the consumer uses other 

sources to fund the remaining amount. 

Similar to the provision relating to 

third-party intermediaries, the proposal 

would add proposed comment 13(a)(3)– 

2.ii to address situations where goods or 

services are purchased using funds 

deposited into a prepaid account and 

those funds are credit drawn from a 

credit plan that is accessed by an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Proposed comment 13(a)(3)–2.ii is 

designed to address situations where (1) 

a separate line of credit is linked to a 

prepaid account where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, (2) 

the consumer requests an advance on 

the credit plan using an account number 

other than a prepaid card, and (3) the 

advance is deposited into the prepaid 

account. This provision is not intended 

to apply to credit extensions for 

property or services that are accessed by 

the prepaid card directly. In that 

situation, there is no intervening 

account in which credit is deposited; 

instead, credit is directly accessed by 

the prepaid card to purchase the 

property or services. When credit is 

accessed by a prepaid card and that 

credit is used to fund the entire amount 

of a purchase of property or service, 

§ 1026.13 applies to these transactions, 

and a billing error would occur under 

§ 1026.13(a)(3) when the goods or 

services are not accepted by the 

consumer or not delivered to the 

consumer as agreed. See the section-bysection analysis of § 1026.13(i) for a 

discussion of transactions made with 

prepaid cards that are credit cards 

where transactions are partially paid 

with funds from the prepaid account 

and partially funded with credit. 

Proposed comment 13(a)(3)–2.ii 

would provide that § 1026.13(a)(3) 

generally applies to disputes about 

goods and services that are purchased 

using a prepaid card funded through use 

of a consumer’s credit plan accessed by 

an account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor when 

the goods or services are not accepted 

by the consumer or not delivered to the 

consumer as agreed. However, the 

extension of credit must be made at the 

time the consumer purchases the good 

or service and match the amount of the 

transaction to purchase the good or 

service (including ancillary taxes and 

fees). Thus, for example, § 1026.13(a)(3) 

would not apply to purchases using a 

prepaid card that is funded through use 

of such a credit plan if: (1) The 

extension of credit is made to fund the 

prepaid account, but the consumer does 

not contemporaneously use those funds 

to purchase a good or service at that 

time; or (2) The extension of credit is 

made to fund only a portion of the 

purchase amount, and the consumer 

uses other sources to fund the remaining 

amount. 

The Bureau believes that for purposes 

of billing error resolution procedures, it 

is appropriate to consider purchases in 

the situations described above to be 

purchases made with the credit plan. In 

cases where the extension of credit is 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77245 

made at the time the consumer 

purchases the good or service and 

matches the amount of the transaction 

to purchase the good or service 

(including ancillary taxes and fees), 

from the consumer’s perspective, there 

is likely to be little difference between 

this transaction and a transaction where 

a consumer would use his or her 

prepaid card to access a credit plan to 

fund the entire amount of the purchase. 

In the latter situation, a purchase made 

with the prepaid card using a credit 

plan accessed by the card to fund the 

entire amount of the purchase would be 

a billing error under § 1026.13(a)(3) 

when the goods or services are not 

accepted by the consumer or not 

delivered to the consumer as agreed. 

Due to the similarities, consumers may 

reasonably believe that those two types 

of similar transactions would be 

afforded the same billing error 

protections. 

The proposal also would make a 

technical revision to comment 13(a)(3)– 

2, by moving the existing language of 

the comment to proposed comment 

13(a)(3)–2.i. 

13(i) Relation to Electronic Fund 

Transfer Act and Regulation E 

Section 1026.13(i) provides guidance 

on whether billing error provisions 

under Regulation E or Regulation Z 

apply in certain overdraft related 

transactions. Specifically, § 1026.13(i) 

provides that if an extension of credit is 

incident to an electronic fund transfer, 

under an agreement between a 

consumer and a financial institution to 

extend credit when the consumer’s 

account is overdrawn or to maintain a 

specified minimum balance in the 

consumer’s account, the creditor must 

comply with the requirements of 

Regulation E, § 1005.11 governing error 

resolution rather than those of 

§ 1026.13(a), (b), (c), (e), (f), and (h). The 

provisions of Regulation Z § 1026.13 (d) 

and (g) would still apply to these 

transactions. 

As discussed in the Overview of 

Regulation Z Proposal section, currently 

under Regulation Z, overdraft credit is 

subject to Regulation Z only if there is 

an agreement to extend credit, which is 

typically described as an overdraft line 

of credit. In those cases, § 1026.13(i) 

applies when a transaction is partially 

funded through an electronic fund 

transfer from an asset account and 

partially funded through an overdraft 

credit line. Such transactions will be 

subject to both Regulation Z and E. 

Under § 1026.13(i), for those 

transactions, the creditor must comply 

with the requirements of Regulation E 

§ 1005.11 governing error resolution 

rather than those of § 1026.13(a), (b), (c), 

(e), (f), and (h). The provisions of 

Regulation Z § 1026.13 (d) and (g) 

would still apply to these transactions. 

See comment 13(i)–2. For overdraft 

lines of credit, (1) if a transaction only 

accesses credit and does not access 

funds in the asset account, the error 

resolution provisions in Regulation Z 

apply and the ones in Regulation E do 

not apply; and (2) if a transaction only 

accesses the funds in the asset account 

and does not access credit, the error 

resolution provisions in Regulation E 

apply and the ones in Regulation Z do 

not apply. For overdraft credit where 

there is not an agreement to extend 

credit, Regulation Z does not apply. For 

those overdraft credit programs, 

overdraft transactions are governed 

solely by the error resolution provisions 

in Regulation E. See comment 13(i)–2. 

Credit extended directly from a nonoverdraft credit line is governed solely 

by Regulation Z, even though a 

combined credit card/access device is 

used to obtain the extension. See 

comment 13(i)–1. 

As discussed above in the Overview 

of Regulation Z Proposal section, both 

overdraft services and overdraft lines of 

credit linked to prepaid accounts would 

be subject to Regulation Z’s open-end 

rules set forth in subpart B if they meet 

the definition of open-end credit or they 

are accessed by a credit card. For such 

overdraft credit plans accessed by a 

prepaid card, where a transaction is 

partially funded through an electronic 

fund transfer from an prepaid account 

and partially funded from credit, the 

proposal would provide that a creditor 

must comply with the requirements of 

Regulation E § 1005.11 governing error 

resolution rather than those of 

§ 1026.13(a), (b), (c), (e), (f), and (h). See 

proposed § 1026.13(i)(2). The provisions 

of Regulation Z § 1026.13(d) and (g) 

would still apply to these transactions. 

For asset accounts other than prepaid 

accounts, proposed § 1026.13(i)(1) 

would continue to focus on whether 

there is an agreement between a 

consumer and a financial institution to 

extend credit when the consumer’s 

account is overdrawn or to maintain a 

specified minimum balance in the 

consumer’s account. On the other hand, 

for prepaid accounts, proposed 

§ 1026.13(i)(2) would apply if credit is 

extended under a credit plan that is 

subject to subpart B and the credit 

extended is incident to an electronic 

fund transfer when the consumer’s 

prepaid account is overdrawn. A credit 

plan accessed by a prepaid card that is 

a credit card would be subject to subpart 

B, and thus proposed § 1026.13(i)(2) 

would apply. Under the proposal, a 

prepaid card can be a credit card under 

Regulation Z even if the creditor retains 

discretion to not pay the credit 

transactions. As discussed in the 

section-by-section analysis of 

§ 1026.2(a)(15)(i), proposed comment 

2(a)(15)–2.i.F would provide that the 

term ‘‘credit card’’ for purposes of 

Regulation Z includes a prepaid card 

that is a single device that may be used 

from time to time to access a credit 

‘‘plan,’’ except if the prepaid card only 

accesses credit that is not subject to any 

finance charge described in § 1026.4 or 

any fee described in § 1026.4(c), such as 

an application fee to apply for credit or 

a late payment fee, and is not payable 

by written agreement in more than four 

installments. As discussed in the 

section-by-section analysis of 

§ 1026.2(a)(20), with respect to credit 

that is accessed by a prepaid card, a 

‘‘plan’’ includes a program where the 

consumer is obligated contractually to 

repay the credit. For example, such a 

plan includes a program under which a 

creditor routinely pays transactions 

when a consumer has insufficient or 

unavailable funds in a prepaid account 

and the consumer is obligated 

contractually to repay those 

transactions. Under the proposal, such a 

program would constitute a plan 

notwithstanding that the creditor retains 

discretion not to pay such transactions. 

Thus, with respect to prepaid accounts, 

proposed § 1026.13(i)(2) focuses on 

whether credit is extended under a 

credit plan that is subject to subpart B 

incident to an electronic fund transfer 

and extended when the consumer’s 

prepaid account is overdrawn, rather 

than whether there is an agreement 

between a consumer and a financial 

institution to extend credit when the 

consumer’s account is overdrawn or to 

maintain a specified minimum balance 

in the consumer’s account. 

Comment 13(i)–1 would be revised to 

explain that with respect to a credit 

account accessed by an account number 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, § 1026.13(i) does not apply 

to transfers from that plan to a prepaid 

account. Under the proposal, the 

creditor for such transfers must comply 

with the billing error provisions in 

§ 1026.13. This guidance is designed to 

address situations where (1) a separate 

line of credit is linked to a prepaid 

account where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, (2) the 

consumer requests an advance on the 

account using an account number other 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77246 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

377Section 1026.57(c) applies to all open-end 

credit. That section prohibits a card issuer or 

creditor from offering a tangible item to a college 

than a prepaid card, and (3) the advance 

is deposited into the prepaid account. 

The provisions in § 1026.13(i) would 

not apply to these types of credit 

accounts because these credit plans do 

not involve overdraft transactions that 

are partially funded through electronic 

fund transfers from prepaid accounts 

and partially funded from credit 

transactions. For these types of credit 

accounts, transactions where credit is 

deposited into the prepaid account are 

separate from transactions that 

withdraw the funds from the prepaid 

account. Proposed comment 13(i)–1 

would specify that transfers from such 

credit plans to a prepaid account are 

subject to the error resolution 

procedures in Regulation Z § 1026.13 

and are not covered by the rules in 

§ 1026.13(i). 

The proposal also would add 

proposed comment 13(i)–4 to provide 

guidance on how proposed § 1026.13(i) 

applies to overdraft credit plans that are 

subject to subpart B such as credit plans 

that are accessed by prepaid cards that 

are credit cards. Specifically, proposed 

comment 13(i)–4 would provide that for 

transactions involving a credit plan that 

is subject to subpart B when the credit 

extension is incident to an electronic 

fund transfer and the credit is extended 

where the prepaid account is 

overdrawn, whether Regulation E or 

Regulation Z applies depends on the 

nature of the transaction. For example, 

if the transaction solely involves an 

extension of credit under an overdraft 

plan, and does not include a debit to the 

prepaid account, the error resolution 

requirements of Regulation Z would 

apply. If the transaction debits a prepaid 

account only (with no credit extended 

under the overdraft plan), the provisions 

of Regulation E would apply. 

Nonetheless, under the proposal, if 

the transaction debits a prepaid account 

but also draws on an overdraft plan 

subject to subpart B, a creditor would be 

required to comply with the 

requirements of Regulation E, 

§§ 1005.11 and proposed § 1005.18(c), 

governing error resolution rather than 

those of § 1026.13(a), (b), (c), (e), (f) and 

(h). 

Comment 13(i)–3 provides additional 

guidance on how the error resolution 

provisions of Regulations Z and E 

interact. Comment 13(i)–3 provides an 

example of the application of 

§ 1026.13(i) to a transaction where a 

consumer withdraws money at an 

automated teller machine and activates 

an overdraft line of credit on the 

checking account. In this case, an error 

asserted with respect to the transaction 

would be subject, for error resolution 

purposes, to the applicable Regulation E 

(12 CFR part 1005) provisions (such as 

timing and notice) for the entire 

transaction. In addition, the creditor 

would not need to provisionally credit 

the consumer’s account, under 

Regulation E § 1005.11(c)(2)(i), for any 

portion of the unpaid extension of 

credit. Also, the creditor would need to 

credit the consumer’s account under 

§ 1005.11(c) with any finance or other 

charges incurred as a result of the 

alleged error. The provisions of 

§§ 1026.13(d) and (g) would apply only 

to the credit portion of the transaction. 

Proposed comment 13(i)–4 would 

provide similar guidance for how 

§ 1026.13(i)(2) applies to transactions 

involving an overdraft credit plan 

subject to subpart B in connection with 

a prepaid account (such as a credit plan 

accessed by a prepaid card that is a 

credit card). 

Proposed comment 13(i)–5 would 

explain that an overdraft credit plan 

would not be subject to subpart B if the 

credit plan is only accessed by a prepaid 

card that is not a credit card. A prepaid 

card would not be a credit card if the 

prepaid card only accesses credit that is 

not subject to any finance charge as 

defined in § 1026.4 or fee described in 

§ 1026.4(c) and is not payable by written 

agreement in more than four 

installments. See proposed comment 

2(a)(15)–2.i.F. For these types of credit 

plans, only the error resolution 

provisions in Regulation E would apply. 

The Bureau believes that it is 

appropriate to apply the error resolution 

procedures in Regulation E generally to 

transactions that debit a prepaid 

account but also draw on an overdraft 

plan subject to subpart B. The Bureau 

believes that this proposed approach is 

consistent with EFTA section 909(c), 

which applies EFTA’s limits on liability 

for unauthorized use to transactions 

which involve both an unauthorized 

electronic fund transfer and an 

extension of credit pursuant to an 

agreement between the consumer and 

the financial institution to extend such 

credit to the consumer in the event the 

consumer’s account is overdrawn. 15 

U.S.C. 1693g(c). An unauthorized 

electronic fund transfer on a prepaid 

account generally would be subject to 

the limits on liability in Regulation E 

§ 1005.6 and proposed § 1005.18(e); an 

unauthorized electronic fund transfer on 

a prepaid account also is an error for 

purposes of the error resolution 

procedures set forth in Regulation E 

§ 1005.11 and proposed § 1005.18(e). 

See Regulation E § 1005.11(a)(1). 

Although billing errors under 

Regulation Z § 1026.13(a) include a 

broader category than only 

unauthorized use, the Bureau believes it 

is necessary and proper to exercise its 

adjustment and exception authority 

under TILA section 105(a) to apply 

Regulation E’s error resolution 

provisions and limited Regulation Z 

error resolution provisions to these 

transactions, to facilitate compliance 

with EFTA section 908 and TILA 

section 161 on error resolution. The 

Bureau is concerned that conflicting 

provisions could apply to transactions 

that debit a prepaid account but also 

draw on an overdraft plan subject to 

subpart B if Regulation E’s provisions 

applied to limits on liability for 

unauthorized use, and Regulation Z’s 

provisions generally apply to 

investigation of billing errors, including 

transactions involving unauthorized 

use. To avoid these potential conflicts 

and to facilitate compliance, under 

§ 1026.13(i)(2), if the transaction debits 

a prepaid account but also draws on an 

overdraft plan subject to subpart B, a 

creditor would be required to comply 

with the requirements of Regulation E, 

§ 1005.11 and proposed § 1005.18(e), 

governing error resolution rather than 

those of § 1026.13(a), (b), (c), (e), (f) and 

(h). This approach is also consistent 

with the existing provisions in 

Regulation E § 1005.12(a)(1)(iv) and 

Regulation Z § 1026.13(i), which applies 

Regulation E’s liability limitation and 

error resolution procedures to an 

extension of credit that is incident to an 

electronic fund transfer for overdraft 

lines of credit. The Bureau specifically 

solicits comment on this approach and 

any operational issues that might arise 

under this approach. 

The proposal also would make 

technical revisions to § 1026.13 and 

related commentary. First, the existing 

language of § 1026.13(i) would be 

moved to proposed § 1026.13(i)(1) and 

revised to specify that this provision 

would apply to asset accounts that are 

not prepaid accounts. Second, 

comments 13(i)–2 and –3 would be 

revised to specify that they only apply 

to debit cards and not to prepaid cards. 

Subpart G 

Except for § 1026.60, which concerns 

certain credit card disclosures, all of the 

provisions in subpart G implement the 

Credit CARD Act. The provisions in 

subpart G that implement the Credit 

CARD Act generally apply to a ‘‘card 

issuer’’ as defined in § 1026.2(a)(7) that 

is extending credit under a ‘‘credit card 

account under an open-end (not homesecured) consumer credit plan’’ as 

defined in § 1026.2(a)(15)(ii).377 Among 


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student on or near a college campus or at an event 

sponsored by the college to induce the student to 

apply for or open an open-end credit plan. 

378A person would not be extending open-end 

credit where the person is not charging a finance 

charge for the credit that is accessed by a prepaid 

card or by an account number where the extensions 

of credit are permitted to be deposited directly only 

into particular prepaid accounts specified by the 

creditor. See section-by-section analysis of 

§ 1026.2(a)(17) and (a)(20). 

379The Overview of the Regulation Z Proposal 

describes some of the benefits from these 

regulations for prepaid account consumers. 

other things, subpart G contains 

provisions to implement the Credit 

CARD Act that: 

• Prohibit credit card issuers from 

extending credit without assessing the 

consumer’s ability to pay, with 

special rules regarding the extension 

of credit to persons under the age of 

21. (§ 1026.51) 

• Restrict the amount of required fees 

that an issuer can charge during the 

first year after an account is opened. 

(§ 1026.52(a)(1)) 

• Limit the amount issuers can charge 

for ‘‘back-end’’ penalty fees, such as 

when a consumer makes a late 

payment or exceeds his or her credit 

limit. (§ 1026.52(b)(1)) 

• Ban ‘‘declined transaction fees’’ and 

other penalty fees where there is no 

cost to the issuer associated with the 

violation of the account agreement. 

(§ 1026.52(b)(2)) 

• Restrict the circumstances under 

which issuers can increase interest 

rates on credit card accounts and 

establish procedures for doing so. 

(§ 1026.55 and 59) 

• Restrict fees for over-the-limit 

transactions to one per billing cycle 

and require that the consumer opt-in 

to payment of such transactions in 

order for the fee to be charged. 

(§ 1026.56) 

• Require institutions of higher 

education to publicly disclose 

agreements with credit card issuers 

and limit the marketing of credit cards 

on or near college campuses. 

(§ 1026.57) 

In addition, subpart G also contains 

§ 1026.60, which sets forth disclosures 

that card issuers generally must provide 

on or with a solicitation or an 

application to open a credit or charge 

card account. 

As discussed above in the Overview 

of Regulation Z Proposal section, the 

Bureau anticipates that most credit 

accessed by a prepaid card, or credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, would meet the definition of 

‘‘open-end credit’’ if the creditor 

imposes a finance charge for the credit. 

See section-by-section analysis of the 

definition of ‘‘credit’’ in § 1026.2(a)(14), 

the definition of ‘‘open-end-credit’’ in 

§ 1026.2(a)(20), and the definition of 

‘‘finance charge’’ in § 1026.4. In 

addition, as discussed above in the 

section-by-section analysis of 

§§ 1026.2(a)(7), (a)(15)(i) and (a)(15)(ii), 

an open-end credit plan accessed by a 

prepaid card that is a credit card, or by 

an account number that is a credit card 

where the extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, would be a 

‘‘credit card account under an open-end 

(not home-secured) consumer credit 

plan,’’ and the person issuing the 

prepaid card or account number would 

be a ‘‘card issuer.’’ 

As a result, pursuant to the Bureau’s 

proposed amendments, certain 

provisions in subpart G generally would 

apply to open-end credit that is 

accessed by a prepaid card that is a 

credit card (such as overdraft credit) or 

open-end credit that is accessed by an 

account number that is a credit card and 

deposited into a prepaid account where 

the extensions of credit are permitted to 

be deposited directly only into 

particular prepaid accounts specified by 

the creditor.378

As discussed in more detail below, 

the Bureau is proposing to amend 

commentary to the following provisions 

to provide guidance on how certain 

provisions in subpart G would apply to 

open-end credit plans that are accessed 

by prepaid cards that are credit cards or 

account numbers as described above 

that are credit cards: 

(1) Section 1026.52(a), which restricts 

required fees charged during the first 

year the account is opened; 

(2) Section 1026.52(b), which restricts 

the imposition of penalty fees, including 

the ban on declined transaction fees; 

and 

(3) Section 1026.57, which limits the 

marketing of credit cards to college 

students.379

The Bureau also is proposing to 

provide guidance on how § 1026.60, 

which requires disclosures to be 

provided on or with a solicitation or 

application to open a credit or charge 

card account, applies to card issuers 

that are issuing prepaid cards that are 

credit cards or account numbers, as 

described above, that are credit cards. 

Section 1026.52 Limitations on Fees 

52(a) Limitations During First Year After 

Account Opening 

TILA section 127(n)(1) restricts the 

imposition of certain fees during the 

first year after opening a credit card 

account under an open-end consumer 

credit plan in order to restrict certain 

‘‘fee harvester’’ or subprime credit cards 

that charged a large amount of fees early 

in the account relationship to the credit 

line, which significantly reduced the 

credit available to a consumer during 

the first year. Specifically, the statute 

provides that ‘‘no payment of any fees 

(other than any late fee, over-the-limit 

fee, or fee for a payment returned for 

insufficient funds) may be made from 

the credit made available under the 

terms of the account’’ where the account 

terms would require consumers to pay 

‘‘an aggregate amount [of non-exempt 

fees] in excess of 25 percent of the total 

amount of credit authorized under the 

account when the account is opened.’’ 

This provision is implemented in 

§ 1026.52(a), which provides generally 

that the total amount of fees a consumer 

is required to pay with respect to a 

credit card account under an open-end 

(not home-secured) consumer credit 

plan during the first year after account 

opening must not exceed 25 percent of 

the credit limit in effect when the 

account is opened. Fees not subject to 

the 25 percent restriction are late 

payment fees, over-the-limit fees, and 

returned-payment fees; or fees that the 

consumer is not required to pay with 

respect to the account. See 

§ 1026.52(a)(2). Existing comment 

52(a)(1)–1 provides that the 25 percent 

limit in § 1026.52(a)(1) applies to fees 

that the card issuer charges to the 

account as well as to fees that the card 

issuer requires the consumer to pay 

with respect to the account through 

other means (such as through a payment 

from the consumer’s asset account to the 

card issuer or from another credit 

account provided by the card issuer). 

Particularly in the context of prepaid 

cards with linked credit card accounts 

that are designed to provide liquidity to 

the prepaid account, the Bureau 

believes that the statute and regulation 

provide important protections to 

consumers. From the consumer’s 

perspective, there is no practical 

difference between a fee charged against 

the credit card account and a fee 

charged to the linked prepaid account in 

order to access credit because both 

functionally reduce the total amount of 

credit available to the consumer through 

the prepaid account until such fees are 

paid. If the statute were not interpreted 

to include fees charged across any 

linked accounts, the Bureau is 

concerned that card issuers could hide 

non-exempt fees reducing the credit 

made available under such accounts by 

artificially charging such fees as 

negative balances on asset accounts or 


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by creating separate artificially distinct 

credit accounts and attempting to 

collect the non-exempt fees from those 

linked credit accounts. The Bureau 

believes that such arrangements would 

subvert the purpose and meaning of 

TILA section 127(n)(1). 

As described below, the Bureau is 

proposing to amend several comments 

to § 1026.52(a) to provide examples and 

other guidance on how this provision 

would apply to credit card accounts 

under an open-end (not home-secured) 

consumer credit plan that are accessed 

by prepaid cards that are credit cards, or 

accessed by account numbers that are 

credit cards where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. The Bureau 

seeks comment on whether additional 

amendments to the regulation or 

commentary would be helpful to 

effectuate its interpretation of the statute 

or to facilitate compliance. For example, 

the Bureau seeks comment on whether 

it would be helpful to mandate the 

disclosure to consumers of the initial 

credit line that is made available under 

the terms of the account, including any 

linked credit accounts. 

52(a)(1) General Rule 

Section 1026.52(a)(1) provides that 

generally the total amount of fees a 

consumer is required to pay with 

respect to a credit card account under 

an open-end (not home-secured) 

consumer credit plan during the first 

year after account opening must not 

exceed 25 percent of the credit limit in 

effect when the account is opened. Fees 

not subject to the 25 percent restriction 

are late payment fees, over-the-limit 

fees, and returned-payment fees; or fees 

that the consumer is not required to pay 

with respect to the account. See 

§ 1026.52(a)(2). 

The Bureau is proposing to amend 

existing comment 52(a)(1)–1, which 

explains that the 25 percent limit in 

§ 1026.52(a)(1) applies to fees that the 

card issuer charges to the account as 

well as to fees that the card issuer 

requires the consumer to pay with 

respect to the account through other 

means (such as through a payment from 

the consumer’s asset account to the card 

issuer or from another credit account 

provided by the card issuer). This 

comment also provides two examples 

illustrating the limitations on fees set 

forth in § 1026.52(a). 

The proposal would amend comment 

52(a)(1)–1 to add a prepaid account as 

an example of a consumer’s asset 

account. Thus, for a credit card account 

under an open-end (not home-secured) 

consumer credit plan that are accessed 

by a prepaid card that is a credit card, 

or accessed by an account number that 

is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, the 

25 percent limit in § 1026.52(a)(1) 

applies to fees that the card issuer 

charges to the account as well as to fees 

that the card issuer requires the 

consumer to pay with respect to the 

account through other means (such as 

through a payment to the card issuer 

from the consumer’s prepaid account or 

other asset account or from another 

credit account provided by the card 

issuer). The Bureau is also proposing to 

add two new examples to existing 

comment 52(a)(1)–1 to illustrate how 

the prohibition in § 1026.52(a) applies 

to credit card accounts under an openend (not home-secured) consumer credit 

plan that are accessed by prepaid cards 

that are credit cards. See proposed 

comment 52(a)(1)–1.iii and .iv. While 

the proposed examples that would be 

added to comment 52(a)(1)–1.iii and .iv 

assume that a consumer opens a credit 

account accessed by the prepaid card 

that is a credit card, the same proposed 

guidance would apply to credit card 

accounts that are accessed by account 

numbers that are credit cards where 

extensions of credit are only permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

52(a)(2) Fees Not Subject to Limitations 

Section 1026.52(a)(2) provides that 

the 25 percent restriction does not apply 

to late payment fees, over-the-limit fees, 

and returned-payment fees, or fees that 

the consumer is not required to pay 

with respect to the account. Existing 

comment 52(a)(2)–1 provides guidance 

on the types of fees that are included in 

the 25 percent threshold. Specifically, 

existing comment 52(a)(2)–1 provides 

that except as provided in 

§ 1026.52(a)(2), § 1026.52(a) applies to 

any fees or other charges that a card 

issuer will or may require the consumer 

to pay with respect to a credit card 

account during the first year after 

account opening, other than charges 

attributable to periodic interest rates. 

The existing comment further clarifies 

that for example, § 1026.52(a) applies to: 

(1) Fees that the consumer is required to 

pay for the issuance or availability of 

credit described in § 1026.60(b)(2), 

including any fee based on account 

activity or inactivity and any fee that a 

consumer is required to pay in order to 

receive a particular credit limit; (2) fees 

for insurance described in § 1026.4(b)(7) 

or debt cancellation or debt suspension 

coverage described in § 1026.4(b)(10) 

written in connection with a credit 

transaction, if the insurance or debt 

cancellation or debt suspension 

coverage is required by the terms of the 

account; (3) fees that the consumer is 

required to pay in order to engage in 

transactions using the account (such as 

cash advance fees, balance transfer fees, 

foreign transaction fees, and fees for 

using the account for purchases); (4) 

fees that the consumer is required to pay 

for violating the terms of the account 

(except to the extent specifically 

excluded by § 1026.52(a)(2)(i)); (5) fixed 

finance charges; and (6) minimum 

charges imposed if a charge would 

otherwise have been determined by 

applying a periodic interest rate to a 

balance except for the fact that such 

charge is smaller than the minimum. 

The Bureau also is proposing to add 

two additional comments to 

§ 1026.52(a)(2) to provide specific 

guidance on the types of fees that would 

be covered by the 25 percent limitation 

for credit card accounts under an openend (not home-secured) consumer credit 

plan that are accessed by prepaid cards 

that are credit cards, or accessed by 

account numbers that are credit cards 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

First, proposed comment 52(a)(2)–2 

would provide additional examples of 

the types of fees that would be covered 

by the 25 percent limitation for credit 

card accounts under an open-end (not 

home-secured) consumer credit plan 

that are accessed by prepaid cards that 

are credit cards. Specifically, proposed 

comment 52(a)(2)–2 provides that 

except as provided in § 1026.52(a)(2), 

§ 1026.52(a) applies to any charge or fee, 

other than a charge attributable to a 

periodic interest rate, that the card 

issuer will or may require the consumer 

to pay in connection with a credit 

account accessed by a prepaid card that 

is a credit card, including fees that are 

assessed on the prepaid account in 

connection with credit accessed by the 

prepaid card. Under proposed comment 

52(a)(2)–2, this would include, but is 

not limited to: (1) Per-transaction fees 

for ‘‘shortages’’ or ‘‘overdrafts;’’ (2) fees 

for transferring funds from a credit 

account to a prepaid account that are 

both accessed by the prepaid card; (3) a 

daily, weekly, or monthly (or other 

periodic) fee (other than a periodic 

interest rate) assessed each period a 

prepaid account is in ‘‘overdraft’’ status, 

or would be in overdraft status but for 

funds supplied by a linked line of credit 

accessed by the prepaid card; or (4) a 

daily, weekly, or monthly (or other 

periodic) fee (other than a periodic 


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380A card issuer also must not impose more than 

one fee for violating the terms or other requirements 

of a credit card account under an open-end (not 

home-secured) consumer credit plan based on a 

single event or transaction. See § 1026.52(b)(2)(ii). 

interest rate) assessed each period a line 

of credit accessed by the prepaid card 

has an outstanding balance. 

Second, proposed comment 52(a)(2)– 

3 would provide additional examples of 

the types of fees that that would be 

covered by the 25 percent limitation for 

credit card accounts under an open-end 

(not home-secured) consumer credit 

plan that are accessed by account 

numbers that are credit cards where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. Specifically, proposed 

comment 52(a)(2)–3 would provide that 

except as provided in § 1026.52(a)(2), 

§ 1026.52(a) applies to any charge or fee, 

other than a charge attributable to a 

periodic interest rate, that the card 

issuer will or may require the consumer 

to pay in connection with a credit 

account accessed by an account number 

that is a credit card where extensions of 

credit are only permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, including fees that are assessed 

on the prepaid account in connection 

with the credit assessed by the account 

number. Proposed comment 52(a)(2)–3 

would further clarify that, this would 

include, but is not limited to: (1) Pertransaction fees for ‘‘shortages’’ or 

‘‘overdrafts;’’ (2) fees for transferring 

funds from the credit account to a 

prepaid account; and (3) a daily, 

weekly, or monthly (or other periodic) 

fee (other than a periodic interest rate) 

assessed each period the line of credit 

accessed by the account number has an 

outstanding balance. 

Proposed comment 52(a)(2)–3 is 

designed to address situations where (1) 

a separate line of credit is linked to a 

prepaid account where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, (2) 

the consumer requests an advance on 

the open-end account using an account 

number, and (3) the advance is 

deposited directly into the prepaid 

account. Proposed comment 52(a)(2)–3 

would not apply to a credit card account 

that is accessed by an account number 

that is a prepaid card; proposed 

comment 52(a)(2)–2 would provide 

guidance on that type of credit card 

account. 

Finally, the Bureau proposes several 

technical revisions. Current comments 

52(a)(2)–2 and –3 would be moved to 

comments 52(a)(2)–4 and -5 

respectively; no substantive change is 

intended. In addition, the section 

heading to § 1026.52(a) would be 

revised to delete the reference to 

limitations prior to account opening to 

be consistent with the scope of the 

limitations set forth in § 1026.52(a); no 

substantive change is intended. 

52(b) Limitations on Penalty Fees 

TILA section 149(a) provides that 

‘‘[t]he amount of any penalty fee or 

charge that a card issuer may impose 

with respect to a credit card account 

under an open end consumer credit 

plan in connection with any omission 

with respect to, or violation of, the 

cardholder agreement, including any 

late payment fee, over-the-limit fee, or 

any other penalty fee or charge, shall be 

reasonable and proportional to such 

omission or violation.’’ 15 U.S.C. 

1665d(a). TILA section 149(e) provides 

that the Bureau, in consultation with the 

Comptroller of the Currency, the Board 

of Directors of the Federal Deposit 

Insurance Corporation, the Director of 

the Office of Thrift Supervision, and the 

National Credit Union Administration 

Board, may issue rules to provide an 

amount for any penalty fee or charge 

described in TILA section 149(a) that is 

presumed to be reasonable and 

proportional to the omission or 

violation to which the fee or charge 

relates. 15 U.S.C. 1665d(e). 

Implementing TILA section 149, 

§ 1026.52(b) provides that a card issuer 

must not impose a fee for violating the 

terms or other requirements of a credit 

card account under an open-end (not 

home-secured) consumer credit plan 

unless the dollar amount of the fee: (1) 

Is consistent with either the cost 

analysis in § 1026.52(b)(1)(i) or the safe 

harbors in § 1026.52(b)(1)(ii); and (2) 

Does not exceed the dollar amount 

associated with the violation.380

Section 1026.52(b)(2)(i)(B) provides a 

card issuer must not impose a fee for 

violating the terms or other 

requirements of a credit card account 

under an open-end (not home-secured) 

consumer credit plan when there is no 

dollar amount associated with the 

violation. Section 1026.52(b)(2)(i)(B)(1) 

through (3), respectively, would 

prohibit the following fees because there 

is no dollar amount associated with the 

following violations: (1) Transactions 

that the card issuer declines to 

authorize; (2) Account inactivity; and 

(3) The closure or termination of an 

account. 

The Bureau is proposing to add 

comment 52(b)(2)(i)–7 to provide 

guidance on when the ban on declined 

transaction fees in 

§ 1026.52(b)(2)(i)(B)(1) would apply in 

the context of prepaid accounts. 

Specifically, this proposed comment 

would provide that 

§ 1026.51(b)(2)(i)(B)(1) applies to 

declined transaction fees where an 

account number is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. In addition, the proposed 

comment would clarify that with 

respect to a credit card that is a prepaid 

card, the prohibition in 

§ 1026.52(b)(2)(i)(B)(1) applies to the 

consumer’s transactions using the 

prepaid card where a declined 

transaction would have accessed the 

consumer’s credit account with the card 

issuer had it been authorized. A fee for 

declining such a transaction is no 

different than a fee for declining a credit 

card transaction, which is prohibited by 

current § 1026.52(b)(2). Thus, if a 

transaction using a prepaid card that is 

a credit card would have accessed the 

credit card account had it been 

authorized, the card issuer may not 

impose a declined transaction fee for 

declining that transaction. Finally, the 

proposed comment would provide that 

fees imposed for declining a transaction 

that would have only accessed the 

prepaid account and would not have 

accessed the consumer’s credit card 

account would not be covered by 

§ 1026.52(b)(2)(B)(i)(1). Such 

transactions do not directly involve a 

credit card account, although they do 

involve a prepaid card that is a credit 

card. The Bureau requests comment on 

whether, once a credit card account has 

been added to a prepaid card, it should 

prohibit a card issuer from thereafter 

assessing a fee for declining to authorize 

a prepaid card transaction, 

notwithstanding that a given transaction 

would not have accessed the credit card 

account even had it been authorized. 

Section 1026.57 Reporting and 

Marketing Rules for College Student 

Open-End Credit 

Overview of Proposed Changes 

TILA section 140(f) requires the 

public disclosure of contracts or other 

agreements between card issuers and 

institutions of higher education for the 

purpose of marketing a credit card and 

imposes restrictions related to 

marketing open-end credit to college 

students. 15 U.S.C. 1650(f). TILA 

section 140(f)(1) provides that an 

institution of higher education must 

publicly disclose any contract or other 

agreement made with a card issuer or 

creditor for the purpose of marketing a 

credit card. 15 U.S.C. 1650(f)(1). TILA 

section 140(f)(2) provides that no card 


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issuer or creditor may offer to a student 

at an institution of higher education any 

tangible item to induce such student to 

apply for or participate in an open-end 

consumer credit plan offered by such 

card issuer or creditor, if such offer is 

made (1) on the campus of an institution 

of higher education; (2) near the campus 

of an institution of higher education, as 

determined by rule of the Bureau; or (3) 

at an event sponsored by or related to 

an institution of higher education. 15 

U.S.C. 1650(f)(2). 

In addition, TILA section 127(r) 

requires card issuers to submit an 

annual report to the Bureau containing 

the terms and conditions of all business, 

marketing, promotional agreements, and 

college affinity card agreements with an 

institution of higher education, or other 

related entities, with respect to any 

college student credit card issued to a 

college student at such institution. 15 

U.S.C. 1637(r). TILA section 140(f) and 

127(r) are implemented in § 1206.57. 

Section 1026.57(b) provides that an 

institution of higher education must 

publicly disclose any contract or other 

agreement made with a card issuer or 

creditor for the purpose of marketing a 

credit card. The Bureau is proposing to 

add comment 57(b)–3 to § 1026.57(b) to 

explain that this provision of Regulation 

Z would apply to any contract or other 

agreement that an institution of higher 

education makes with a card issuer or 

creditor for the purpose of marketing 

either (1) the addition of an open-end 

(not home-secured) consumer credit 

account to previously issued prepaid 

accounts that were issued to full-time or 

part-time students or (2) new prepaid 

accounts where a credit account may be 

added in connection with the prepaid 

account, where, in either case, the credit 

account would be accessed by a prepaid 

card that is a credit card, or would be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Thus, under 

the proposal, § 1026.57(b) would require 

an institution of higher education to 

publicly disclose such agreements. 

Section 1026.57(c) provides that no 

card issuer or creditor may offer a 

college student any tangible item to 

induce such student to apply for or 

open an open-end consumer credit plan 

offered by such card issuer or creditor, 

if such offer is made: (1) On the campus 

of an institution of higher education; (2) 

Near the campus of an institution of 

higher education; or (3) At an event 

sponsored by or related to an institution 

of higher education. The proposal 

would add comment 57(c)–7 to 

§ 1026.57(c) to explain that § 1026.57(c) 

applies to either (1) the application for 

or opening of a credit card account that 

is being added to previously issued 

prepaid accounts that were issued to 

full-time or part-time students or (2) the 

application for or opening of a prepaid 

account where a credit account may be 

added in connection with the prepaid 

account, where, in either case, the credit 

account would be accessed by a prepaid 

card that is a credit card, or would be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Thus, under 

the proposal, § 1026.57(c) would 

prevent a card issuer or creditor from 

offering a college student any tangible 

item to induce such student to apply for 

or open a prepaid account with a linked 

credit card account (as discussed above) 

or a credit card account linked to the 

previously-issued prepaid account (as 

discussed above), offered by such card 

issuer or creditor, if such offer is made: 

(1) On the campus of an institution of 

higher education; (2) Near the campus 

of an institution of higher education; or 

(3) At an event sponsored by or related 

to an institution of higher education. 

Section 1026.57(d) requires card 

issuers that are a party to one or more 

‘‘college credit card agreements’’ to 

submit annual reports to the Bureau 

regarding those agreements. The 

proposal would amend existing 

comments 57(a)(1)–1 and 57(a)(5)–1 

relating to the definitions of ‘‘college 

student credit card’’ and ‘‘college credit 

card agreement’’ respectively to provide 

that § 1026.57(d) applies to a business, 

marketing or promotional agreement 

between a card issuer and a college or 

university (or an affiliated organization, 

such as an alumni club or a foundation) 

if the agreement provides for the 

addition of open-end (not homesecured) consumer credit plans to 

previously-issued prepaid accounts that 

were issued to full-time or part-time 

students, where that credit account 

would be accessed by a prepaid card 

that is a credit card, or would be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Proposed 

comment 57(a)(1)–1 and 57(a)(5)–1 also 

would provide that § 1026.57(d) applies 

to a business, marketing or promotional 

agreement between a card issuer and a 

college or university (or an affiliated 

organization, such as an alumni club or 

a foundation) if (1) the agreement 

provides for the issuance of prepaid 

accounts to full-time or part-time 

students; and (2) an open-end (not 

home-secured) consumer credit plan 

may be added in connection with the 

prepaid accounts where that credit 

account would be accessed by a prepaid 

card that is a credit card, or would be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Thus, under 

the proposal, a card issuer that is a party 

to one or more such agreements would 

be required to submit annual reports to 

the Bureau regarding those agreements. 

The proposal would add or amend the 

comments discussed above to provide 

that the provisions of § 1026.57 apply to 

prepaid accounts that do not contain a 

credit card feature at the time the 

prepaid account is issued, so long as a 

credit card feature may be added to the 

previously issued prepaid account 

issued to a college student where that 

credit account would be accessed by a 

prepaid card that is a credit card, or may 

be accessed by an account number that 

is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. The 

Bureau notes that under proposed 

§ 1026.12(h), a prepaid account at the 

time it is opened or issued cannot 

include a credit card feature. As 

discussed in more detail in the sectionby-section analysis of proposed 

§ 1026.12(h), under the proposal, card 

issuers would be required to wait at 

least 30 days after a prepaid account is 

registered before the card issuer may 

open a credit card account for the 

holder of the prepaid account, or make 

a solicitation or provide an application 

to the holder of the prepaid account to 

open a credit or charge card account, 

accessed by the prepaid card or by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. Nonetheless, the Bureau 

believes that the marketing efforts 

related to a prepaid account, and the 

inducements given by a card issuer to 

open a prepaid account, also may have 

an impact on whether consumers may 

request that a credit card account be 

linked to the prepaid account, as 

discussed above, when such credit card 

accounts are offered to them. Thus, the 

proposal would add or amend the 

comments discussed above to provide 

that the provisions in that section apply 

to the issuance of prepaid accounts that 

do not have credit card accounts linked 

to them at the time the prepaid accounts 

are opened, if credit card accounts may 


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381See, for example, an August 11 letter from 

Senator Menendez to CFPB Director Richard 

Cordray and Department of Education Secretary 

Arne Duncan urging the agencies to prohibit 

overdraft fees on student prepaid accounts 

established in connection with the financial aid 

process or students’ relationships with colleges. 

The letter is available at www.menendez.senate.gov/ 

newsroom/press/menendez-calls-for-protectionsfrom-campus-card-trap. 

382See www2.ed.gov/policy/highered/reg/

hearulemaking/2012/programintegrity.html for 

further information about the department’s 

negotiated rulemaking. 

be linked to the prepaid accounts in the 

future as described above. 

The Bureau requests comment on this 

approach. The Bureau believes it is 

reasonable to interpret credit cards in 

this section to include prepaid cards 

where credit features may subsequently 

be added, and that it is consistent with 

congressional concerns that college 

students could become trapped in a 

cycle of credit card debt.381 Further, 

these concerns might be heightened 

with respect to prepaid cards to which 

credit card accounts may be linked, 

because students might be more prone 

to use such cards as their primary 

transaction account. The Bureau notes 

that, in light of these types of concerns, 

the Department of Education is 

undertaking a negotiated rulemaking 

considering, among other things, 

overdraft fees on prepaid cards 

marketed to college students.382

57(a) Definitions 

Section 1026.57(d) requires card 

issuers that are a party to one or more 

college credit card agreements to submit 

annual reports to the Bureau regarding 

those agreements. Section 1026.57(a)(5) 

defines ‘‘college credit card agreement’’ 

to mean any business, marketing or 

promotional agreement between a card 

issuer and an institution of higher 

education or an affiliated organization 

in connection with which college 

student credit cards are issued to college 

students currently enrolled at that 

institution. Section 1026.57(a)(1) 

defines ‘‘college student credit card’’ as 

used in the term ‘‘college credit card 

agreements’’ to mean a credit card 

issued under a credit card account 

under an open-end (not home-secured) 

consumer credit plan to any college 

student. 

Existing comment 57(a)(1)–1 provides 

guidance on the definition of ‘‘college 

student credit card’’ which is used in 

the definition of ‘‘college credit card 

agreements.’’ The proposal would 

amend this comment to include a 

prepaid card that is a credit card, or an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, that is issued to any college 

student under a credit card account 

under an open-end (not home-secured) 

consumer credit plan. Proposed 

comment 57(a)(1)–1 also would provide 

that the definition of college student 

credit card includes a prepaid account 

that is issued to any college student 

where an open-end (not home-secured) 

consumer credit plan may be added in 

connection with the prepaid account 

and the credit account may be accessed 

by a prepaid card that is a credit card, 

or may be accessed by an account 

number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

Existing comment 57(a)(5)–1 provides 

guidance on the definition of ‘‘college 

credit card agreements.’’ The proposal 

would amend this comment to include 

guidance on when agreements related to 

prepaid accounts would be considered 

‘‘college credit card agreements.’’ 

Proposed comment 57(a)(5)–1 would 

provide that the definition of ‘‘college 

credit card agreements’’ includes a 

business, marketing or promotional 

agreement between a card issuer and a 

college or university (or an affiliated 

organization, such as an alumni club or 

a foundation) if the agreement either 

provides for the addition of open-end 

(not home-secured) consumer credit 

plans to previously-issued prepaid 

accounts that were issued to full-time or 

part-time students, where that credit 

account would be accessed by a prepaid 

card that is a credit card, or may be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Proposed 

comment 57(a)(5)–1 also would provide 

that the definition of ‘‘college credit 

card agreements’’ includes a business, 

marketing or promotional agreement 

between a card issuer and a college or 

university (or an affiliated organization, 

such as an alumni club or a foundation) 

if (1) an agreement provides for the 

issuance of prepaid accounts to fulltime or part-time students; and (2) an 

open-end (not home-secured) consumer 

credit plan may be added in connection 

with the prepaid account where that 

credit account may be accessed by a 

prepaid card that is a credit card, or may 

be accessed by an account number that 

is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

Thus, pursuant to the Bureau’s 

proposed amendments to commentary, 

§ 1026.57(d) would require a card issuer 

that is a party to one or more agreements 

in connection with prepaid accounts 

with linked credit cards, as described 

above, to submit annual reports to the 

Bureau regarding those agreements. 

Under the proposal, a card issuer would 

be required to submit agreements that 

provide for the issuance of prepaid 

accounts to full-time or part-time 

students even if credit accounts are not 

linked to the prepaid account when they 

are issued, so long as credit accounts 

may be added in connection with the 

prepaid accounts where the credit 

accounts may be accessed by a prepaid 

card that is a credit card, or may be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. 

As discussed above, the Bureau 

believes that the marketing efforts 

related to a prepaid account, and the 

inducements given by a card issuer to 

open a prepaid account, also have an 

impact on whether consumers may 

request that a credit card account be 

linked to the prepaid account when 

such credit card accounts are offered to 

them. Thus, even though a prepaid 

account will not have a credit card 

account linked to it at the time the 

prepaid account is opened, if a credit 

card account may be linked to a prepaid 

account as described above in the 

future, the prepaid account at the time 

of issuance would be a ‘‘college student 

credit card’’ for purposes of 

§ 1026.57(a)(1) if the prepaid account is 

issued to a college student. As a result, 

under the proposal, a card issuer that is 

a party to one or more agreements 

between the card issuer and a college or 

university (or an affiliated organization, 

such as an alumni club or a foundation) 

must submit annual reports to the 

Bureau regarding those agreements if (1) 

an agreement provides for the issuance 

of prepaid accounts to full-time or parttime students; and (2) a credit account 

may be added in connection with the 

prepaid account where that credit 

account may be accessed by a prepaid 

card that is a credit card, or may be 

accessed by an account number that is 

a credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. 

57(b) Public Disclosure of Agreements 

Section 1026.57(b) provides that an 

institution of higher education must 

publicly disclose any contract or other 

agreement made with a card issuer or 

creditor for the purpose of marketing a 

credit card. The Bureau is proposing 


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77252 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

comment 57(b)–3 to explain that 

§ 1026.57(b) applies to any contract or 

other agreement that an institution of 

higher education makes with a card 

issuer or creditor for the purpose of 

marketing either (1) the addition of 

open-end (not home-secured) consumer 

credit accounts to previously issued 

prepaid accounts that were issued to 

full-time or part-time students, where 

that credit account would be accessed 

by a prepaid card that is a credit card, 

or may be accessed by an account 

number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor; or (2) prepaid accounts where 

a credit account may be added in 

connection with the prepaid account 

and that credit account may be accessed 

by a prepaid card that is a credit card 

or may be accessed by an account 

number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. Thus, under § 1026.57(b), an 

institution of higher education must 

publicly disclose such agreements. 

As discussed above, the Bureau 

believes that the marketing efforts 

related to a prepaid account, and the 

inducements given by a card issuer to 

open a prepaid account, also may have 

an impact on whether consumers may 

request that a credit card account be 

linked to the prepaid account, as 

discussed above, when such credit card 

accounts are offered to them. Thus, the 

Bureau believes that the marketing 

related to a prepaid account where a 

credit card feature may be added in 

connection with the prepaid account as 

discussed above would constitute 

marketing of a credit card. Thus, under 

the proposal, an institution of higher 

education must publicly disclose 

agreements for the marketing of prepaid 

accounts where a credit account may be 

added in connection with the prepaid 

account and that credit account may be 

accessed by a prepaid card that is a 

credit card or may be accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

57(c) Prohibited Inducements 

Section 1026.57(c) provides that no 

card issuer or creditor may offer a 

college student any tangible item to 

induce such student to apply for or 

open an open-end consumer credit plan 

offered by such card issuer or creditor, 

if such offer is made: (1) On the campus 

of an institution of higher education; (2) 

Near the campus of an institution of 

higher education; or (3) At an event 

sponsored by or related to an institution 

of higher education. The Bureau is 

proposing to add comment 57(c)–7 to 

explain that § 1026.57(c) applies to (1) 

the application for or opening of a credit 

card account that is being added to 

previously-issued prepaid accounts that 

were issued to full-time or part-time 

students, where that credit account 

would be accessed by a prepaid card 

that is a credit card, or may be accessed 

by an account number that is a credit 

card where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor; or (2) the 

application for or opening of a prepaid 

account where a credit account may be 

added in connection with the prepaid 

account where that credit account may 

be accessed by a prepaid card that is a 

credit card or may be accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

As discussed above, the Bureau 

believes that the marketing efforts 

related to a prepaid account, and the 

inducements given by a card issuer to 

open a prepaid account, also may have 

an impact on whether consumers may 

request that a credit card account be 

linked to the prepaid account, as 

discussed above, when such credit card 

accounts are offered to them. Thus, any 

tangible item given to induce college 

students to apply or open a prepaid 

account where a credit card feature may 

be added in connection with the 

prepaid account as discussed above 

would also be seen as inducing a college 

student to apply for or open a credit 

card account in connection with the 

prepaid account when it is offered to the 

consumer. As a result, under the 

proposal, under § 1026.57(c), a card 

issuer or creditor would be prohibited 

from offering a college student any 

tangible item to induce such student to 

apply for or open a prepaid account 

offered by such card issuer or creditor 

where a credit account may be added in 

connection with the prepaid account 

where that credit account may be 

accessed by a prepaid card or may be 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, if such offer is made: (1) On the 

campus of an institution of higher 

education; (2) Near the campus of an 

institution of higher education; or (3) At 

an event sponsored by or related to an 

institution of higher education. 

Section 1026.58 Internet Posting of 

Credit Card Agreements 

TILA section 122(d), implemented by 

§ 1026.58, generally requires card 

issuers to post their card agreements on 

the internet and to provide those 

agreements to the Bureau. Separately, as 

part of this proposal, the Bureau is 

proposing to adopt similar provisions 

for prepaid card accounts in Regulation 

E in proposed § 1005.19. Although the 

Bureau is not proposing to revise 

§ 1026.58, it does note that the 

requirements of § 1026.58 and those of 

Regulation E in proposed § 1005.19 are 

distinct and independent of one 

another. In other words, card issuers 

would have to comply with both as 

appropriate. 

Section 1026.60 Credit and Charge 

Card Applications and Solicitations 

TILA section 127(c), implemented by 

§ 1026.60, generally requires card 

issuers to provide certain cost 

disclosures on or with an application or 

solicitation to open a credit or charge 

card account. 15 U.S.C. 1637(c). Under 

§ 1026.60, card issuers generally are 

required to provide the following 

disclosures, among other cost 

disclosures, on or with the credit or 

charge card applications or solicitations: 

(1) The annual percentage rates 

applicable to the account, for purchases, 

cash advances, and balance transfers; (2) 

any annual or other periodic fee, 

expressed as an annualized amount, that 

is imposed for the issuance or 

availability of a credit card, including 

any fee based on account activity or 

inactivity; (3) any non-periodic fees 

related to opening the account, such as 

one-time membership or participation 

fees; (4) any minimum or fixed finance 

charge that could be imposed during a 

billing cycle; (5) any transaction charge 

imposed on purchases, cash advances or 

balance transfers; and (6) any late 

payment fees, over the limit fees or 

returned payment fees. 

Section 1026.60(a)(5) provides several 

exceptions to the requirements in 

§ 1026.60 to provide cost disclosures on 

or with credit or charge card 

applications or solicitations. 

Specifically, § 1026.60(a)(5) provides 

that § 1026.60 does not apply to: (1) 

Home-equity plans accessible by a 

credit or charge card that are subject to 

the requirements of § 1026.40; (2) 

Overdraft lines of credit tied to asset 

accounts accessed by check-guarantee 

cards or by debit cards; (3) Lines of 

credit accessed by check-guarantee 

cards or by debit cards that can be used 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77253 

383The Bureau notes that, pursuant to Regulation 

E proposed § 1005.18(b)(2)(ii)(B), a financial 

institution also would have to include these 

disclosures as part of the long form provided before 

a consumer acquires a prepaid account. 

384Public Law 100–583, 102 Stat. 2960. 

385 54 FR 13855, 13857 (Apr. 6, 1989). 

386 Id. 

387 Id. 

388See 55 FR 13103, 13103 (Apr. 9, 1990). 

only at automated teller machines; (4) 

Lines of credit accessed solely by 

account numbers; (5) Additions of a 

credit or charge card to an existing 

open-end plan; (6) General purpose 

applications unless the application, or 

material accompanying it, indicates that 

it can be used to open a credit or charge 

card account; or (7) Consumer-initiated 

requests for applications. 

As discussed above in the Overview 

of Regulation Z Proposal section, under 

the proposal, a person would be a card 

issuer if the person issues a prepaid 

card that is a credit card, or issues an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. Thus, such a card issuer 

generally would be required to provide 

the disclosures required by § 1026.60 on 

or with a solicitation or application to 

open a credit plan that is accessed by a 

prepaid card that is a credit card, or by 

an account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

As discussed above, 

§ 1026.60(a)(5)(iv) currently provides 

that the disclosure requirements in 

§ 1026.60 do not apply to lines of credit 

accessed solely by account numbers. As 

discussed further below, the proposal 

would amend § 1026.60(a)(5)(iv) to 

provide that this exception does not 

apply where the account number is a 

credit card where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. Thus, under 

the proposal, a card issuer would have 

to provide the disclosures required by 

§ 1026.60 on or with a solicitation or 

application to open a credit or charge 

card account that will be accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor.383

The proposal also would amend the 

commentary to § 1026.60(b)(4) and (b)(8) 

to provide additional guidance on how 

disclosures related to transaction fees 

for purchases and for cash advances 

would have to be provided for credit 

card accounts that will be accessed by 

a prepaid card that is a credit card, or 

by an account number that is a credit 

card where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. 

60(a) General Rules 

Comment 60(a)–1 explains that 

§ 1026.60 generally requires that credit 

disclosures be contained in application 

forms and solicitations initiated by a 

card issuer to open a credit or charge 

card account. This comment provides a 

cross reference to several relevant 

provisions of Regulation Z related to 

credit cards, such as a cross reference to 

§ 1026.60(a)(5) and (e)(2) for exemptions 

to the disclosure requirements in 

§ 1026.60, to § 1026.60(a)(1) and 

accompanying commentary for the 

definition of solicitation, and to 

§ 1026.2(a)(15) and accompanying 

commentary for the definition of charge 

card. The proposal would amend this 

comment to provide a cross reference to 

proposed § 1026.12(h) that sets forth 

restrictions on when credit or charge 

card accounts can be added to 

previously-issued prepaid accounts. As 

discussed in more detail in the sectionby-section analysis of proposed 

§ 1026.12(h), new proposed 

§ 1026.12(h)(1) would require card 

issuers to wait at least 30 calendar days 

after a prepaid card is registered before 

the card issuer may make a solicitation 

or provide an application to the holder 

of the prepaid account to open a credit 

or charge card account, or open a credit 

card account for the holder the prepaid 

account, accessed by a prepaid card that 

is a credit card or by an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

60(a)(5) Exceptions 

As discussed above, § 1026.60(a)(5) 

provides several exceptions to the 

requirements in § 1026.60 to provide 

cost disclosures on or with credit or 

charge card applications or solicitations. 

Specifically, § 1026.60(a)(5) provides 

that § 1026.60 does not apply to: (1) 

Home-equity plans accessible by a 

credit or charge card that are subject to 

the requirements of § 1026.40; (2) 

Overdraft lines of credit tied to asset 

accounts accessed by check-guarantee 

cards or by debit cards; (3) Lines of 

credit accessed by check-guarantee 

cards or by debit cards that can be used 

only at automated teller machines; (4) 

Lines of credit accessed solely by 

account numbers; (5) Additions of a 

credit or charge card to an existing 

open-end plan; (6) General purpose 

applications unless the application, or 

material accompanying it, indicates that 

it can be used to open a credit or charge 

card account; or (7) Consumer-initiated 

requests for applications. These 

exemptions are not specifically listed in 

TILA section 127(c). 

In 1989, to implement the disclosure 

provisions in TILA section 127(c) as 

amended by the Fair Credit and Charge 

Card Disclosure Act of 1988,384 the 

Board exempted the following credit 

card accounts from the disclosure 

requirements set forth in its § 226.5a 

(which are contained in the Bureau’s 

Regulation Z § 1026.60): (1) Home 

equity plans accessible by a credit or 

charge card that are subject to the Home 

Equity Loan Consumer Protection Act of 

1988, Public Law 100–709; (2) overdraft 

lines of credit tied to asset accounts 

accessed by check guarantee cards or by 

debit cards; or (3) lines of credit 

accessed by check guarantee cards or by 

debit cards that can be used only at 

automated teller machines.385 In the 

supplemental information to that 

rulemaking, the Board indicated that a 

number of commenters raised issues 

concerning coverage of the proposed 

rule given the broad definition of the 

term ‘‘credit card’’ in the regulation.386

Among other things, the Board reported 

that commenters argued that 

congressional intent was to require 

disclosures only for ‘‘traditional’’ credit 

card accounts used primarily to 

purchase goods and services, and not for 

other types of accounts that do not fall 

within such a category or for which the 

use of a credit or charge card as an 

access device is merely incidental to the 

product being offered.387

In 1990, the Board added commentary 

to its Regulation Z § 226.5a (now 

§ 1026.60) to provide that the 

disclosures set forth in its Regulation Z 

§ 226.5a also did not apply to (1) lines 

of credit accessed solely by account 

numbers; (2) the addition of a credit or 

charge card to an existing open-end 

plan; or (3) general purpose applications 

unless the application, or material 

accompanying it, indicates that it can be 

used to open a credit or charge card 

account; or (4) consumer-initiated 

requests for applications.388 In the 

supplemental information to the 1990 

rulemaking, the Board did not explain 

why it was including these exemptions. 

For the reasons discussed below, the 

proposal would revise the exemption in 

§ 1026.60(a)(5)(iv) that relates to lines of 

credit accessed solely by account 

numbers so that this exception would 

not apply to lines of credit that are 

accessed only by account numbers that 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77254 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

389The Bureau also believes consumers would 

benefit from receiving these disclosures before they 

acquire a prepaid account. See section-by-section 

analysis of Regulation E proposed 

§ 1005.18(b)(2)(ii)(B). 

are credit cards where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

This proposed revision is intended to 

address situations where (1) a separate 

line of credit is linked to a prepaid 

account where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor, (2) the 

consumer requests an advance on the 

account using an account number only, 

and (3) the advance is deposited into the 

prepaid account. Thus, under the 

proposal, a card issuer would be 

required to provide the disclosures set 

forth in § 1026.60 on or with 

solicitations or applications to open a 

credit or charge card account that would 

be accessed only by an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

The Bureau does not believe that 

TILA section 127(c) dictates that the 

above credit card accounts be exempted 

from the disclosures requirements set 

forth in TILA section 127(c). The Bureau 

also believes that the cost disclosures in 

§ 1026.60 would be helpful to 

consumers in deciding whether to open 

such a credit or charge card account. 

The Bureau notes that under the current 

regulation, a card issuer generally 

would be required to provide the cost 

disclosures in § 1026.60 on or with 

solicitations or applications to open a 

credit or charge card account that is 

accessed by a prepaid card that is a 

credit card. The Bureau believes that 

consumers would benefit from receiving 

the cost disclosures set forth in 

§ 1026.60 when a credit or charge card 

is linked to a prepaid account as 

discussed above, regardless of whether 

the credit account is accessed by a 

prepaid card or whether the credit 

account is assessed by only an account 

number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor.389

60(b) 

60(b)(4) Transaction Charges 

Section 1026.60(b)(4), which 

implements TILA section 

127(c)(1)(A)(ii)(III), generally requires 

that card issuers disclose on or with 

solicitations or applications to open 

credit or charge card accounts any 

transaction charge imposed on 

purchases. 15 U.S.C. 

1637(c)(1)(A)(ii)(III). The proposal 

would add proposed comment 60(b)(4)– 

3 to provide guidance on when fees 

would be considered transaction fees for 

purchases under § 1026.60(b)(4) for 

prepaid cards that are credit cards. 

Specifically, proposed comment 

60(b)(4)–3 would provide that if a card 

issuer assesses a fee (other than a 

periodic rate that may be used to 

compute the finance charge on an 

outstanding balance) for credit accessed 

by a credit card that is a prepaid card 

to make a purchase, that fee is a 

transaction charge as described in 

§ 1026.60(b)(4). Proposed comment 

60(b)(4)–3 would provide that such fees 

must be disclosed as transaction charges 

under § 1026.6(b)(4) whether the fee is 

a flat per-transaction fee to make a 

purchase, a flat fee for each day (or 

other period) the consumer has an 

outstanding balance of purchase 

transactions, or a one-time fee for 

transferring funds from the consumer’s 

credit account to the consumer’s 

prepaid account to cover the shortfall in 

the prepaid account as a result of a 

purchase with the prepaid card. 

60(b)(8) Cash-Advance Fee 

Section 1026.60(b)(8), which 

implements TILA section 127(c)(1)(B)(i), 

generally requires that card issuers 

disclose on or with solicitations or 

applications to open credit or charge 

card accounts any fee imposed for an 

extension of credit in the form of cash 

or its equivalent. 15 U.S.C. 

1637(c)(1)(B)(i). The proposal would 

add proposed comment 60(b)(8)–4 to 

provide guidance on when fees would 

be considered cash advance fees that 

must be disclosed under § 1026.60(b)(8) 

for credit card accounts that are 

accessed by prepaid cards. In addition, 

proposed comment 60(b)(8)–4 would 

provide guidance on how cash advance 

fees must be disclosed. Specifically, 

proposed comment 60(b)(8)–4 would 

provide that if a card issuer assesses a 

fee (other than a periodic rate that may 

be used to compute the finance charge 

on an outstanding balance) for a cash 

advance accessed by a credit card that 

is a prepaid card, such as a cash 

withdrawal at an ATM, that fee is a cash 

advance fee. Under proposed comment 

60(b)(8)–4, if the cash advance fee is the 

same dollar amount as the transaction 

charge for purchases described in 

§ 1026.60(b)(4), the card issuer may 

disclose the fee amount under a heading 

that indicates the fee applies to both 

purchase transactions and cash 

advances. Proposed comment 60(b)(8)–4 

would provide the following three 

examples of how cash advance fees 

must be disclosed. 

Under proposed comment 60(b)(8)– 

4.i, the first example would provide that 

a card issuer assesses a $15 fee for credit 

accessed by a credit card that is a 

prepaid card to purchase goods or 

services at the point of sale when the 

consumer has insufficient or 

unavailable funds in the prepaid 

account. Under this proposed example, 

the card issuer assesses a $25 fee for 

credit accessed by a prepaid card for a 

cash advance at an ATM when the 

consumer has insufficient or 

unavailable funds in the prepaid 

account. In this instance, under the 

proposal, the card issuer must disclose 

separately a purchase transaction charge 

of $15 and a cash advance fee of $25. 

Under proposed comment 60(b)(8)– 

4.ii, the second example would provide 

that a card issuer assesses a $15 fee for 

credit accessed by a credit card that is 

a prepaid card to purchase goods or 

services at the point of sale when the 

consumer has insufficient or 

unavailable funds in the prepaid 

account. Under this proposed example, 

the card issuer also assesses a $15 fee 

for credit accessed by a credit card that 

is a prepaid card for providing cash at 

an ATM when the consumer has 

insufficient or unavailable funds in the 

prepaid account. In this instance, under 

the proposal, the card issuer may 

disclose the $15 fee under a heading 

that indicates the fee applies to both 

purchase transactions and ATM cash 

advances. Alternatively, under the 

proposal, the card issuer may disclose 

the $15 fee on two separate rows, one 

row indicating that a $15 fee applies to 

purchase transactions, and a second row 

indicating that a $15 fee applies to ATM 

cash advances. The Bureau believes that 

either alternative would provide 

effective disclosure of the transaction 

fee for purchases and the cash advance 

fee. 

Under proposed comment 60(b)(8)– 

4.iii, the third example would provide 

that a card issuer assesses a $15 fee for 

credit accessed by a credit card that is 

a prepaid card for providing cash at an 

ATM when the consumer has 

insufficient or unavailable funds in the 

prepaid account. The card issuer also 

assesses a fee of $1.50 for out-ofnetwork ATM cash withdrawals and 

$1.00 for in-network ATM cash 

withdrawals. The card issuer must 

disclose the cash advance fee as $16.50 

for out-of-network ATM cash 

withdrawals, indicating that $1.50 is for 

the out-of-network ATM withdrawal fee, 

such as ‘‘$16.50 (including a $1.50 outof-network ATM withdrawal fee). The 


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390Signe-Mary McKernan, Caroline Ratcliffe & 

Katie Vinopal, Urban Institute, Do Assets Help 

Families Cope with Adverse Events? (Nov. 2009), 

available at http://www.urban.org/uploadedpdf/

411994_help_family_cope.pdf; Diane R. Calmus, 

The Heritage Foundation, Improving Economic 

Mobility Through Increased Savings, (Dec. 21, 2012) 

available at http://www.heritage.org/research/

reports/2012/12/improving-economic-mobilitythrough-increased-savings. 

card issuer also must disclose the cash 

advance fee as $16.00 for in-network 

ATM cash withdrawals, indicating that 

$1.00 is for the in-network ATM 

withdrawal fee, such as ‘‘$16 (including 

a $1.00 in-network ATM cash 

withdrawal fee).’’ The Bureau believes 

that the proposed disclosure of the total 

amount of cash advance fees that the 

consumer will pay for each transaction 

along with an indication of the separate 

ATM withdrawal fee that the consumer 

will pay for each transaction, will allow 

consumers to more easily understand 

the cost of each cash advance 

transaction. 

The proposal also would add 

proposed comment 60(b)(8)–5 to 

provide guidance on when fees will be 

considered cash advance fees under 

§ 1026.60(b)(8) with respect to a credit 

card account accessed by an account 

number where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. Specifically, 

proposed comment 60(b)(8)–5 would 

provide that if a card issuer assesses a 

fee (other than a periodic rate that may 

be used to compute the finance charge 

on an outstanding balance) for an 

extension of credit that will be 

deposited into a prepaid account that 

fee is a cash advance fee. This proposed 

revision is intended to address 

situations where (1) a separate line of 

credit is linked to a prepaid account 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, (2) the consumer requests 

an advance on the account using an 

account number only, and (3) the 

advance is deposited into the prepaid 

account. In this situation, any fee for an 

advance taken on the line of credit 

would be disclosed as a cash advance 

fee under § 1026.60(b)(8) even if the 

consumer subsequently uses the 

deposited funds to purchase goods or 

services at a merchant. This provision 

would not apply to credit that is 

accessed by a prepaid card. As 

discussed above, proposed comments 

60(a)(4)–3 and 60(b)(8)–4 would provide 

guidance on how transaction fees for 

purchases and for cash advances would 

be disclosed when charged on credit 

card accounts accessed by prepaid 

cards. 

Other Topics in the Bureau’s Prepaid 

ANPR 

In its Prepaid ANPR, the Bureau 

sought comment on several topics that 

it is not proposing to address in this 

rulemaking, including how credit 

reporting and savings accounts relate to 

prepaid accounts. 

Credit Reporting 

In the Prepaid ANPR, the Bureau 

sought input and data on the efficacy of 

credit reporting features that some GPR 

cards claim to offer to enable consumers 

to improve or build credit and on 

whether regulatory provisions should 

address how such services are marketed 

to consumers. Numerous comments 

from industry, trade associations, and 

consumer groups pointed out that, 

because GPR cards typically do not 

involve the extension of credit, none of 

the three primary credit reporting 

agencies factor prepaid card-related 

payment histories into their credit 

scoring models. Several commenters 

suggested that the Bureau consider 

issuing rules to prevent deceptive credit 

building claims or to establish 

reasonable guidelines on accurate 

disclosures. Others suggested it was 

premature to issue regulations until 

there is a well-established basis for 

using such information to determine 

creditworthiness and noted that, in the 

interim, the Bureau has authority to 

police misleading or deceptive claims 

via its UDAAP authority. 

Based on its understanding of the 

current state of the market, the Bureau 

does not believe it is appropriate to take 

further action on credit reporting in the 

context of this proposal although the 

Bureau does note that it has concerns 

about deceptive marketing regarding 

claims of a credit building aspect to 

certain prepaid accounts. The Bureau 

does, however, continue to seek 

comment on recent developments in 

this area and whether future action 

might be warranted. 

Savings Features 

In the Prepaid ANPR, the Bureau 

noted that, at the time, most GPR cards 

did not offer a savings account 

associated with the card and sought 

input on the costs, benefits, and 

consumer protection issues related to 

savings features offered with GPR cards. 

A savings account feature could allow a 

consumer to save or separate funds, 

such as for budgeting purposes, and 

potentially earn interest on such funds. 

Many industry, trade association, and 

consumer group commenters remarked 

that savings accounts are or can be 

beneficial to consumers and should be 

encouraged by the Bureau but not be 

made mandatory. Several commenters 

noted that such accounts, depending on 

how they are structured, are generally 

already subject to Regulation E as well 

as Regulation DD. A few consumer 

group commenters suggested that fees 

should be prohibited on such linked 

savings accounts, while several industry 

commenters noted that implementing a 

savings feature or linked savings 

account can be very expensive and is 

difficult for financial institutions to do. 

The Bureau agrees with the majority 

of commenters that both linked savings 

accounts and savings features associated 

with prepaid accounts can be beneficial 

to consumers. Such savings programs 

may allow participating consumers to 

better manage their current spending 

and set aside funds for planned or 

unexpected expenses. Further, research 

suggests that having savings and 

engaging in regular saving activity each 

can contribute to both short-term 

financial stability and medium- to longterm economic mobility, even when the 

amounts are small.390 Adding savings 

features may help consumers establish 

long-term relationships with financial 

services providers that facilitate 

effective money management. Finally, 

one non-profit commenter to the 

Bureau’s ANPR noted that results from 

its qualitative research using focus 

groups with consumers who purchase 

and use prepaid debit cards found that 

an overwhelming majority of focus 

group participants want a savings 

feature on their GPR prepaid cards. 

Nevertheless, the Bureau is not taking 

regulatory action at this time on this 

issue and hopes that financial 

institutions will continue to expand 

their offerings in this area, in such a 

way as to provide protections and 

opportunities for consumers. The 

Bureau remains interested in learning 

more about these products and therefore 

requests comment on recent 

developments regarding such features 

and whether future regulation might be 

warranted. 

Proposed Effective Date 

Except as modified by proposed 

§ 1005.18(h), discussed above, the 

Bureau is proposing that this rule take 

effect nine months after publication of 

a final rule in the Federal Register. As 

is explained in proposed 

§ 1005.18(h)(2), the Bureau proposes an 

exception to this nine month 

implementation period; specifically that 

after12 months, all prepaid accounts 

and related packaging, access devices, 

and other physical materials that are 

offered, sold, or otherwise made 

available to consumers in connection 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77256 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

391See, e.g., Study of Prepaid Account 

Agreements. 

392Specifically, section 1022(b)(2)(A) of the 

Dodd-Frank Act calls for the Bureau to consider the 

potential benefits and costs of a regulation to 

consumers and covered persons, including the 

potential reduction of access by consumers to 

consumer financial products or services; the impact 

on depository institutions and credit unions with 

$10 billion or less in total assets as described in 

section 1026; and the impact on consumers in rural 

areas. 

393The requirements for government benefit 

accounts are described in § 1005.15. Proposed 

§ 1005.2(b)(3)(iii) would state that a government 

benefit account is a prepaid account. 

394The Bureau has discretion in future 

rulemakings to choose the relevant provisions to 

discuss and the most appropriate baseline for that 

particular rulemaking. 

with a prepaid account must comply 

with the requirements of this section. As 

discussed in the Section-by-Section 

Analysis of proposed § 1005.18(h)(1), 

the Bureau believes that nine months 

strikes the appropriate balance between 

providing consumers with necessary 

protections while giving financial 

institutions adequate time to comply 

with all aspects of this proposal. The 

Bureau notes that many providers 

already comply with many of the new 

requirements proposed herein.391 The 

Bureau seeks comment on its approach 

to the effective date of this proposal, 

whether it should be simplified and 

whether the proposed time periods are 

appropriate, should be lengthened, or 

should be shortened. 

Section 1022(b)(2) of the Dodd-Frank 

Act 

A. Overview 

In developing the proposed rule, the 

Bureau has considered the potential 

benefits, costs and impacts.392 The 

Bureau requests comment on the 

preliminary discussion presented below 

as well as submissions of additional 

data that could inform the Bureau’s 

consideration of the potential benefits, 

costs, and impacts of the proposed rule. 

The Bureau has consulted, or offered to 

consult, with the prudential regulators, 

the Department of the Treasury, the 

Securities and Exchange Commission, 

and the Federal Trade Commission, 

regarding consistency with any 

prudential, market, or systemic 

objectives administered by such 

agencies. 

As discussed above, the Bureau is 

proposing to amend Regulation E and 

Regulation Z, as well as the official 

commentary to those regulations. 

Regulation E implements the Electronic 

Fund Transfer Act (EFTA), and 

Regulation Z implements the Truth in 

Lending Act (TILA). The proposal 

would bring a wide range of general use 

prepaid products within a unified 

regulatory regime for ‘‘prepaid 

accounts’’ by expressly defining them as 

accounts subject to Regulation E. 

Additionally, the proposal would 

subject credit features linked to prepaid 

accounts to Regulation Z. Further, the 

Bureau also proposes to modify certain 

Regulation E provisions as they would 

apply to prepaid accounts and certain 

existing Regulation E provisions that 

currently apply to payroll card accounts 

and government benefit accounts.393 For 

those prepaid accounts that offer 

overdraft services or other credit 

features in connection with the account, 

the Bureau is proposing that such 

accounts are additionally subject to 

relevant provisions in Regulation Z and 

is proposing to modify certain 

provisions of Regulations E and Z 

accordingly. In proposing to apply the 

consumer protections in Regulation E to 

a broader set of prepaid accounts, the 

Bureau is furthering the statutory 

purposes of EFTA, which include 

providing a basic framework 

establishing the rights, liabilities, and 

responsibilities of participants in 

electronic fund transfer systems and 

providing individual consumer rights. 

In addition, the Bureau believes that 

applying the consumer protections 

articulated in Regulation Z to overdraft 

services offered in connection with 

prepaid accounts conforms to TILA’s 

statutory purposes, which include 

assuring a meaningful disclosure of 

credit terms, avoiding the uninformed 

use of credit, and protecting consumers 

against inaccurate and unfair billing and 

credit card practices. 

B. Provisions To Be Discussed 

With respect to each major provision 

of the proposed rule, the discussion 

considers the benefits and costs to 

consumers and covered persons and, in 

certain instances, considers other 

impacts. Specifically, the discussion 

below considers the following major 

proposed provisions: 

1. The establishment of certain 

disclosures that financial institutions 

would be required to provide to 

consumers (or, in certain circumstances, 

provide consumers access to) prior to 

the consumer’s acquisition of a prepaid 

account; 

2. The application of Regulation E’s 

periodic statement requirement to 

prepaid accounts and the establishment 

of an alternative to this requirement that 

would require financial institutions to 

give consumers access to certain types 

of account information at no cost to the 

consumer; 

3. The extension of Regulation E’s 

limited liability and error resolution 

regime, including provisional credit 

requirements, to all prepaid accounts 

that have been through a customer 

identification and verification process; 

4. The requirement that all issuers of 

prepaid accounts post their prepaid 

account agreements on their Web sites 

or, in limited circumstances, respond to 

consumers’ requests for written copies 

of their agreements and, with some 

exceptions, submit copies of their 

agreements to the Bureau on a quarterly 

basis; and 

5. The modification and application 

of particular provisions in Regulation E 

and open-end credit provisions in 

Regulation Z to prepaid accounts that 

offer overdraft services or other credit 

features in connection with the account. 

This discussion also addresses certain 

alternative provisions that were 

considered by the Bureau in the 

development of the proposed rule. 

In considering the relevant potential 

benefits, costs, and impacts, the Bureau 

has utilized the available data discussed 

in this preamble and has applied its 

knowledge and expertise concerning 

consumer financial markets. When 

available, the Bureau has used the 

economic analyses that it regards as 

most reliable and helpful to consider the 

relevant potential benefits, costs, and 

impacts of the proposal. However, the 

Bureau notes that, in some instances, 

there are limited data available with 

which to quantify the potential benefits, 

costs, and impacts. For instance, 

prepaid account providers that are 

presently applying Regulation E’s 

limited liability or error resolution 

provisions, including provisional credit, 

do not generally publicize information 

regarding the incremental costs 

associated with these activities. 

Moreover, some potential benefits are 

difficult to quantify. 

General economic principles, 

considered in combination with 

available quantitative information, 

provide insight into the potential 

benefits, costs, and impacts arising from 

the proposed rule. Where possible, the 

Bureau has made quantitative estimates 

based on these principles as well as 

available data. However, in light of data 

limitations, the Bureau generally 

provides a qualitative discussion of the 

benefits, costs, and impacts of the 

proposed rule. 

C. Baseline for Consideration of Benefits 

and Costs 

The baseline for this discussion is the 

current market for prepaid accounts.394

However, in order to more fully inform 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77257 

395As discussed above, several Federal regulatory 

regimes, including those regarding consumer 

protection; receipt of Federal payments onto 

prepaid cards; interchange fees; and prevention of 

money laundering, terrorist financing, and other 

financial crimes, apply to some or all types of 

prepaid accounts or to transactions involving these 

accounts. Prudential regulators have also issued 

guidance pertaining to the application of their rules 

to prepaid cards, program managers, and issuing 

financial institutions. In addition, the benefits, 

costs, and impacts that would arise as a 

consequence of the proposed rule are attenuated to 

the extent that certain provisions are already 

required under State law. 

396Specifically, the alternative to the periodic 

statement described in existing § 1005.15(c) does 

not require that an electronic history of the 

consumer’s account transactions be made available 

to the consumer. 

397As discussed above, payment card association 

network rules impose some form of zero liability 

protections for prepaid cardholders in certain 

circumstances. See, e.g., Visa Inc., Zero Liability, 

http://usa.visa.com/personal/security/zeroliability.jsp#anchor_2 (last visited Nov. 3, 2014). 

See, e.g., MasterCard Inc., Zero Liability Protection, 

http://www.mastercard.us/zero-liability.html (last 

visited Nov. 3, 2014). 

398The Study of Prepaid Account Agreements 

suggested that some prepaid programs, according to 

their terms and conditions, reserve the right to 

impose a fee for a negative balance on a prepaid 

account. (These programs’ agreements typically 

state that the cardholder is not permitted to spend 

beyond the balance in the prepaid account, but if 

circumstances were to occur that cause the balance 

to go negative, a fee will or may be imposed. Some 

agreements state that repeated attempts to spend 

beyond the card balance will or may result in the 

prepaid account being closed). Roughly 10 percent 

of reviewed agreements noted such a charge. Based 

on its outreach, the Bureau has doubts as to 

whether, in practice, these charges are assessed and 

requests comment regarding current industry 

practice. 

In addition, one source suggests that overdraft 

fees may be collected by a handful of government 

benefit card programs, but the Bureau is not certain 

whether such fees are currently being assessed as 

it understands several such programs have ceased 

charging overdraft fees, and the aggregate value of 

these fees is relatively modest. See Bd. of Governors 

of the Fed. Reserve Sys., Report to Congress on 

Government-Administered, General Use Prepaid 

Cards, at 9, (July 2014), available at http://

www.federalreserve.gov/publications/files/2014_

Prepaid_Cards_Final.pdf (showing $2 million in 

overdraft fees in 2013). 

399NetSpend is a significant provider of prepaid 

accounts. See Aite Grp. LLC, The Contenders: 

Prepaid Debit and Payroll Cards Reach Ubiquity, at 

23–24 (Nov. 2012). A recent news article reported 

that six percent of NetSpend’s customers regularly 

use overdraft. See Suzanne Kapner, Prepaid Plastic 

is Creeping into Credit, Wall Street J. (Sept. 5, 2012), 

http://online.wsj.com/news/articles/SB10000872

396390443686004577633472358255602. In 

addition, a larger percentage of accounts would 

potentially be eligible for their overdraft program. 

A recent financial filing suggested that NetSpend 

had 3.4 million active cards as of June 30, 2014 and 

47 percent of those active cards had direct deposit. 

See Total Sys. Serv. Inc., Form 10–Q, at 28, 

available at http://www.sec.gov/Archives/edgar/ 

data/721683/000119312514300851/

d737574d10q.htm (for the quarterly period ended 

June 30, 2014) 

400See Suzanne Kapner, Prepaid Plastic is 

Creeping Into Credit, Wall Street J. (Sept. 5, 2012), 

http://online.wsj.com/news/articles/ 

SB10000872396390443686004577633472358

255602. 

401See Kansas City Fed Study, at 9. 

402The Treasury FMS rule, described above, 

prohibits prepaid cards from having an attached 

line of credit if the credit agreement allows for the 

automatic repayment of the loan from a card 

account triggered by the delivery of the Federal 

payment into the account (31 CFR 210(b)(5)(i)(C)). 

Certain State laws subject some government benefit 

accounts to similar provisions (see CA AB 1280 and 

CA AB 2252). In addition, payroll card accounts are 

currently subject to Regulation E’s compulsory use 

provision. 

403See Suzanne Kapner, Prepaid Plastic is 

Creeping Into Credit, Wall Street J. (Sept. 5, 2012), 

http://online.wsj.com/news/articles/ 

SB10000872396390443686004577633472

358255602; see also NetSpend Corp., Amended 

Terms for Your Cardholder Agreement, https:// 

www.netspend.com/account/overdraftTerms.m (last 

visited Nov. 11, 2014) (overdraft terms and 

conditions). 

the proposed rulemaking, the Bureau 

also discusses potential future impacts 

relative to how the market might evolve 

absent the proposed rule. This baseline 

considers both the existing regulatory 

structure as well as the economic 

attributes of the relevant market.395

With respect to proposed provisions 

regarding access to account information, 

limited liability, and error resolution 

protections, the Bureau is generally 

proposing to extend existing provisions 

of Regulation E, as they apply to payroll 

card accounts, to prepaid accounts. 

Since payroll card accounts and prepaid 

accounts that receive Federal payments 

(and thus are subject to the FMS Rule) 

are presently subject to provisions of 

Regulation E (as they apply to payroll 

card accounts) that address consumer 

access to account information, limited 

liability, and error resolution 

protections, financial institutions 

currently are required to offer these 

protections to some consumer accounts 

that would be covered by the proposed 

rule. In addition, the proposed rule 

would amend similar provisions of 

Regulation E applicable to government 

benefit accounts to make these 

provisions generally conform to 

proposed requirements for other types 

of prepaid accounts. The existing 

provisions governing access to account 

information for government benefit 

accounts differ somewhat from those 

applicable to payroll card 

accounts.396 See existing § 1005.15(c) 

and (d). 

Given that many of the proposed 

requirements are consistent with current 

industry practice, the benefits, costs, 

and impacts arising from the proposal 

are moderated relative to those that 

would be experienced if current 

industry practice were significantly 

different from the proposal’s 

requirements. As discussed above, the 

Bureau’s Study of Prepaid Account 

Agreements suggested that many 

covered providers are already fully or 

partially implementing the proposed 

requirements pertaining to access to 

account information, limited liability, 

and error resolution regardless of 

whether they are currently required to 

do so. Providers may already be fully or 

partially implementing the proposed 

requirements with respect to limited 

liability and error resolution due, in 

part, to the need for issuers to comply 

with payment card association network 

rules in addition to the existing Federal 

regulatory requirements described 

above.397

In addition to these requirements, the 

proposal includes requirements for 

financial institutions and creditors that 

offer overdraft services or other credit 

features in connection with prepaid 

accounts. The Bureau’s understanding is 

that, at present, overdraft services are 

offered in connection with a small 

number of products that would be 

considered to satisfy the proposed 

definition of prepaid account.398

However, one of the largest providers of 

prepaid accounts offers an overdraft 

service in connection with its prepaid 

accounts (which include GPR cards and 

payroll card accounts), so the number of 

prepaid accounts currently eligible for 

overdraft is not negligible.399 The credit 

limits extended to consumers for these 

overdraft services are generally of 

modest size (e.g., $100).400

The Bureau believes that providers of 

overdraft services offered in connection 

with these prepaid accounts do not 

presently comply with all of the 

practices that would be required by the 

proposal. For those prepaid accounts 

that offer overdraft services, the Bureau 

understands that providers currently 

require consumers to opt-in to the 

service and that they condition 

eligibility on receipt of a regularlyoccurring direct deposit.401 When funds 

are added to a prepaid account that has 

an associated overdraft service, the 

Bureau understands that these funds are 

generally applied automatically to any 

negative balance (including to repay 

fees) before the consumer may access 

the remaining funds.402 The Bureau 

understands that providers that 

presently offer these overdraft services 

in connection with prepaid accounts 

have adopted program rules designed to 

discourage persistent use of the 

overdraft feature, such as capping the 

number of fees that may be incurred in 

a month.403 However, there is presently 

no Federal regulatory requirement that 

providers limit the frequency with 

which overdraft services are used or the 


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77258 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

404The issuer typically enters into a contract with 

the program manager to provide the association 

bank identification number for the program and to 

monitor regulatory compliance in exchange for fee 

income and indemnification from risk. See 2012 

FRB Philadelphia Study, at 10. 

405With respect to overdraft services or credit 

features offered in connection with prepaid 

accounts, the impacts on creditors are also 

considered. The creditor may be the prepaid 

account issuer, program manager, or another 

person. 

406Classically, the issues discussed here would 

be considered to be market failures. 

407 In general, at the social optimum, the benefit 

to consumers from additional information would 

exactly equal the additional cost to providers of 

providing that information. 

408Recent research covering prepaid programs 

that represent approximately 90 percent of the GPR 

card market (in terms of number of cards) shows 

that the majority of the market sampled (70 percent) 

provides explicit tips regarding how to avoid fees 

and minimize the costs associated with using the 

card. However, marketing and communication to 

promote positive consumer use is identified as an 

area for improvement. See Ctr. for Fin. Serv. 

Innovation, Prepaid Industry Scorecard, Assessing 

Quality in the Prepaid Industry with CFSI’s 

Compass Principles, at 11 (Mar. 2014), available at 

http://cfsinnovation.s3.amazonaws.com/CFSI_

Prepaid_Industry_Scorecard_2014.pdf. 

409 In contrast, personalized estimates of the cost 

of using a product or product recommendations 

based on private information would not be a public 

good. However, charging customers a fee for this 

information might not be possible if other providers 

receive revenue from industry or other sources and 

do not charge for information that appears to be 

comparable. 

410See, e.g., Joseph E. Stiglitz, Market Failure, in 

Economics of the Public Sector, (W.W. Norton & 

Co., Inc., 3d ed. 2000). 

411The relationship between reputation and 

quality is highly complex, even under competition; 

see Rachel Kranton, Competition and the Incentive 

to Produce High Quality, 70 Economica 385 (2003). 

For a general survey of reputation and quality, see 

Heski Bar-Isaac &Steve Tadelis, Seller Reputation, 

4 Foundations and Trends in Microeconomics 273 

(2008). 

frequency with which a consumer may 

incur overdraft-related fees. 

The Bureau believes that additional 

providers may be considering offering 

credit features, such as an overdraft 

service, in connection with prepaid 

accounts. This suggests that there could 

be increased consumer access to these 

products in the future. The proposed 

rule would provide clarity regarding the 

terms on which overdraft services and 

other credit features may be offered in 

connection with prepaid accounts. The 

proposed provisions would help to 

ensure that such credit would be offered 

to consumers in a transparent manner 

and that consumers would obtain 

certain important protections. 

D. Coverage of the Proposal 

The provisions of the proposed rule 

would apply to any account that meets 

the definitional criteria described in 

proposed § 1005.2(b)(3). Covered 

persons would include prepaid account 

issuers who may work with program 

managers or other industry participants 

in marketing, establishing, and 

maintaining these accounts. As 

discussed above, prepaid account 

issuers may choose to perform all of the 

functions required to manage a prepaid 

program, including marketing prepaid 

accounts directly to consumers. More 

commonly, however, prepaid account 

issuers elect to take a more limited role, 

leaving program management to others 

although the scope of such roles may 

vary.404 In addition to the requirements 

specified in Regulation E, persons 

offering overdraft or other credit 

features in connection with prepaid 

accounts would also be subject to the 

provisions of Regulation Z governing 

extensions of credit. These persons may 

or may not be distinct from the prepaid 

account issuer or the prepaid account 

program manager. For the purpose of 

discussing the benefits and costs of the 

proposed rule, the Bureau considers 

potential impacts on both prepaid 

account issuers and program managers 

(who would both be directly affected by 

the proposed provisions) and discusses 

burdens without allocating them among 

market participants.405

E. Potential Benefits and Costs to 

Consumers and Covered Persons 

In proposing to apply the consumer 

protections in Regulations E and Z to a 

wider group of accounts, the Bureau 

intends to reduce consumer uncertainty 

regarding responsibilities and liabilities 

among market participants. The Bureau 

also aims to lessen consumer risk 

associated with the use of prepaid 

accounts that do not currently comply 

with the proposed protections or that 

would not comply in the future, absent 

the adoption of the proposed rule. In 

particular, the Bureau is concerned that 

certain consumers with prepaid 

accounts that do not currently offer the 

protections provided by Regulation E 

may incorrectly believe that these 

accounts have such protections. The 

Bureau believes that it is likely that 

some consumers do not realize that, 

under current Federal law, their prepaid 

accounts may offer fewer protections 

than substitute products. Both prepaid 

cards and debit cards provide 

consumers with access to their own 

funds and have similar functionalities 

and appearances, which may encourage 

the perception that the accounts 

associated with such cards have similar 

protections. With the possible exception 

of certain provisions applicable to 

overdraft services and other credit 

features offered in connection with 

prepaid accounts, the proposed rule is 

not anticipated to meaningfully reduce 

consumer access to consumer financial 

products and services. 

The proposed requirements would 

address the potential under-provision of 

information about prepaid accounts to 

consumer holders of these accounts by 

the private sector and the possible 

exercise of market power by prepaid 

account providers.406 The socially 

optimal amount of information about a 

prepaid account depends on the cost to 

prepaid providers (or third party 

information providers) of acquiring and 

providing product information and the 

benefit to consumers from improved 

understanding and choice.407 Prepaid 

account providers have strong 

incentives to make consumers aware of 

generally attractive product features, 

such as functionality that may be used 

by consumers without a fee. They have 

less incentive to identify and highlight 

unattractive product features, such as 

high fees that may be associated with 

certain types of activities, even if those 

features are utilized frequently by 

prepaid account holders.408 In 

principle, third parties could try to 

generate (or approximate) this 

information independently. However, 

simply collecting, synthesizing, and 

providing product information for a fee 

likely would not be profitable since the 

information generally would be nonexcludable; that is, it could not be 

withheld from consumers who did not 

pay for it.409 Information is generally a 

public good in that it is both non-rival, 

meaning that it may be used without 

reducing the amount available for 

others, and non-excludable. As with any 

other public good, standard 

microeconomic analysis establishes that 

this information would be underproduced by the private sector.410

In addition, consumers rely on 

providers of prepaid accounts to offer 

services on an ongoing basis, including 

access to account information and error 

resolution. Although the account terms 

and conditions may articulate the 

provider’s commitments with respect to 

these features, many consumers may not 

review these documents in advance and 

may not be able to anticipate their needs 

accurately even if they did. In addition, 

the quality with which these functions 

are performed is difficult or impossible 

to observe in advance. While a provider 

would lose customers and the 

reputation of its products would suffer 

if it consistently provided poor service, 

these long-term consequences may not 

protect consumers sufficiently against 

incentives for short-term gain.411 Having 

opened an account, the costs incurred 


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412See Dale O. Stahl II, Oligopolistic Pricing with 

Sequential Consumer Search, 79 Am. Econ. Rev. 

700 (1989). 413See Bd. of Governors of the Fed. Reserve Sys., 

Consumers and Mobile Financial Services 2014, at 

8 (Mar. 2014), available at http://

www.federalreserve.gov/econresdata/mobiledevices/files/consumers-and-mobile-financialservices-report-201403.pdf. (2014 Mobile Report). 

General purpose prepaid cards are one type of 

product that would be subsumed within the 

proposed rule’s definition of prepaid account. As 

described above, payroll card accounts are already 

required to comply with Regulation E’s limited 

liability and error resolution regime. 

414See 2014 Mobile Report at 48 tbl.C.9 & C.10. 

Note that this implies that roughly three percent of 

respondents had a general purpose prepaid card or 

payroll card which they or someone else had 

(re)loaded in the past month. 

415See Bd. of Governors of the Fed. Reserve Sys., 

Consumers and Mobile Financial Services 2013, at 

53 tbl C.12 (Mar. 2013), available at http://

www.federalreserve.gov/econresdata/consumersand-mobile-financial-services-report-201303.pdf. 

416See GFK, GfK Prepaid Omnibus Research 

Findings, at 6 (2014), available at http://

www.nbpca.org/∼/media/2519B8BADB1B4388

BA5F11C511B3ACAE.ashx. The definition of 

prepaid card in this survey appears to have 

included products that would not be covered by the 

proposed definition of prepaid account. Id. at 7. 

417See Fed. Deposit Ins. Corp., 2013 FDIC 

National Survey of Unbanked and Underbanked 

Households, at 29–30 (Oct. 2014), available at 

https://fdic.gov/householdsurvey/2013report.pdf. 

418See The Pew Charitable Trusts, Why 

Americans Use Prepaid Cards: A Survey of 

Cardholders’ Motivations and Views, at 1 (Feb. 

2014) (2014 Pew Survey), available at http://

www.pewtrusts.org/∼/media/legacy/uploadedfiles/

pcs_assets/2014/PrepaidCardsSurveyReportpdf.pdf. 

For the purpose of this survey, respondents were 

explicitly told not to include gift cards, rebate 

cards, credit cards, or phone cards. 

419See 2014 Pew Survey, at 1, 7. 

420See Bd. of Governors of the Fed. Reserve Sys., 

Consumers and Mobile Financial Services 2013, at 

5 (Mar. 2013), available at http://

www.federalreserve.gov/econresdata/consumersand-mobile-financial-services-report-201303.pdf. 

This statistic is derived from the following: ‘‘In 

2012, the share of unbanked consumers [meaning 

those who reported that neither they nor their 

spouse or partner had a checking, savings, or money 

market account] declined to 9.5 percent of the 

population. Adopting a more expansive definition 

of being banked that includes use of a reloadable 

prepaid card, the share of consumers who are 

unbanked declined . . . to 7.9 percent in 2012.’’ 

The 2014 Mobile Report, which summarizes a 

survey conducted in 2013, did not permit the 

Bureau to calculate this statistic using information 

from the later survey. 

421As discussed above, payroll card accounts and 

government benefit accounts are currently subject 

to Regulation E. The FMS Rule ensures that the 

protections that apply to payroll card accounts 

under Regulation E also apply to any prepaid cards 

that receive Federal payments. 

by a consumer to change prepaid 

account providers may serve as an 

additional friction that decreases a 

provider’s incentive to provide high 

quality ongoing services. 

The proposed disclosure formatting 

requirements and the provisions 

requiring the posting of prepaid account 

agreements are designed to decrease 

consumer search costs, which can be a 

source of market power for providers. 

Consumers generally incur costs, in 

terms of time or money, in order to find 

and understand the price and quality of 

a particular product before purchasing 

it. Consumers have less of an incentive 

to shop around and to compare various 

products when the costs associated with 

performing these comparisons are high. 

Prepaid account providers can obtain 

market power when consumers are 

unwilling to incur these search costs to 

learn about available options. A 

sufficiently inexpensive reduction in 

these costs can benefit consumers and 

enhance efficiency.412 In the context of 

the proposed rule, disclosure formatting 

requirements that are relatively 

inexpensive and, through 

standardization, reduce the cost of 

finding and understanding critical 

information about prepaid accounts 

address this market failure. It is worth 

noting that the benefits of lower search 

costs extend beyond those consumers 

who actually search since all consumers 

of the product potentially benefit from 

any resulting reduction in prices. 

Although the Bureau’s Study of 

Prepaid Account Agreements suggested 

that most prepaid account programs 

reviewed already generally offer the 

proposed limited liability and error 

resolution protections, the Bureau is 

concerned that as more consumers 

adopt and use prepaid accounts, the 

number of consumers at risk of an 

unexpected loss could increase. Most 

prepaid accounts generally leverage 

large payment network rails and, as 

such, are widely accepted by a broad 

range of merchants. A survey conducted 

by the Board in 2013 found that 15 

percent of respondents reported using a 

general purpose prepaid card in the past 

12 months.413 Among those who 

reported having a general purpose 

prepaid card or a payroll card, 38 

percent reported that it was reloadable, 

and about half of those respondents who 

reported that they had a reloadable 

general purpose or payroll card reported 

that they or someone else added money 

to their card in the past month.414 In the 

prior wave of the survey, 10.8 percent 

of respondents had used a ‘‘general 

purpose prepaid card that you can add 

funds to’’ in the past 12 months.415

Another survey conducted in May 2014 

found that 16 percent of respondents 

had used a ‘‘prepaid card’’ that was not 

a gift card in the last 12 months.416 A 

survey performed by the FDIC in 2013 

found that 12 percent of households had 

ever used prepaid cards, 7.9 percent had 

used prepaid cards in the last 12 

months, and 3.9 percent had used 

prepaid cards in the last 30 days; 

further, use was more common among 

households that were unbanked or 

underbanked.417 Another study found 

that five percent of adults use prepaid 

cards at least once a month.418

Although there are many uses for 

prepaid accounts, covered accounts may 

be designed, implemented, and 

marketed as substitutes for traditional 

checking accounts. According to one 

study, of the five percent of adults 

surveyed that reported using a prepaid 

card at least once a month, 41 percent 

did not currently have a checking 

account, implying that roughly two 

percent of the adult population uses a 

prepaid card monthly and does not have 

a checking account.419 According to a 

survey conducted by the Board, 1.6 

percent of respondents reported that 

either they or their partner had a 

reloadable prepaid card and did not 

have a checking, savings, or money 

market account in 2012.420 Prepaid 

accounts offer individuals who do not 

have access to traditional debit accounts 

or credit accounts a means to perform 

electronic fund transfers. These 

accounts enable consumers who may 

not otherwise have access to an 

electronic payment mechanism to make 

purchases from online merchants and 

others who do not accept cash. 

Additionally, prepaid accounts provide 

individuals who do not have access to 

traditional checking accounts a means 

of storing funds that can be more secure 

than holding cash. Prepaid accounts 

also offer consumers the ability to 

accept payments of wages and/or 

benefits via direct deposit; for the 

unbanked, this can serve as an 

alternative to relying on a check cashing 

provider. 

Although consumers may access 

funds through certain types of prepaid 

accounts that are currently subject to 

Regulation E, some consumers regularly 

deposit funds into prepaid accounts that 

are not currently subject to Regulation 

E.421 Consumers may use these prepaid 

accounts instead of traditional checking 

accounts, holding these prepaid 

accounts for extended periods and 

loading significant portions of their 

available funds into such accounts. If 

their prepaid account provider does not 

offer limited liability and error 

resolution protections (including 

provisional credit), these consumers 

may be at risk of an unexpected loss or 

a delay in access to funds in the event 

of an error or unauthorized transfer. The 

proposed rule would reduce the risk 

associated with prepaid accounts for 

these consumers by requiring that 

providers offer a limited liability and 

error resolution regime that includes 


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422A credit plan that is accessed by a prepaid 

card would not be a credit card account where the 

credit is not subject to any finance charge as 

defined in § 1026.4 or fee described in § 1026.4(c) 

and is not payable by written agreement in more 

than four installments. Such credit plans would not 

be subject to Regulation Z, but would be subject to 

Regulation E. See section-by-section analysis of 

§ 1026.2(a)(15) and (17). 

423Fixed costs are those costs that do not depend 

on the number of prepaid accounts offered by the 

provider. 

provisional credit once cards are 

registered. 

In addition, the proposed rule would 

aid consumers in properly assessing the 

risks and costs associated with using 

these products by requiring more 

comprehensive and standardized 

information disclosures. 

Standardization of information 

disclosures may permit consumers to 

make better informed comparisons 

among products when they are choosing 

a prepaid account. To the extent that 

this information is not already provided, 

more comprehensive disclosure of 

account information may help 

consumers to understand the financial 

costs associated with using these 

products and may aid in the recognition 

of errors and the exercise of error 

resolution rights. As discussed below, 

with some exceptions, the costs 

incurred by covered financial 

institutions arising from the 

standardization of information 

disclosure are one-time implementation 

costs, and many providers of covered 

accounts presently implement several of 

the provisions relating to 

communication of account information, 

including providing access to account 

history information. 

The proposed rule would generally 

also require issuers to treat an overdraft 

service or other credit feature offered in 

connection with a prepaid account as a 

credit card account subject to the 

provisions of Regulation Z that apply to 

such accounts.422 As a result, 

consumers using prepaid accounts with 

associated credit card plans would be 

guaranteed certain important consumer 

protections. Specifically, persons 

offering overdraft services or other 

credit features in connection with 

prepaid accounts would be required to 

comply with the provisions governing 

application and disclosure that apply to 

credit cards and would be subject to 

certain fee and payment restrictions, 

among other requirements. 

Further, the proposed rule would 

modify Regulation E to require that 

financial institutions offering prepaid 

accounts that could be associated with 

a credit card feature disclose the fees 

associated with the credit card plan to 

consumers in the prepaid account’s preacquisition disclosures and in the 

prepaid account agreement. In addition, 

financial institutions would be 

prohibited from providing a solicitation 

or an application to a consumer to open 

an associated credit card account prior 

to 30 calendar days after the prepaid 

account has been registered, and they 

would be prohibited from offering terms 

and conditions, applicable to 

transactions solely accessing the 

prepaid account, that differ depending 

on whether the consumer elects to link 

a credit feature to a prepaid account. 

Although few providers of prepaid 

accounts currently offer overdraft 

services or other credit features in 

connection with prepaid accounts, the 

Bureau believes that such product 

offerings could become more 

widespread in the future. Therefore, the 

Bureau believes that it is important to 

ensure that these products are 

structured so that consumers receive 

appropriate protections when offered 

prepaid accounts that include credit 

features. By proposing to put 

requirements in place now, the Bureau 

hopes to mitigate costs to consumers 

and providers that may occur if these 

products become more prevalent and 

the proposed protections are not in 

place. 

To assess the potential impacts of the 

proposed rule on consumers and 

covered persons, the Bureau separately 

discusses the benefits and costs 

associated with each major proposed 

provision. For clarity of discussion, 

costs arising from compliance burdens 

that would be imposed on providers by 

the proposed rule will be discussed 

under the subheading ‘‘Benefits and 

Costs to Covered Persons’’ for each 

major proposed provision. The 

proposed provisions may impose onetime implementation costs and may 

affect ongoing operational costs. Both of 

these types of costs may be fixed or 

variable.423 Economic theory predicts 

that fixed cost increases will be 

absorbed by providers. However, 

consumers may be adversely affected by 

increases in these costs to the extent 

these cost increases prompt current 

providers of prepaid accounts to exit the 

market or deter entry by new providers 

in the future. This could result in 

consumers having more restricted 

choices than they would otherwise 

have. In certain situations, a decrease in 

the number of market participants could 

better enable those remaining providers 

to exercise market power, resulting in 

higher prices for consumers, decreased 

product quality, or both. 

With respect to variable costs, the 

ability of providers to recoup cost 

increases by charging consumers higher 

prices for covered products depends on 

the relative elasticities of supply and 

demand for the product (e.g., how 

responsive the quantity supplied by 

providers is to a price change relative to 

how responsive the quantity demanded 

by consumers is to a price change) and 

the extent of competition in the market. 

The burdens will ultimately be shared 

by both providers and consumers, with 

the larger share of the burden falling on 

the party that is less responsive to a 

price change. 

It is worth noting that the relative 

elasticities of supply and demand can 

vary across products that would be 

covered by the proposed rule and may 

be influenced by the presence of 

substitute products as well as the 

availability of information (which 

would influence the perceived 

availability of substitute products). 

1. Establishing Certain Disclosures That 

Providers Must Give to Consumers 

The proposed rule would require two 

new, pre-acquisition disclosures; extend 

existing Regulation E disclosure 

requirements to prepaid accounts; and 

require new disclosures to be made on 

prepaid account access devices. Under 

the proposal, newly-printed disclosures 

would need to be compliant after nine 

months, and, financial institutions 

would be required to be in full 

compliance with the rule’s disclosure 

requirements after twelve months. See 

proposed § 1005.18(h). 

Proposed § 1005.18(b)(1) would 

require that a financial institution must 

provide a ‘‘short form’’ disclosure and a 

‘‘long form’’ disclosure before a 

consumer acquires a prepaid account. 

Proposed § 1005.18(b)(2) through(6) 

would establish the content, form, and 

timing of these two disclosures. 

Proposed § 1005.18(b)(2)(i) would set 

forth the information a financial 

institution would be required to provide 

on the short form disclosure. The short 

form disclosure would include a 

‘‘static’’ portion that would be disclosed 

for all prepaid account products. In 

addition to certain other fees, this static 

portion would have a ‘‘top-line’’ 

component that highlights at the top of 

the form, in a large font-size, four types 

of fees (a periodic fee, per purchase fees, 

ATM withdrawal fees, and a cash reload 

fee) that the Bureau believes to be the 

most important to consumers when 

shopping for a prepaid account. The 

short form disclosure would also 

include an ‘‘incidence-based’’ portion 

that would require inclusion of up to 

three additional fees. These would be 


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424See Section ‘‘Disclosure Requirements 

Generally’’ for a summary of disclosures § 1005.7(b) 

currently requires. 

425Here, ‘‘make the best choice’’ is intended to be 

descriptive of the consumer’s process of choice; to 

consciously optimize over her choice set and 

through that process, select the best option. This is 

distinct from the possible interpretation of 

obtaining the best outcome, which could be 

Continued 

the fees that consumers incurred most 

frequently during the prior 12-month 

period when using a given prepaid 

account product. The fees disclosed 

could therefore vary across products. If 

the amount of a fee listed in the short 

form disclosure could vary, a financial 

institution would have to disclose the 

highest fee it could impose for utilizing 

the service associated with the fee, 

along with a symbol, such as an asterisk, 

and explanatory text indicating that the 

fee could be lower. A financial 

institution would be required to use the 

same symbol and explanatory text for all 

fees that could be lower. 

The short form disclosure would also 

state the number of other fees that apply 

to the product that are not disclosed on 

the short form disclosure; an instruction 

for the prepaid account holder to 

register his or her prepaid account in 

order to protect his or her funds; the 

URL for the Web site of the Consumer 

Financial Protection Bureau; and a 

statement regarding whether the 

product offers overdraft services or 

other credit features. In most cases, the 

short form would also disclose if a 

prepaid account is not eligible for FDIC 

(or NCUSIF) pass-through deposit (or 

share) insurance. A short form 

disclosure for a payroll card account or 

government benefit account would also 

include a notice at the top of the form, 

when applicable, that consumers are not 

required to accept such an account. 

Proposed § 1005.18(b)(2)(ii) would set 

forth the information a financial 

institution would be required to provide 

on the long form disclosure. The long 

form disclosure would set forth all fees 

imposed in connection with a prepaid 

account and their qualifying conditions. 

Financial institutions would be required 

to provide consumers with the long 

form disclosure prior to acquisition of a 

prepaid account, unless that account is 

acquired orally by telephone or in a 

retail store, as discussed below. The 

long form disclosure would also include 

the telephone number, Web site, and 

address of the person or office that the 

consumer may contact to learn about the 

terms and conditions of the prepaid 

account, to call for a balance inquiry, to 

request or to notify the person or office 

when a consumer believes that 

unauthorized electronic fund transfer 

has occurred; the disclosure described 

above regarding FDIC pass-through or 

NCUSIF share insurance, when 

appropriate; and the URL of the Web 

site and the telephone number of the 

Consumer Financial Protection Bureau 

that consumers could use to report a 

complaint in connection with a prepaid 

account. Finally, if at any point a credit 

plan may be offered to any holder of a 

given prepaid account, then the 

financial institution would be required 

to include in that prepaid account’s long 

form disclosures the disclosures 

described in Regulation Z 12 CFR 

1026.60(a), (b) and (c). 

The proposed rule would also set 

forth requirements for how the short 

form and long form disclosures must be 

presented. Specifically, proposed 

§ 1005.18(b)(3) would set forth general 

form requirements for written, 

electronic, and oral disclosures; provide 

requirements regarding whether these 

disclosures should be in a retainable 

form; and set forth parameters for the 

tabular form in which the disclosures 

must be presented, including specific 

requirements for short form disclosures 

presenting multiple service plans. 

Proposed § 1005.18(b)(4) would provide 

specific formatting requirements on 

grouping, prominence, and size. 

If a financial institution principally 

uses a foreign language on a package, 

when speaking to a consumer by 

telephone, in person, or on a Web site 

consumers utilize to acquire a prepaid 

account, proposed § 1005.18(b)(6) 

would require financial institutions to 

provide the short and long form 

disclosures in that same foreign 

language. The financial institution 

would also be required to provide the 

long form disclosure in English upon 

the consumer’s request or on its Web 

site where it provides the long form 

disclosure in a foreign language. 

The proposed rule would create 

exceptions to the proposed preacquisition disclosure regime if the 

prepaid account is acquired in a retail 

store or orally by telephone. In a retail 

store, financial institutions would be 

required to provide the short form 

disclosure before the consumer acquires 

a prepaid account, but they could 

provide the long form disclosure after 

the consumer acquires a prepaid 

account as long as certain conditions are 

met. See proposed § 1005.18(b)(1)(ii). 

Before a consumer acquires a prepaid 

account orally by telephone, a financial 

institution must disclose the short form 

information that would be required by 

proposed § 1005.18(b)(2)(i). However, a 

financial institution could disclose the 

long form content required by 

§ 1005.18(b)(2)(ii) after the consumer 

acquires a prepaid account provided 

that the financial institution 

communicates to the consumer, before 

the consumer acquires the prepaid 

account, that the information required 

to be disclosed by § 1005.18(b)(2)(ii) is 

available by telephone or via a Web site. 

The proposed rule would require 

modifications to the initial disclosures 

required by Regulation E. Regulation E 

§ 1005.7(b) currently requires financial 

institutions to provide certain initial 

disclosures when a consumer contracts 

for an electronic fund transfer service or 

before the first electronic fund transfer 

is made involving the consumer’s 

account. The Bureau is proposing that 

these existing disclosure requirements 

be extended to prepaid accounts; 424

however, the Bureau is further 

proposing (see proposed § 1005.18(f)) to 

modify the initial disclosure of fees 

requirement in § 1005.7(b)(5) for 

prepaid accounts to require that in 

addition to disclosing any fees imposed 

by a financial institution for electronic 

fund transfers or the right to make such 

transfers, the financial institution must 

also provide all other fees imposed by 

the financial institution in connection 

with a prepaid account, in the form of 

a table substantially similar to proposed 

sample form A–10(e) in appendix A. 

Finally, the proposed rule would 

require that financial institutions 

include on a prepaid account access 

device the financial institution’s name, 

the URL of a Web site, and a telephone 

number. See § 1005.18(b)(7). 

a. Benefits and Costs to Consumers 

The benefits and costs to consumers 

arising from the proposed disclosure 

requirements for prepaid accounts are 

addressed in four parts: (i) A general 

discussion of the benefits to consumers 

of information; (ii) a discussion of the 

anticipated benefits of the proposed 

disclosure requirements; (iii) a 

discussion of consumer engagement 

with disclosure; and (iv) a discussion of 

potential costs of the proposed 

disclosure requirements. Finally, this 

analysis discusses alternatives to the 

Bureau’s proposed disclosure 

requirements. 

i. Information 

According to standard social science 

models, when consumers are faced with 

a choice among products in a given 

market, they consider which choices are 

available to them as well as the 

information they have about each of 

those choices. Further, in order for 

consumers to make the best choices for 

their situations, their information must 

be accurate and descriptive of all of 

their available options.425 In reality, 


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achieved without optimizing; through random 

selection among known options, for example. 

426 Increasing knowledge of the consumer’s 

choice set may be particularly beneficial when 

products within a market are highly differentiated 

or in which consumers within a market have 

diverse tastes. 

427Examining payroll account usage data, 

Wilshusen el al. find that these fees also constitute 

a large majority of the fees charged to consumers, 

both by incidence and total value. See 2012 FRB 

Philadelphia Study, at 10. 

428Reducing the size of the choice set for choices 

made under time pressure has been shown to 

increase both the percentage of the remaining items 

seen as well as the time of fixation on those items. 

See Elena Reutskaja et al., Search Dynamics in 

Consumer Choice under Time Pressure: An EyeTracking Study, 101 Am. Econ. Rev. 900 (2011). 

429Andrew Caplin et al., Search and Satisficing, 

101 Am. Econ. Rev. 2899 (2011). 

430This variation is pronounced in both retail 

stores and non-retail channels. For example, The 

Pew Charitable Trusts documented wide disparity 

in disclosures available on prepaid card Web sites. 

See The Pew Charitable Trusts, Loaded with 

Uncertainty: Are Prepaid Cards a Smart Alternative 

to Checking Accounts? (Sept. 2012), available at 

http://www.pewtrusts.org/en/research-andanalysis/reports/2012/09/06/loaded-withuncertainty; see also The Pew Charitable Trusts, 

Consumers Continue to Load Up on Prepaid Cards 

(Feb. 2014), available at http://.pewtrusts.org/en/

research-and-analysis/reports/2014/02/06/

consumers-continue-to-load-up-on-prepaid-cards. 

Relatedly, CFSI and Pew cited the lack of current 

standards, among other things, as motivation for 

developing their own model forms. See CFSI, 

Thinking Inside the Box: Improving Consumer 

Outcomes Through Better Fee Disclosure for 

Prepaid Cards (Mar. 2012), available at http://

www.cfsinnovation.com/content/improvingconsumer-outcomes-through-prepaid-cards; see 

also The Need for Improved Disclosures for General 

Purpose Reloadable Prepaid Cards (Feb. 2014), 

available at http://www.pewtrusts.org/en/researchand-analysis/issue-briefs/2014/02/26/the-need-forimproved-disclosures-for-general-purposereloadable-prepaid-cards. 

however, consumers may not be fully 

informed. As discussed above, among 

other reasons, this could transpire 

because firms perceive an advantage to 

withholding information, or because 

consumers perceive gathering 

information as overly burdensome. 

Information provision (e.g., mandated 

disclosure) can therefore facilitate 

consumer decision-making in at least 

three ways. First, information provision 

can inform consumers about the choices 

that are available to them. This provides 

a direct benefit of improving the 

likelihood that consumers find products 

that fit their needs.426 In addition, as 

discussed above, informing consumers 

about their choices (or facilitating 

information gathering by consumers) 

may increase competition in the product 

market, which in turn could cause firms 

to offer consumers better terms. Second, 

information provision can inform 

consumers about the attributes of the 

products that are available to them. This 

provides the direct benefit of enabling 

consumers to consider the relative 

merits of each product and to select the 

best products from among their choices. 

In addition, revealing or highlighting 

certain attributes of a product-type 

could induce firms to compete on those 

attributes, raising benefits to consumers 

or lowering costs. Third, information 

provision can inform consumers about 

the attributes of the products they have 

already chosen. This can both increase 

the benefits a consumer receives from a 

chosen product and reduce the costs 

associated with its use. 

ii. Benefits 

Together, the Bureau believes that the 

short and long form disclosures provide 

consumers with the information 

necessary to make fully informed 

choices regarding the prepaid account 

products available to them. The short 

form disclosure would disclose key fees, 

conditions, and notices. So that they 

may be quickly located and compared, 

the fees that participants in the Bureau’s 

testing identified as being most 

important to them would be listed at the 

top of the short form disclosure.427

Consumers seeking information not 

found on the short form disclosure 

could utilize the long form disclosure. 

The long form disclosure would list all 

fees for a particular prepaid account 

product and their qualifying conditions, 

if any. Accompanying fees with their 

qualifying conditions would help 

consumers to become fully informed 

about the details of each prepaid 

account product and therefore improve 

consumer choice among available 

products. As noted, the long form would 

be required to be made available to 

consumers pre-acquisition in all 

acquisition channels. As a result, 

interested consumers would always be 

enabled to make fully-informed 

acquisition decisions. In addition, 

proposed § 1005.18(f) would effectively 

require the long form disclosure to be 

disclosed whenever a product’s terms 

and conditions are disclosed. The 

Bureau believes that because these 

disclosures are what consumers will 

likely reference throughout their 

ongoing use of their prepaid accounts, 

this provision could potentially help 

inform consumers’ use of their prepaid 

account products after acquisition. 

In part, the Bureau designed the short 

form disclosure to guide consumers to 

what it believes are important features 

of most prepaid account products. By 

limiting displayed information, the 

disclosure would make the information 

that is disclosed more salient and easier 

to locate.428 As noted above, the fees 

that participants in the Bureau’s testing 

identified as being most important to 

them would be listed at the top of the 

short form disclosure, which the Bureau 

believes is a likely point for consumers’ 

first engagement.429 This effect would 

be reinforced by the display of top-line 

information, which would be presented 

in a relatively large, bold font offset by 

whitespace. Other disclosed fees would 

be presented in clear, concise language 

and listed in a table with horizontal 

lines to direct the eye and padded by 

whitespace for ease of reading. 

One potential outcome of the Bureau’s 

emphasis of a limited number of fees in 

the short form is that consumers could 

begin to rely on this information to 

guide their purchase decisions more 

heavily than they do currently. If so, 

then financial institutions may in turn 

increase their competitive efforts on 

these dimensions, which could result in 

a benefit for consumers in the form of 

a reduction in these particular fees. 

Another benefit of the proposed rule 

would be to standardize prepaid 

account product disclosures. Currently, 

there is significant variation in the 

content and formatting of the 

disclosures offered in connection with 

prepaid accounts that are available to 

consumers prior to acquisition.430 These 

disclosures generally convey only 

certain fees, terms, and conditions, and 

the items disclosed vary across prepaid 

account products. In addition, the form 

of these disclosures varies significantly 

across products, variously utilizing 

bulleted lists, tables, plain text, and 

combinations of these methods. In some 

cases, fee inclusion, fee descriptions, 

and fee prominence are seemingly 

selected to highlight the relative 

strengths or to diminish the relative 

weaknesses of the particular product. As 

described above, the Bureau believes 

that standardization would reduce the 

cost to consumers associated with 

finding and understanding critical 

information about prepaid accounts and 

therefore increase consumers’ 

knowledge of their available choices 

and facilitate comparison shopping 

among prepaid account products. The 

short form disclosure would standardize 

the summary disclosure of key fees, 

conditions, and notices. Similarly, the 

long form disclosure would standardize 

the display of fees and the details of 

their qualifying conditions. The 

proposed long form disclosure’s 

categories and its tabular display would 

organize the complete list of a prepaid 

account product’s fees, making them 

easier for consumers to locate and 

compare across products. 

If a financial institution principally 

uses a foreign language on packaging 

material, by telephone, in person, or on 


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431See 2014 Pew Study. 

432 James Lacko & Janis Pappalardo, The Failure 

and Promise of Mandated Consumer Mortgage 

Disclosures: Evidence from Qualitative Interviews 

and a Controlled Experiment with Mortgage 

Borrowers, 100 Am. Econ. Rev. 516 (2010); see also 

Kleimann Commc’n Group, Know Before You Owe: 

Evolution of the Integrated TILA RESPA Disclosures 

(July 2012); For example, Eric Johnson, et. al. Can 

Consumers Make Affordable Care Affordable? The 

Value of Choice Architecture, PLOS One, Dec. 2013, 

at 1, 2. 

433Throughout, this treatment describes the first 

moment of information consumption as ‘‘engaging’’ 

with the information provision. ‘‘Engaging,’’ as it is 

used here, is therefore distinct from ‘‘reading’’ or 

‘‘comprehending,’’ both of which could imply 

sustained consumption. 

434A related decision-making framework is 

developed with accompanying case studies by 

Stephen Wendel. See, Stephen Wendel, Designing 

for Behavior Change: Applying Psychology and 

Behavioral Economics (Mary Treseler ed., 2013). 

435See, e.g., Ian Ayres & Alan Schwartz, The NoReading Problem in Consumer Contract Law, 66 

Stan. L. Rev. 545 (2014). 

436The idea that consumers may decrease their 

engagement with information when more 

information is provided is somewhat supported by 

research on ‘‘choice overload.’’ This work 

demonstrates that when choice sets are large, some 

people opt to make no choice at all. See, e.g., 

Sheena Iyengar et al., How Much Choice Is Too 

Much? Contributions to 401(k) Retirement Plans, in 

Pension Design and Structure: New Lessons from 

Behavioral Finance 83 (Oxford: Oxford University 

Press 2004). 

the Web site consumers utilize to 

acquire a prepaid account, the short 

form and long form must be provided in 

that same foreign language. A financial 

institution must also provide the long 

form disclosure in English upon a 

consumer’s request and on any part of 

the Web site where it provides the long 

form disclosure in a foreign language. 

The Bureau believes that utilizing a 

foreign language to acquire a prepaid 

account could imply that that foreign 

language is the consumer’s language of 

greatest proficiency, and this proposed 

requirement therefore ensures that such 

consumers receive the information they 

need to make an informed choice. Since 

this implication does not necessarily 

follow, the English version of the long 

form disclosure would also be available 

to consumers who are more proficient in 

English or who may seek informed help 

and advice from family or friends with 

English proficiency. 

The proposal would also require 

disclosure of the availability of an 

overdraft service or other credit feature 

or the lack thereof on the short form 

disclosure. Because both the existence 

of, and the absence of, possible credit 

plans are required to be similarly 

disclosed, consumers would be able to 

easily compare prepaid account 

products along this dimension. The 

Bureau’s consumer testing, in addition 

to external studies,431 suggests that 

many consumers choose prepaid 

products specifically to avoid overdraft 

services. Requiring the existence of 

credit features to be disclosed on the 

short form disclosure would help those 

consumers make informed acquisition 

decisions. Conversely, those consumers 

who are seeking a prepaid account with 

the possibility of accessing credit would 

be able to more easily identify products 

that offer such a feature. 

In addition, if at any point a credit 

feature may be offered to any holder of 

a given prepaid account, then the 

financial institution would be required 

to include in that prepaid product’s long 

form the disclosures described in 

Regulation Z, 12 CFR 1026.60(a), (b) and 

(c). These are the same disclosures that 

Regulation Z requires financial 

institutions to provide along with mail 

or electronic applications for, or 

solicitations to open, credit card 

accounts. Because this information 

would be included in prepaid accounts’ 

long form disclosures, consumers would 

be made aware of the fees associated 

with such a plan, were it to be offered. 

Those consumers who are able to 

accurately predict their future use of 

such services could compare the prices 

of various prepaid account products, 

taking into account the price of an 

associated credit feature, in making 

their initial acquisition decision. The 

Bureau requests comment and the 

submission of data that could inform the 

Bureau’s consideration of the 

effectiveness of the proposed creditrelated disclosures on both the short 

form and long form disclosures, 

including information about the use of 

the terms ‘‘credit-related,’’ ‘‘credit,’’ and 

‘‘overdraft.’’ 

Before acquiring a payroll card 

account or government benefit account, 

the proposed rule would require 

financial institutions to include above 

the top-line on their short form 

disclosure a statement that the 

consumer does not have to accept the 

payroll card account and that other 

methods are available from which the 

consumer may choose to receive his 

wages or salary from the employer 

instead of receiving them on the payroll 

card account. This provision would 

ensure that employees are informed that 

receiving their wages on a payroll card 

account is neither a condition of their 

employment nor their only option. 

Moreover, it would ensure that 

recipients of government benefits are 

informed that they do not have to accept 

payments in the government benefit 

account and that they can ask about 

other ways to get their benefit payments. 

Finally, proposed 

§ 1005.18(b)(2)(i)(B)(10) would require 

disclosure of the total number of fees 

charged by the financial institution 

other than those disclosed on the short 

form disclosure. In the Bureau’s testing, 

this number became a focal point for 

participants. If this number becomes a 

focal point for consumers generally, 

then financial institutions may choose 

to compete on this metric, which could 

potentially reduce the number of fees 

imposed in connection with prepaid 

accounts. As a result, consumers may 

benefit from fewer hidden fees and 

simpler products, generally. 

iii. Engagement 

According to the standard social 

science models of consumer decisionmaking presented above, consumers 

must have relevant and accurate 

information in order to make good 

choices. However, recent research in 

social science, law, and design suggests 

that even if consumers were provided 

an unlimited amount of information, 

many consumers would not 

comprehend or utilize all that 

information.432 This research highlights 

the importance of an initial step, 

‘‘engagement,’’433 and posits that when 

a consumer encounters any new 

informational provision, she conducts a 

split-second analysis, assessing the costs 

and benefits of continued consumption 

of that information.434 This calculation 

incorporates the consumer’s automatic 

emotional response to the design as well 

as the consumer’s expected reward from 

engagement. Without an affirmative 

decision at this first step, neither 

utilization nor comprehension can 

occur.435

The Bureau designed the model short 

form disclosure not only to provide 

relevant information to consumers, but 

also to increase consumer engagement. 

To appeal to consumers’ automatic 

emotional response, the Bureau 

designed the short form disclosure to be 

visually appealing as well. In addition, 

to reduce the perceived difficulty of 

learning about a prepaid product, the 

short form disclosure assigns terms a 

clear hierarchy through positioning, 

font-size, accompanying whitespace, 

and font-weight; includes concise 

descriptions of fees and conditions; and 

uses asterisks and fine-print sparingly. 

Finally, as the perceived cost of using a 

disclosure increases with the amount of 

information provided, the proposed 

short form disclosure presents 

consumers with a reduced, manageable 

set of information about the product.436

iv. Costs 

The Bureau’s effort to simplify preacquisition disclosures may also 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77264 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

437See ICF Report at 5; see also 2014 Pew Study. 

438This treatment considers five significant 

acquisition channels for prepaid accounts: Inperson, in a retail store; in-person, in a non-retail 

environment, such as a bank or place of 

employment; orally, over the telephone; 

electronically, via a Web site; and via direct mail. 

generate costs for consumers. As 

discussed above, the Bureau’s emphasis 

of a limited number of fees in the short 

form could result in a reduction of those 

particular fees through competitive 

pressure. However, to the extent they 

exist, fees that would be relatively deemphasized by the proposed disclosure 

regime could, as a result, experience an 

easing of competitive pressure and 

thereby increases in the amounts 

charged. 

Proposed § 1005.18(b)(2)(i)(C) may 

also generate costs for consumers. If the 

amount of the fee that a financial 

institution imposes for a given fee type 

can vary, then proposed 

§ 1005.18(b)(2)(i)(C) would require the 

financial institution to disclose the 

highest fee associated with that fee type. 

As discussed above, the Bureau believes 

that there is a clear benefit to consumers 

of providing a simple and concise short 

form disclosure, and the Bureau 

believes that this is achieved, in part, by 

limiting footnotes and fine print. 

However, in acquisition channels in 

which the short form disclosure is not 

necessarily accompanied by the long 

form disclosure, this provision could 

result in a consumer having less 

information about a prepaid product 

than they would have had in the current 

marketplace. The provision would 

therefore create a distinct new cost to 

consumers if it results in them not 

having all the information they want or 

need to make their acquisition choice. 

Furthermore, proposed 

§ 1005.18(b)(2)(i)(C) may make some 

fees associated with a fee type less 

salient to consumers than they are 

currently. As a result, these fees could 

increase either because consumers find 

those fees difficult to monitor or 

because of a reduction in competitive 

pressure on those fees. 

v. Alternatives 

An alternative to the proposed 

disclosure regime that some nonprofit 

groups have suggested is full disclosure 

of all fees regardless of the acquisition 

channel. These groups argue that, 

among other things, any disclosure 

other than a full disclosure of all fees 

enables financial institutions to hide 

fees that could be important to 

consumers. The Bureau believes the 

potential harm of such actions to be 

largely mitigated by the existence of the 

long form disclosure, which discloses 

all fees, and which consumers would 

have to receive or have access to prior 

to account acquisition. The short form 

disclosure also would contain two 

additional elements that could mitigate 

the risk of hidden fees. First, the 

proposed incidence-based portion of the 

short form disclosure ensures that 

consumers are informed of the fees that 

consumers incur most frequently for a 

particular product and that are not part 

of the static portion of the short form 

disclosure. Second, as noted above, the 

proposal would require disclosure of the 

total number of fees charged by the 

financial institution other than those 

disclosed on the short form disclosure. 

The Bureau believes that disclosure of 

this number, coupled with the 

incidence-based disclosures, should 

make conspicuous any attempt to hide 

charges. 

Another alternative suggested by 

some consumer advocacy groups was to 

disclose a single number for each 

product that would indicate the relative 

costliness of that product. Commenters 

suggested that this number could be an 

estimate of monthly costs to consumers 

for using a prepaid account, the average 

amount paid by users of a prepaid 

account program, or the output of an 

algorithm intended to replicate specific 

consumers’ use-cases of prepaid 

accounts. The Bureau believes that 

while such an approach holds promise, 

it is not well-suited to prepaid products 

at this time. The Bureau’s testing, along 

with other studies, revealed many 

typical use cases for prepaid 

accounts.437 The diversity of use cases 

makes it difficult to design disclosures 

that provide relevant information for 

consumers with respect to their all-in 

cost to use a particular product since 

such costs could vary significantly. For 

example, the monthly cost for someone 

who uses a prepaid product primarily 

for occasional online purchases could 

be significantly different from the 

monthly cost for someone who uses a 

prepaid product as a checking account 

replacement. Indeed, because of the 

variety of use-patterns, such overlysimplistic disclosures may be more 

misleading than helpful. 

b. Benefits and Costs to Covered Persons 

The benefits and costs to a covered 

person arising from the proposed 

disclosure requirements depend on the 

covered person’s current business 

practices. This treatment therefore 

considers benefits and costs relative to 

those borne by financial institutions in 

the current marketplace. They are 

addressed in five parts: (i) A discussion 

of common sources of cost; (ii) a 

discussion of the costs associated with 

proposed provisions, including 

acquisition-channel-specific costs for 

channels other than the retail 

channel; 438 (iii) a discussion of the 

costs specific to the retail acquisition 

channel; (iv) a discussion of benefits; 

and (v) a discussion of the costs and 

benefits to new entrants. 

i. Common Sources of Cost 

The Bureau recognizes that certain 

financial benefits to consumers that 

stem from the proposed disclosures may 

have an associated financial impact on 

covered persons. Covered persons 

generate revenue through consumers’ 

use of their products. Therefore, when 

a consumer experiences a financial 

benefit, a financial institution may 

experience a financial cost of the same 

magnitude. Such costs could stem from 

each of the primary consumer benefit 

channels identified above: Bolstered 

consumer knowledge of alternative 

products; improved acquisition-choices 

from among available products; lowercost, higher-benefit usage of acquired 

products; and increased competitive 

pressures. 

A number of the provisions detailed 

above require financial institutions to 

provide or make available disclosures 

orally via a telephone. The Bureau 

expects that compliance with these 

proposals may require implementation 

costs of updating an interactive voice 

response (IVR) system and/or training 

live customer service agents. The 

Bureau believes that both of these costs 

will be relatively small. To the extent 

that the proposed provisions increase 

usage of financial institutions’ 

telephone systems, financial institutions 

may incur additional ongoing costs of 

utilizing or operating these systems. 

According to industry sources, utilizing 

an IVR system costs up to $0.12 per 

minute, while live agent customer 

service costs up to $0.90 per minute. 

The total burden of these costs for any 

single financial institution would 

depend on the financial institution’s 

potential customers’ demand for 

obtaining disclosures orally over the 

telephone, and may depend on the 

financial institution’s negotiated rates 

for IVR and/or live agent customer 

service. Finally, financial institutions 

would bear small ongoing costs of 

monitoring and updating to ensure that 

their telephone systems provide 

accurate information. 

Similarly, a number of the provisions 

detailed above require financial 

institutions to provide or make available 

disclosures electronically, via a Web 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77265 

439The Bureau’s industry outreach revealed that 

in some cases payroll card accounts and similar 

products are distributed in unsealed envelopes that 

also contain fee disclosures, the terms and 

conditions documents, and marketing materials. 

The model short form that includes this payroll 

card account notice easily fits within these 

constraints. See proposed Model Form A–10(a) in 

Appendix A. 

site. The Bureau believes that all 

prepaid account providers already offer 

at least one service electronically, via a 

Web site, and therefore that 

implementation costs of complying with 

these provisions would not include the 

costs of obtaining and initializing a Web 

site. To the extent that the proposed 

provisions increase usage of financial 

institutions’ Web site(s), financial 

institutions may bear additional ongoing 

costs of bandwidth usage. In addition, 

financial institutions would be required 

to design an electronic version of the 

relevant disclosure(s), and therefore 

would bear a one-time web-design cost. 

The Bureau believes this cost would be 

relatively small and also mitigated by 

the Bureau’s provision of model forms 

and sample forms. The total burden of 

these costs for any single financial 

institution would depend on the 

financial institution’s customers’ 

demand for obtaining disclosures 

electronically, via a Web site, and may 

depend on the financial institution’s 

negotiated web-hosting rates. Finally, 

financial institutions would bear small 

ongoing costs of monitoring and 

updating to ensure that their Web site(s) 

provides accurate information. 

ii. Costs 

As noted, Regulation E § 1005.7(b) 

currently requires financial institutions 

to provide certain initial disclosures, 

and this proposal would extend this 

provision to prepaid accounts. 

Generally, the Bureau believes that 

financial institutions already disclose 

full terms and conditions, which 

include much of what would be 

required by § 1005.7(b), before the first 

electronic fund transfer is made. The 

disclosure requirements of Regulation E 

section § 1005.7(b) as they are currently 

defined (not considering the 

modifications in proposed § 1005.18(f)) 

would therefore entail very small cost to 

covered persons. 

Proposed § 1005.18(b)(2) through (4) 

would set forth the content and form 

requirements for the short form and long 

form disclosures. To satisfy these 

requirements, financial institutions 

would incur one-time costs of designing 

compliant disclosures. Based on 

industry outreach, the Bureau 

understands that the design process will 

require as many as 100 labor hours per 

prepaid product, including time for 

design work and legal and financial 

institution review. However, the design 

costs should be offset somewhat by the 

Bureau’s provision of model forms and 

sample forms for the required 

disclosures. 

In-person transactions and direct mail 

transactions would require the short 

form and long form disclosures to be 

disclosed on paper. The long form 

disclosure would be disclosed both preacquisition and as part of the terms and 

conditions document. For each prepaid 

account sold, this would entail 

additional costs of materials (e.g., 

printing, paper), logistics (e.g., shipping 

costs), and personnel training (e.g., how 

to disclose the forms in retail settings). 

Prepaid account transactions 

conducted orally over the telephone 

would necessitate an oral disclosure of 

the short form disclosure prior to 

acquisition. Financial institutions 

would be able to choose between 

disclosing the long form orally prior to 

acquisition and communicating prior to 

acquisition that the long form is 

available orally over the telephone or 

electronically, via a Web site. Both the 

costs of providing disclosures orally 

over the telephone and the costs of 

providing disclosures electronically, via 

a Web site, were considered above. 

Because the labor and capital necessary 

to conduct business over the telephone 

may also be used to disclose fees, the 

Bureau estimates that the costs of 

providing disclosures orally over the 

telephone would be substantially 

mitigated for financial institutions that 

already transact over the telephone. 

Prepaid account transactions 

conducted electronically, via a Web site 

would necessitate electronic disclosure 

of both the short and long form 

disclosures prior to account acquisition. 

The costs of providing disclosures 

electronically, via a Web site were 

considered above. The Bureau believes 

that these costs would be minimal for 

financial institutions that transact 

online since they generally already 

disclose fees and terms and conditions 

online. 

Transactions that do not occur in 

person, such as those that occur over the 

telephone, via direct mail, or via a Web 

site, may necessitate financial 

institutions to send consumers an 

account access device via the mail. The 

Bureau understands that these 

deliveries typically include the prepaid 

products’ full terms and conditions. 

Therefore, proposed § 1005.18(f) would 

require that these deliveries include a 

long form disclosure. As a result, 

financial institutions that do not 

transact with consumers in person may 

incur small new ongoing costs in the 

form of increased shipping costs and 

increased materials costs. 

Financial institutions that distribute 

payroll card accounts or government 

benefit accounts may incur additional 

costs in order to provide on the short 

form the notice described in proposed 

§ 1005.18(b)(2)(i)(A) that consumers are 

not required to accept a payroll card 

account, and a similar requirement for 

government benefit accounts in 

proposed § 1005.15(c)(2). Additional 

costs could accrue, for example, if the 

additional disclosure caused the short 

form disclosure to exceed the space 

constraints of payroll card packaging 

materials. However, the Bureau believes 

that in the payroll card account context, 

prepaid accounts are not usually 

distributed within space-constrained 

packaging, and that the short form 

disclosure requirements could be easily 

met if provided, for example, on an 81⁄2

inch by 11 inch sheet of paper.439 If it 

is the case that this disclosure both 

informs consumers and motivates them 

to consider other payment options, then 

the costs to some financial institutions 

could increase. In particular, a financial 

institution could experience a cost if 

consumers decline to acquire its prepaid 

account product as a result of this 

notice. Both of these types of costs 

could be small, depending on current 

industry practice. In particular, existing 

regulation already prohibits employers 

and financial institutions from requiring 

a consumer to use a payroll card 

account to receive wages or a 

government benefit account to receive 

benefit payments. If covered persons 

comply with this existing regulation in 

a manner similar to the proposed 

requirement, then the additional cost of 

this proposal would be very small. 

If a financial institution principally 

uses a foreign language on packaging 

material, by telephone, in person, or on 

the Web site consumers utilize to 

acquire a prepaid account, then it would 

be required to provide the short form 

and long form disclosures in that same 

foreign language. In addition, the 

financial institution would be required 

to make an English version of the long 

form disclosure available upon request. 

If a financial institution does not 

already maintain the practice of 

disclosing its fee schedules in both 

languages, then this requirement may 

entail a small fixed cost to have its 

disclosures translated, as well as 

additional ongoing translation costs 

whenever the financial institution 

introduces a new fee or changes the 

wording of any part of its terms and 

conditions. Because, in such cases, the 

long form disclosure would be required 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77266 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

440The Bureau made early versions of its model 

forms available to the public for comment. 

See Eric Goldberg, Prepaid cards: Help design a 

new disclosure, CFPB Blog Post (Mar. 18, 2014), 

http://www.consumerfinance.gov/blog/prepaidcards-help-design-a-new-disclosure/. 441The Bureau heard from industry participants 

that the per-package printing cost, including the 

card access device and the packaging materials, 

ranges from $0.75 to $2.00. 

to be provided in two languages, this 

requirement could also result in 

additional ongoing material costs and 

increased shipping costs. The total 

burden of costs related to this 

requirement would depend on the 

amount that these requirements diverge 

from current practices. Based on 

industry outreach, the Bureau believes 

that most financial institutions that 

transact in foreign languages also 

provide fee disclosures in those foreign 

languages, and therefore that this 

requirement is unlikely to generate 

significant additional costs. 

A financial institution would need to 

design its short form disclosure to 

indicate whether it may offer an 

overdraft service or other credit feature 

to its prepaid account holders, and its 

long form disclosure to disclose the fees 

and costs associated with such a credit 

feature, when offered. This requirement 

would generate direct costs for financial 

institutions that offer such credit 

features. However, based on its Study of 

Prepaid Account Agreements of existing 

prepaid account products, the Bureau 

believes that very few financial 

institutions offer such features. 

Financial institutions that do offer 

credit features would face ongoing costs 

of insuring that the disclosed costs of 

credit in the long form disclosure are 

accurate. 

The ongoing costs of maintaining the 

short form and long form disclosures 

would depend on current practices and 

the acquisition channel. The long form 

and the non-incidence-based portions of 

the short form disclosure (the incidencebased portion is discussed below) 

would require updating at most as often 

as a prepaid product’s terms and 

conditions are updated. Based on 

industry outreach, the Bureau believes 

that financial institutions rarely change 

the terms and conditions of their 

prepaid products in a way that would 

require changes to the disclosures they 

provide. Moreover, the Bureau believes 

that pursuant to State law and 

regardless of this proposal, provided 

marketing materials, fee disclosures, 

and terms and conditions documents 

must always be accurate when provided 

to consumers. Therefore, the Bureau 

does not believe that maintaining the 

accuracy of the long form disclosure and 

the non-incidence-based portions of the 

short form disclosure would represent a 

substantial new ongoing cost to 

financial institutions. 

Financial institutions may incur a 

number of ongoing costs to comply with 

the short form disclosure’s proposed 

incidence-based disclosure 

requirements. The incidence-based 

portion of the short form disclosure 

would require disclosure of the three 

fees incurred most frequently in the 

prior 12-month period for that particular 

prepaid product that are also not 

already disclosed in the static portion of 

the short form disclosure. These fees 

could vary over time for a given product 

due to changes in how consumers use 

the card or due to changes in the 

product itself. In either case, financial 

institutions would be responsible for 

updating the incidence-based portion of 

their short form disclosures. If a 

financial institution changed its 

product, then it would be required to 

populate the incidence-based portion 

with a reasonable estimate of the fees 

that would match the incidence-based 

portion’s criteria. For each prepaid 

product, the financial institution would 

be required to reassess fee incidence 

ranking used to determine the 

incidence-based portion of the product’s 

short form disclosure once per year. 

Financial institutions would be 

permitted to choose the date of 

reassessment for each individual 

product, but for a given product, 

reassessment would be required to 

occur at the same time each year. Fee 

incidence rankings would be required to 

be assessed using data from the twelve 

months prior to the reassessment date 

each year. Financial institutions may 

incur some fixed costs of 

implementation if they must update 

their accounting systems or practices to 

evaluate fee incidence from all sources 

on a twelve-month basis. However, the 

Bureau believes that most financial 

institutions are already capable of 

tabulating fees in this manner, and thus 

it expects this cost to be small. 

Moreover, since financial institutions 

would be free to choose reassessment 

dates, the Bureau believes that ongoing 

costs associated with this reassessment 

should be small as well. For example, 

financial institutions could choose their 

reassessment date to coincide with its 

established calendar for evaluating its 

prior year performance for tax, or other 

reporting, purposes. 

After reassessment, financial 

institutions would have up to 90 days 

to update the incidence-based portion 

on their short form disclosures. In 

addition, after reassessment, financial 

institutions would be prohibited from 

printing new retail stock that includes 

out-of-date incidence-based fee 

information. However, financial 

institutions would be allowed to 

continue to sell stock printed prior to 

the reassessment date indefinitely. For a 

given prepaid product, the full burden 

of the costs of updating short form 

disclosures due to changes in the 

incidence-based portion would depend 

on the frequency with which the top 

three fees change for that product and 

the channel through which that product 

is distributed. The Bureau believes the 

costs of updating the incidence-based 

portion are very small for acquisition 

channels where disclosures are not 

printed on packaging material. 

iii. Retail Costs 

Through industry outreach and 

analysis, the Bureau understands that 

the proposed rule could generate many 

costs unique to the retail acquisition 

channel. For this reason, the retail 

acquisition channel is considered 

separately here. Nonetheless, costs 

borne by financial institutions 

transacting in the retail acquisition 

channel are largely the same as those 

borne by the financial institutions 

described above. This treatment 

therefore takes the above treatment as a 

starting point and describes costs to 

covered persons only as they deviate 

from that treatment. 

In a retail store, financial institutions 

would be required to provide their 

prepaid account product’s short form 

disclosure before the consumer acquires 

the prepaid account. Through 

discussions with industry participants, 

the Bureau has learned that some 

financial institutions will not be able to 

accommodate the short form disclosure 

on the exterior of their current 

packaging materials without significant 

changes, such as redesigning of 

packages.440 The one-time costs 

associated with a package redesign are 

discussed above and are relatively 

small. However, some financial 

institutions currently utilize the exterior 

of their packaging materials to facilitate 

retail transactions or to incorporate 

fraud prevention mechanisms (i.e., by 

providing bar codes or other 

information). In these cases, the Bureau 

has heard from industry participants 

that complying with the short form 

disclosure requirement of proposed 

§ 1005.18(b)(1), while maintaining their 

products’ previous levels of 

functionality and fraud prevention, 

could as much as double the per unit 

cost of printing packaging materials.441

In a retail store that is not operated by 

the financial institution or agent of the 

financial institution, the financial 


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442These costs would also apply to provision of 

the English version of the long form as would be 

required upon a consumer’s request by proposed 

§ 1005.18(b)(6). 

443The figures presented in this treatment are 

estimates derived from discussions with a limited 

number of industry participants. In some cases, the 

Bureau arrived at its estimates by combining 

estimates from various sources or by interpolating 

from industry estimates to estimate costs over new 

timeframes. Moreover, the Bureau recognizes that 

these figures vary as a function of myriad factors, 

including the size of the financial institution’s 

business, its business practices, and its 

relationships with other participants in the value 

chain. The Bureau requests comment on these 

preliminary figures as well as the submission of 

data that could inform the Bureau’s consideration 

of the costs of pre-acquisition disclosures to 

providers of retail prepaid accounts. 

444 ‘‘Card’’ is used here to refer to the access 

device for a single physical prepaid account sold in 

a retail store. ‘‘Cards in distribution’’ is defined to 

be the number of cards in retail distribution 

channels on the date of publication of the Bureau’s 

final rule in the Federal Register. 

445This estimate is based on discussions with 

industry participants, and is comprised of an 

estimate of $20 per hour to pay a professional 

stocker, or ‘‘merchandiser,’’ and an estimate that the 

resetting process takes approximately one hour 

complete. 

446The cost of printing a single new card could 

be more than the per-card cost of implementation 

because not every card in distribution would need 

to be reprinted as a result of this proposed rule. As 

stated, the Bureau believes that approximately 40 

percent of cards will remain after the second 

effective date and this is therefore also the Bureau’s 

estimate of the percentage of cards that would need 

to be re-printed as a result of this proposed rule. 

institution would be able to choose 

between two methods of providing the 

long form disclosure. As it would be 

required to do in other acquisition 

channels, the financial institution could 

provide the long form disclosure before 

a consumer acquires a prepaid account. 

Alternatively, in a retail store, a 

financial institution could provide the 

long form disclosure after the consumer 

acquires a prepaid account, provided 

that, among other things, the short form 

disclosure includes both a telephone 

number and a URL of a Web site that the 

consumer could use to access the long 

form disclosure. The cost of this 

requirement will therefore vary for 

financial institutions based on the 

option they select. Financial institutions 

that provide the long form disclosure 

pre-acquisition would bear additional 

costs of shipping and materials and 

potentially personnel training in retail 

settings. Financial institutions that do 

not provide the long form disclosure 

pre-acquisition would bear the costs of 

making the long form available 

electronically, via a Web site and orally 

over the telephone. These costs were 

considered in generality above.442

Based on industry outreach and 

analysis, the Bureau believes that in the 

retail channel a prepaid product’s terms 

and conditions document is included in 

its packaging materials. In this case, 

proposed § 1005.18(f) would require 

that financial institutions also include 

the long form disclosure inside their 

retail packaging materials. This 

requirement could create new ongoing 

costs for financial institutions through 

increased material and shipping costs. 

Moreover, currently, if a prepaid 

product’s terms and conditions 

document is included in its packaging 

materials, then any change in a prepaid 

account product that would trigger a 

need to update the prepaid account 

product’s disclosures would also trigger 

a need to update the prepaid account 

product’s terms and conditions 

document. Therefore, the Bureau 

believes that in the retail acquisition 

channel, monitoring the long form and 

the non-incidence-based portions of 

short form disclosure for accuracy, and 

updating these disclosures to reflect 

changes in the prepaid product, would 

not represent significant new costs 

relative to the costs currently borne by 

financial institutions. 

In addition, the Bureau believes that 

in the retail channel the cost of 

monitoring and updating the incidencebased portion of the short form would 

be almost fully mitigated by two factors: 

first, because financial institutions 

would be able to sell their out-of-date 

retail packaging indefinitely there 

would be no costs of product 

destruction or resetting; second, because 

financial institutions could choose their 

reassessment dates to coincide with 

their natural product refresh cycle, there 

would be few additional costs to 

printing or shipping new prepaid cards. 

The proposed two-tiered effective 

date of this proposed rule would require 

that newly printed retail materials are 

accurate within nine months of the date 

of publication of a final rule in the 

Federal Register, but would allow outof-date stock to be sold for up to twelve 

months thereafter. Because this 

extended implementation period would 

allow financial institutions time to sell 

their old stock, it would also reduce, 

relative to a shorter period, financial 

institutions’ total costs of shipping and 

destroying old stock. Moreover, the 

extended implementation period would 

allow financial institutions’ printing 

and shipping of updated stock to 

coincide with financial institutions’ 

natural yearly product refresh cycle. 

Nonetheless, through discussion with 

industry participants, the Bureau 

understands that even after an extended 

implementation period, out-of-date 

stock may remain in retail locations, 

financial institutions may be uncertain 

as to whether or not out-of-date stock 

remains at a given retail location, and as 

a result, certain costs, such as the labor 

cost for merchandisers, may not be 

greatly reduced by the extended 

implementation period. 

If a financial institution has not sold 

all of its out of date stock by the second 

effective date, then the proposed rule 

may result in financial institutions 

destroying and replacing out-of-date 

stock.443 The Bureau estimates the onetime cost of destruction and 

replacement of retail stock due to 

implementation of the proposed rule to 

be $0.68 per prepaid card in 

distribution.444 This cost is comprised 

of the costs of creating new stock; 

removing and destroying old stock; 

confirming that no old stock remains in 

retailers’ possession and/or is offered for 

sale; and replenishing retail inventory. 

Based on industry outreach, the Bureau 

estimates that after twelve months 40 

percent of total prepaid account stock 

will remain in distribution. It estimates 

that destroying remaining stock would 

cost approximately $0.05 per card for 

the destruction service itself, 

approximately $20 per retail location in 

resetting costs,445 and $28 per retail 

location for secure shipping to a 

destruction facility. Further, it estimates 

that the cost of printing new cards and 

packaging materials would be between 

$0.75 and $2.00 per newly printed card, 

depending on the volume of the order 

and the type of packaging materials.446

iv. Benefits 

Finally, the Bureau recognizes that 

when a consumer chooses one prepaid 

product over another, one covered 

person incurs a cost but another 

receives a benefit. Because consumers 

use prepaid products in a variety of 

ways, it is currently unclear if the 

proposed rule would yield more such 

benefits for some financial institutions 

than for others. However, in line with 

the discussion of benefit to consumers, 

the Bureau believes that the proposed 

rule may most benefit financial 

institutions that offer products with low 

fees, generally; low top-line fees (and 

other fees in the static portion of the 

short form), specifically; and fewer fees, 

overall. 

v. New Entrants 

The Bureau expects that costs and 

benefits to new entrants would be 

similar as those experienced by 

financial institutions that currently 

provide prepaid account products. 

Therefore, except where noted in this 


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77268 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

447See existing § 1005.18(c)(1) and (2) for payroll 

card accounts, revised as proposed § 1005.18(d) for 

prepaid accounts, and existing § 1005.15(d)(1) and 

(2) for government benefit accounts, revised as 

proposed § 1005.15(d)(1) and (2). 

448With respect to government benefit accounts, 

proposed § 1005.15(d)(2) would refer to 

§ 1005.18(c)(2), (3), and (4). 

part, the above discussions apply to new 

entrants as well. 

The proposed rule would imply fewer 

fixed costs of implementation for new 

entrants. Because producing 

disclosures, marketing materials, and 

packaging materials is a natural part of 

the process of creating a new prepaid 

account product, the proposed rule 

would not impose new costs of 

changing these things for new entrants. 

Moreover, because new entrants do not 

currently have stock in retail channels, 

the proposed rule would not generate 

the implementation costs of destroying 

and replacing out-of-date stock in the 

retail channel for new entrants. 

The Bureau believes that new 

entrants’ costs, as they relate to the 

incidence-based portion, would be 

similar to other covered persons’. 

Although financial institutions do not 

have actual fee data for new prepaid 

account products, the Bureau believes 

that they nonetheless should have a 

reasonable expectation as to which fees 

would be incurred most frequently. 

Thus, proposed 

§ 1005.18(b)(2)(i)(B)(8)(II) would require 

institutions, for those prepaid account 

products without prior fee data, to 

estimate in advance the fees that should 

be disclosed in the incidence-based 

portion of the short form disclosure. The 

Bureau expects that this effort would be 

no more costly than the effort of 

producing an incidence-based portion 

based on actual fee data (as would be 

required of financial institutions that 

possess such data). Like other covered 

persons, new entrants would be 

required to update the incidence-based 

portions of their disclosures to reflect 

the previous year’s data every twelve 

months. 

2. Applying Regulation E’s Periodic 

Statement Requirement With Slight 

Modification and Providing an 

Alternative Means of Compliance With 

the Requirement 

While expressly defining prepaid 

accounts as accounts subject to 

Regulation E, the Bureau’s proposal also 

would extend the alternative means of 

compliance with Regulation E’s periodic 

statement requirement, currently offered 

to payroll card account providers, to 

prepaid accounts with certain 

modifications. See proposed 

§ 1005.18(c)(1). In addition, the 

proposed rule would modify the 

alternative means of compliance with 

Regulation E’s periodic statement 

requirement for government benefit 

accounts so that it is consistent with the 

alternative means of compliance for 

prepaid accounts. See proposed 

§ 1005.15(d). 

Regulation E currently states in 

§ 1005.18(b) that financial institutions 

offering payroll card accounts need not 

furnish periodic statements if the 

financial institution makes available to 

the consumer his or her account balance 

through a readily available telephone 

line, an electronic history of the 

consumer’s account transactions that 

covers at least 60 days preceding the 

date that the consumer electronically 

accesses the account, and, upon oral or 

written request, a written transaction 

history that covers at least 60 days. 

Similarly, government agencies offering 

government benefit accounts need not 

comply with the periodic statement 

requirement if they make available to 

the consumer the account balance, 

through a readily available telephone 

line and at a terminal, and promptly 

provide at least 60 days of written 

history of the consumer’s account 

transactions in response to an oral or 

written request. See existing 

§ 1005.15(c). 

The proposed rule would require that 

covered financial institutions wishing to 

avail themselves of this alternative 

means of complying with the Regulation 

E periodic statement requirement make 

available to the consumer at no charge 

his or her account balance through a 

readily available telephone line, provide 

the consumer with access to at least 18 

months of transaction history online 

and, if requested by the consumer, 

provide at least 18 months of 

transaction history in writing. See 

proposed § 1005.18(c)(1). For those 

payroll card account providers and 

providers of prepaid accounts that 

receive Federal payments that are 

presently required to comply with the 

Regulation E periodic statement 

requirement and are meeting their 

compliance obligations by relying on 

the alternative means of compliance, 

this proposed provision would extend 

the present requirement that 60 days of 

transaction history be provided to 18 

months. For government agencies that 

are currently required to comply with 

the Regulation E periodic statement 

requirement, this proposed provision 

would additionally require electronic 

access to government benefit account 

history information under the 

alternative means of compliance, which 

Regulation E does not presently require. 

Regardless of how a financial 

institution chooses to comply with the 

proposal, the proposed rule also would 

require that the financial institution 

disclose to the consumer a summary 

total of the amount of all fees assessed 

against the consumer’s prepaid account, 

the total amount of deposits to the 

prepaid account, and the total amount 

of all debits from the prepaid account 

for both the prior calendar month as 

well as the calendar year to date. This 

information would be required to be 

disclosed on any periodic statement and 

any electronic or written history of 

account transactions provided. Finally, 

for financial institutions following the 

alternative means of complying with the 

periodic statement requirement, the 

proposed rule would extend to prepaid 

accounts modified requirements for 

initial disclosures regarding access to 

account information and error 

resolution, as well as annual error 

resolution notices.447

a. Benefits and Costs to Consumers 

Extending Regulation E’s periodic 

statement requirement to all prepaid 

accounts would help to ensure that 

consumers receive the benefits 

associated with increased information 

regarding their prepaid accounts. These 

benefits include having the ability to 

monitor account balances for both 

budgeting and the identification of 

errors. 

The Bureau’s proposal would require 

that financial institutions disclose to the 

consumer a summary total of the 

amount of all fees assessed against the 

consumer’s prepaid account, along with 

the total amount of deposits to and the 

total amount of debits from the prepaid 

account for the prior calendar month 

and the calendar year to date, on any 

periodic statement, any written history 

of account transactions, and any 

electronic history of account 

transactions (see proposed 

§ 1005.18(c)(4) 448). This disclosure 

would make the cumulative costs 

associated with the use of the prepaid 

account accessible and transparent to 

consumers and, given that some 

consumers use their prepaid account as 

their primary transaction account or as 

a budgeting mechanism for a particular 

category of expenditures, would also 

provide these consumers with a means 

of tracking budgeting goals. The 

inclusion of these summary measures 

may also make tracking spending and 

load patterns less burdensome for 

consumers and may aid consumers in 

identifying atypical account activity or 

spending trends. For those consumers 

who use their prepaid accounts 

infrequently and may not track balance 

information on a regular basis, this 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77269 

449See ICF Report, at 10. 

450The program manager reported that consumers 

viewed the statements for just over one percent of 

active accounts, and consumers downloaded the 

statements for slightly less than one percent of 

active accounts. 

451According to a survey conducted by the Board, 

roughly 87 percent of respondents owned or had 

regular access to a mobile phone, and roughly 61 

percent of those with a mobile phone had a 

smartphone as of December 2013. Additionally, 

over 89 percent had regular access to the internet, 

either at home or outside of the home (but 

excluding internet access through a cellular phone). 

See Bd. of Governors of the Fed. Reserve Sys., 

Consumers and Mobile Financial Services 2014, at 

49 tbl.C16, C.18 & C.19 (Mar. 2014), available at 

http://www.federalreserve.gov/econresdata/mobiledevices/files/consumers-and-mobile-financialservices-report-201403.pdf. A survey of prepaid 

card users found that 88 percent use the internet. 

See 2014 Pew Survey, at 5 ex.2. 

452See The Pew Charitable Trusts, Consumers 

Continue to Load Up on Prepaid Cards: Changes in 

General Purpose Reloadable Prepaid Cards Make 

Them More Like Checking Accounts but Without 

Important Protections, at 17 (Feb. 2014), available 

at http://www.pewtrusts.org/∼/media/legacy/

uploadedfiles/pcs_assets/2014/

PrepaidCardsStillLoadedReportpdf.pdf. 

453Additionally, they found that all of the cards 

reviewed provided consumers with accessible 

customer service assistance and IVR systems. See 

Ctr. for Fin. Serv. Innovation, Prepaid Industry 

Scorecard, Assessing Quality in the Prepaid 

Industry with CFSI’s Compass Principles, at 12 

(Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. 454Of the GPR card programs reviewed by that 

organization, 21 percent of programs did not 

disclose a paper statement fee, and 11 percent 

disclosed that paper statements are free. See The 

Pew Charitable Trusts, Consumers Continue to Load 

Up on Prepaid Cards: Changes in General Purpose 

Reloadable Prepaid Cards Make Them More Like 

Checking Accounts but Without Important 

Protections, at 19 (Feb. 2014), available at http://

www.pewtrusts.org/∼/media/legacy/uploadedfiles/

pcs_assets/2014/

PrepaidCardsStillLoadedReportpdf.pdf. 

disclosure would provide another 

means to become familiar with the costs 

associated with using the prepaid 

account, including any inactivity fees 

that may be incurred. 

In extending the Regulation E 

periodic statement requirement to all 

prepaid accounts, the Bureau would 

also require that those financial 

institutions relying on the alternative 

means of complying with the periodic 

statement requirement make accessible 

18 months of transaction history 

electronically and, if requested, in 

writing. Consumers, especially those 

who rely on a prepaid account as their 

primary transaction account, may need 

to consult more extensive account 

history in connection with, for example, 

rental and employment applications or 

tax filings; in these situations, they 

would benefit from having 18 months of 

account history available. Additionally, 

transaction histories may help 

consumers to discover unauthorized 

transfers or other errors. For instance, in 

certain circumstances, consumers have 

up to 120 days from the date of the 

unauthorized transfer to assert an error 

and thus in order to fully exercise these 

protections, consumers must be able to 

access at least 120 days of transaction 

history. The proposed rule additionally 

requires that account histories provided 

as part of the alternative means of 

compliance with the periodic statement 

requirement be provided electronically. 

Though government benefit accounts 

are not presently required by Regulation 

E to provide such access, and prepaid 

accounts generally are not subject to this 

requirement at present, the Bureau’s 

understanding is that most financial 

institutions offer electronic access. 

The Bureau considered alternatives, 

such as expanding the Regulation E 

periodic statement requirement without 

an alternative for prepaid accounts, 

requiring electronic periodic statements 

(as opposed to transaction histories), 

requiring that account histories be made 

available for various lengths of time, 

and not expanding the periodic 

statement requirement to prepaid 

accounts in any form. In focus group 

research, the Bureau generally found 

that consumers were satisfied with the 

amount of information they receive 

regarding their transaction history 

presently (either online, through text 

message, or over the telephone), and 

they generally did not express a desire 

to receive a paper statement.449 Several 

industry participants the Bureau spoke 

with during its outreach, as well as 

several participants in the Bureau’s 

consumer testing, noted that the time 

lag between receipt of a paper statement 

and the transactions covered by the 

statement decreased its utility for 

tracking account balance information 

relative to other means, such as realtime text message alerts, which provide 

consumers with more timely access. 

According to one program manager, 

when it provided electronic periodic 

statements to all of its customers, its 

customers only infrequently accessed 

those statements.450

Many consumers participating in the 

Bureau’s focus groups also stated that 

they monitor their account balance 

using the internet and mobile 

devices.451 This is consistent with the 

findings of various industry surveys, 

which suggest that many consumers 

currently have multiple methods 

through which they can access 

information regarding their prepaid 

account. According to one survey of 66 

GPR card programs, almost threequarters offer text alerts, and more than 

half offer email alerts regarding account 

balances and transactions.452 Another 

organization reviewed the terms and 

conditions associated with 18 GPR card 

programs that they estimated 

collectively represented 90 percent of 

the total GPR card marketplace (based 

on number of active cards in 

circulation). It found that all of the 

reviewed cards allowed cardholders to 

check balances online, via text message, 

by calling customer service, or on a 

mobile app or a mobile-enabled Web 

site.453

Although consumers generally have 

access to transaction history information 

in some form at present, the proposed 

rule’s requirement that 18 months of 

written transaction history, 18 months 

of electronic transaction history, and 

telephone access to balance information 

must generally be provided for free 

would lower the cost of accessing this 

information for some consumers. Of the 

66 GPR card programs reviewed by one 

organization, 68 percent disclosed a 

paper statement fee ranging from 99 

cents to $10 (median $2.95).454 As 

discussed below, the Bureau’s 

discussions with industry participants 

suggest that few consumers presently 

request paper statements. It is worth 

noting, however, that if financial 

institutions were unwilling to provide 

such statements to consumers for free, 

they may decide to require all 

consumers to provide E-Sign consent in 

order to have access to the product so 

that they could provide statements 

electronically. This could result in 

decreased access to account information 

for those consumers who cannot or 

choose not to provide E-Sign consent. 

b. Benefits and Costs to Covered Persons 

The benefits and costs to covered 

persons arising from the application of 

Regulation E’s periodic statement 

requirement to all prepaid accounts 

would depend on the financial 

institution’s current business practices 

and whether the financial institution 

would choose to avail itself of the 

alternative means of complying with the 

periodic statement requirement. 

Specifically, financial institutions may 

comply with the proposed requirement 

by providing periodic statements, either 

in paper form or in electronic form 

having obtained E-Sign consent from the 

consumer, or they may choose to 

implement the alternative means of 

complying with the periodic statement 

requirement. 

As discussed above, financial 

institutions are already required to 

comply with the Regulation E periodic 

statement requirement, or the specified 

alternative, for payroll card accounts 

and for accounts that receive Federal 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77270 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

455One review of 66 GPR card programs found 

that almost every card provided free online access 

to account information. It also found that most card 

programs offered email and text alerts free of charge 

and that most programs provided the customer with 

at least a limited number of free interactive voicerecognition customer service calls through which 

consumers could access account information. See 

The Pew Charitable Trusts, Consumers Continue to 

Load Up on Prepaid Cards: Changes in General 

Purpose Reloadable Prepaid Cards Make Them 

More Like Checking Accounts but Without 

Important Protections, at 36 (Feb. 2014), available 

at http://www.pewtrusts.org/∼/media/legacy/

uploadedfiles/pcs_assets/2014/

PrepaidCardsStillLoadedReportpdf.pdf. Another 

review of 18 GPR card programs, comprising an 

estimated 90 percent of active GPR cards in 

circulation, found that all of the cards reviewed 

allowed cardholders ‘‘to check their balance online, 

via text message, by calling customer service, or on 

a mobile app or a mobile-enabled Web site.’’ See 

Ctr. for Fin. Serv. Innovation, Prepaid Industry 

Scorecard, Assessing Quality in the Prepaid 

Industry with CFSI’s Compass Principles, at 12 

(Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. 

456See Ctr. for Fin. Serv. Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

12 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. ‘‘Eleven of the fifteen 

cards for which information is available . . . allow 

cardholders to access at least two years of 

transactional data online, which can be important 

for tax-filing and budgeting purposes. Three of the 

four cards that offer less than two years of 

transactional data provide one year of data, while 

one card offers six months of data.’’ 

457As a result of the proposed rule, financial 

institutions that do not provide consumers with 18 

months of transaction history may incur additional 

costs in the future when migrating information 

across information technology platforms since 

additional data must be retained. 

458One program manager estimated that 

modifying its Web site to provide such functionality 

would cost approximately $15,000. 

459One program manager that relies on a 

processor for this function told the Bureau that fees 

for data storage are charged on a per account basis 

one time at activation. The program manager did 

not have an estimate of the cost associated with 18 

months of history, but costs were generally 

increasing from $0.08 per account for three months 

of transaction history to $0.19 per account for one 

year of transaction history. This program manager 

also suggested that processor prices decrease with 

scale and that they were operating at low scale and 

were consequently paying among the highest prices. 

460One program manager stated that its processor 

quoted a one-time cost of $65,000 for providing this 

functionality on its processor-hosted Web site (in 

response to an ad-hoc request). This potentially 

represents an upper bound for the true development 

cost since this number likely includes a mark-up 

over the true cost of providing the service. Actual 

development costs would be borne jointly by the 

processor and the prepaid account providers relying 

on the processor for hosting services. 

461One program manager reported that when it 

eliminated a $2.50 fee for receiving a paper 

statement, there was no change in the frequency 

with which statements were requested. 

462Estimates quoted to the Bureau by providers 

varied somewhat but generally were approximately 

$1 per statement to respond to ad hoc requests once 

the costs associated with fielding the incoming call, 

postage, and producing the statement were 

considered. Providers generally noted that postage 

is a large driver of this cost. One provider noted 

payments (pursuant to the FMS Rule). 

Government agencies that offer 

government benefit accounts are 

similarly required to comply with this 

requirement (without the requirement to 

provide electronic access to account 

history under the periodic statement 

alternative). Based on outreach to 

industry participants, the Study of 

Prepaid Account Agreements, and 

review of various industry studies, the 

Bureau understands that financial 

institutions generally provide 

consumers with electronic access to 

transaction histories or electronic 

periodic statements and generally 

provide telephone access to account 

information similar to what the Bureau 

is proposing to require.455 In many 

instances, electronic transaction 

histories currently provided extend well 

beyond the 60 days currently required 

for certain prepaid accounts.456 The 

Bureau’s understanding based on 

outreach to industry is that few, if any, 

financial institutions provide paper 

periodic statements or paper transaction 

histories to consumers with prepaid 

accounts on a non-ad hoc basis. 

If the proposed rule were adopted, the 

Bureau predicts that most financial 

institutions would continue to offer 

account history information to 

consumers electronically (except for 

those cases where a written transaction 

history is required in response to an ad 

hoc consumer request) and would 

continue to use an automated telephone 

line to provide 24 hour access to 

account balance information. Therefore, 

the Bureau believes that the majority of 

costs to covered persons would arise 

from two sources. 

First, periodic statements or 

transaction histories would be required 

to display a summary total of the 

amount of all fees assessed against the 

consumer’s prepaid account, along with 

the total amount of deposits and the 

total amount of all debits made to the 

prepaid account for the prior calendar 

month and for the calendar year to date. 

Covered financial institutions would 

need to modify existing statements or 

electronic transaction histories to 

include these totals if such totals are not 

already included. Second, those covered 

financial institutions that do not 

presently make 18 months of transaction 

history available to consumers would 

potentially incur additional data storage 

costs and may need to implement 

system changes if they choose to avail 

themselves of the proposed alternative 

means of complying with Regulation E’s 

periodic statement requirement.457

The structure of the costs associated 

with these changes would depend on 

whether the financial institution relies 

on vendors to format or host online 

periodic statements or transaction 

histories or whether it performs these 

functions in-house. In either case, the 

Bureau anticipates the cost associated 

with these changes to be minimal. 

Those financial institutions that format 

their own periodic statements or 

transaction histories and do not 

currently display the required totals on 

their periodic statements or transaction 

histories would incur a one-time 

implementation cost to modify these 

disclosures.458 Those providers that 

currently do not make available 18 

months of account history would incur 

costs associated with obtaining 

additional electronic storage media to 

expand existing capacity. According to 

discussions with industry participants, 

the costs associated with such an 

expansion should be minimal. 

Many providers of prepaid accounts 

rely on processors to provide online 

portals that give consumers access to 

account history information. Based on 

discussions with industry participants, 

the Bureau understands that program 

managers typically pay processors a flat 

fee per account that may be a function 

of both the extent of the account history 

provided and the number of accounts 

that are being serviced.459 These entities 

would generally rely on their processor 

to modify periodic statements or 

electronic transaction histories to 

display the required summary totals. 

However, one program manager 

predicted that if such a fee disclosure 

were a regulatory requirement, the 

processor would offer it as part of a 

standard package of services at no 

additional cost.460 However, the Bureau 

requests additional comment regarding 

the costs associated with the impact of 

these proposed provisions. 

In formulating its proposal, the 

Bureau conducted outreach to prepaid 

card issuers and program managers 

regarding the utilization of paper 

account statements by consumers and 

the cost to financial institutions of 

providing such statements. Based on 

these discussions, the Bureau’s 

understanding is that consumer requests 

for written account histories for GPR 

cards are infrequent, generally well 

under one percent of active cardholdermonths, regardless of whether the 

consumer is charged a fee for the 

statement.461 The Bureau notes that 

some providers currently charge 

consumers fees if they wish to receive 

paper statements or transaction 

histories, and in some cases, providers 

may charge consumers fees that exceed 

the cost to provide these statements.462


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that, given the sensitivity associated with the 

information, such statements need to be sent via 

first class mail. Another provider that relied on its 

processor to provide ad hoc paper statements to 

consumers pays its processor $2 for each paper 

statement delivered. 

463Payroll card accounts and government benefit 

accounts are required to follow Regulation E’s 

limited liability and error resolution regime 

regardless of whether the account had been through 

the customer identification and verification 

processes. As described above, the FMS Rule 

requires that a prepaid card that receives a Federal 

payment comply with these provisions. 

464The financial institution has 90 days (instead 

of 45) if the claimed unauthorized EFT was not 

initiated in a state, resulted from a point-of-sale 

debit card transaction, or occurred within 30 days 

after the first deposit to the account was made. See 

§ 1005.11(c)(3). Provisional credit is not required if 

the financial institution requires, but does not 

receive, written confirmation within 10 business 

days of an oral notice by the consumer. See 

§ 1005.11(c)(2)(i)(A). 

465See Ctr. for Fin. Serv. Innovation, Prepaid 

Industry Scorecard, Assessing Quality in the 

Prepaid Industry with CFSI’s Compass Principles, at 

12 (Mar. 2014), available at http://

cfsinnovation.s3.amazonaws.com/CFSI_Prepaid_

Industry_Scorecard_2014.pdf. Another study 

asserts that only two-fifths of 66 GPR card programs 

reviewed included all of the protections, but most 

of this appears to be the lack of disclosure of 

mandatory extensions of time frames to submit 

claims for good cause. Regulation E, as applied to 

payroll card programs, does not require the 

disclosure of this information, so it is unclear 

whether it can be inferred that lack of disclosure of 

this information in the terms and conditions 

implies lack of protection for consumers See The 

Pew Charitable Trusts, Consumers Continue to Load 

Up on Prepaid Cards: Changes in General Purpose 

Reloadable Prepaid Cards Make Them More Like 

Checking Accounts but Without Important 

Protections, at 20 (Feb. 2014), available at http://

www.pewtrusts.org/∼/media/legacy/uploadedfiles/

pcs_assets/2014/

PrepaidCardsStillLoadedReportpdf.pdf. 

466See, e.g., Network Branded Prepaid Card 

Association, Cardholder Protections—NBPCA 

Position, available at http://www.nbpca.org/en/

Government-Affairs/Policy-Positions/CardholderProtections.aspx (last accessed Nov. 4, 2014). 

However, given the infrequent nature of 

such requests (regardless of whether a 

fee is charged for the statement), the 

Bureau believes that the revenue impact 

is likely de minimis. Since a covered 

financial institution may require that 

consumers provide E-Sign consent in 

order to receive a prepaid account, and 

thus would provide traditional periodic 

statements electronically instead of 

following the proposed periodic 

statement alternative, any revenue 

impact could be further mitigated. 

If the proposed provisions expanded 

consumer access to account 

information, financial institutions could 

benefit from receiving more timely 

notice of unauthorized transfers by 

consumers and potentially fewer 

inquiries by telephone or email. For 

example, in the event that a consumer 

identifies an unauthorized transfer, the 

financial institution may be able to 

place the appropriate holds on the 

account to prevent further unauthorized 

use. Timely notification could also 

decrease the costs associated with 

investigations of alleged errors. In 

addition, if timely notification by some 

consumers were to provide an early 

warning of a widespread or systemic set 

of unauthorized transfer attempts, the 

financial institution could benefit from 

cutting off the avenue for the 

unauthorized transfers before the issue 

becomes more widespread. However, to 

the extent that consumers are able to 

identify unauthorized transfers and 

other errors that they would not have 

identified in the absence of these 

disclosures, financial institutions may 

incur additional costs. 

3. Applying Regulation E’s Limited 

Liability and Error Resolution Regime 

The Bureau is also proposing to 

extend Regulation E’s limited liability 

and error resolution regime, including 

provisional credit requirements, to all 

prepaid accounts that have been 

through the customer identification and 

verification processes.463 Regulation E 

provides that a consumer may be held 

liable for an unauthorized electronic 

fund transfer resulting from the loss or 

theft of an access device only if the 

financial institution has provided 

certain required disclosures and other 

conditions are met. See § 1005.6(a). In 

addition to describing conditions under 

which a consumer may be held liable 

for an unauthorized electronic fund 

transfer, Regulation E provides 

limitations on the amount of liability a 

consumer may assume. See § 1005.6(b). 

For accounts subject to the Regulation 

E error resolution provisions, EFTA 

places the burden of proof on the 

financial institution to show that an 

alleged unauthorized transfer was, in 

fact, authorized. See EFTA section 

909(b). More specifically, after receiving 

notice that a consumer believes that an 

electronic fund transfer was 

unauthorized, the financial institution 

must promptly perform an investigation 

to determine whether an error occurred. 

Although the investigation must 

generally be completed within 10 

business days (20 business days if the 

EFT occurred within 30 days of the first 

deposit to the account), the financial 

institution may take up to 45 days to 

complete the investigation if it 

provisionally credits the consumer’s 

account for the amount of the alleged 

error within 10 business days of 

receiving the error notice.464 See 

§ 1005.11(c)(2). Upon completion of the 

investigation, the financial institution 

must report the investigation’s results to 

the consumer within three business 

days and correct an error within one 

business day after determining that an 

error occurred. See § 1005.11(c)(1). In 

cases where the financial institution 

ultimately can establish that no error (or 

a different error) occurred, the financial 

institution may reverse the provisional 

credit. See § 1005.11(d)(2). If the 

financial institution cannot establish 

that the transfer in question was 

authorized, the financial institution 

must credit the consumer’s account (or 

not reverse the provisional credit). 

Prepaid accounts that are payroll card 

accounts, government benefit accounts, 

and those that receive Federal payments 

are presently required to provide 

Regulation E’s limited liability and error 

resolution protections. Other types of 

prepaid accounts, such as GPR cards 

that do not receive Federal payments, 

currently are not required to provide 

these protections. One study reviewed 

18 GPR card programs, estimated to 

represent 90 percent of the number of 

active GPR cards in circulation, and 

found that all of the programs reviewed 

had adopted the consumer liability 

protections outlined by Regulation E as 

it applies to payroll cards.465 The 

Bureau’s Study of Prepaid Account 

Agreements found that roughly 89 

percent of all programs, and all of the 

largest GPR card programs, offer liability 

protections to consumers. The Bureau’s 

Study of Prepaid Account Agreements 

also found that over two-thirds of 

prepaid programs (excluding 

government benefit accounts and 

payroll card accounts) appear to follow 

Regulation E’s error resolution regime, 

including provisional credit 

requirements, with roughly 80 percent 

of the largest GPR card programs 

offering such protections. 

To the extent that providers already 

follow policies consistent with 

Regulation E’s limited liability and error 

resolution regime, the potential impacts 

on most consumers and covered persons 

arising from these proposed provisions 

are limited. Additionally, prepaid 

accounts are typically subject to 

payment card association network rules 

that provide zero-liability protection 

and chargeback rights in some 

circumstances that, unless changed by 

the networks, would apply regardless of 

what Regulation E requires.466 In certain 

cases, business practices may differ 

from those guaranteed by the terms and 

conditions associated with the prepaid 

account, and consumers may, in 

practice, have additional protections 

beyond those articulated in the account 

agreement. 


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467The proposed rule may also provide 

additional benefits to consumers. First, the 

proposed requirements may reduce the frequency 

with which unauthorized transfers or other errors 

occur by creating an additional incentive for 

financial institutions to prevent these adverse 

events in the first place. This change could benefit 

consumers in non-monetary ways if adverse events 

nevertheless impose meaningful costs (including 

inconvenience). Second, even if no unauthorized 

transfer or other error has occurred, the requirement 

to offer provisional credit provides consumers with 

a zero-interest loan and a timely investigation. 

Third, as discussed further below, consumers with 

prepaid accounts from providers that currently 

voluntarily offer the proposed protections receive 

some benefit from the proposed requirements since 

providers currently offering these protections could 

change their terms and conditions and stop 

providing these protections in the future, absent the 

proposed rule. 

468See Bd. of Governors of the Fed. Reserve Sys., 

Consumers and Mobile Financial Services 2014, at 

48 Tbl.C.8a (Mar. 2014), available at http://

www.federalreserve.gov/econresdata/consumersand-mobile-financial-services-report-201403.pdf. 

See also 2014 Pew Survey, at 1. For the purpose of 

this survey, respondents were explicitly told not to 

include gift cards, rebate cards, credit cards, or 

phone cards. Five percent of adults reported using 

a prepaid card at least once a month. See also Fed. 

Deposit Ins. Corp., 2013 FDIC National Survey of 

Unbanked and Underbanked Households, at 29–30 

(Oct. 2014), available at https://fdic.gov/

householdsurvey/2013report.pdf (which reports 

that 12 percent of households surveyed had ever 

used prepaid cards, 7.9 percent have used a prepaid 

card in the last 12 months, and 3.9 percent have 

used a prepaid card in the last 30 days). See also 

Mercator Advisory Grp., Prepaid 2013: U.S. 

Consumers Buying More Cards For Own Use, at 9 

(Oct. 2013) (which reports that seven percent of 

households surveyed in 2013 currently use a GPR 

card). See also id. at 11 (which reports that 14 

percent of households surveyed in 2013 purchased 

a GPR card in the last year). See also GFK, GfK 

Prepaid Omnibus Research Findings, at 6 (2014), 

available at http://www.nbpca.org/∼/media/

2519B8BADB1B4388BA5F11C511B3ACAE.ashx. 

The definition of prepaid card in this survey 

appears to have included some products that would 

not be covered by the proposed definition of 

prepaid account. This survey found that 16 percent 

of respondents had used a ‘‘prepaid card’’ that was 

not a gift card in the last 12 months. 

469One study which asserts that it covers 

programs accounting for 90 percent of active GPR 

cards in circulation found that all providers offered 

liability and error resolution provisions consistent 

with those in Regulation E. See Ctr. for Fin. Serv. 

Innovation, Prepaid Industry Scorecard, Assessing 

Quality in the Prepaid Industry with CFSI’s 

Compass Principles, at 12 (Mar. 2014), available at 

http://cfsinnovation.s3.amazonaws.com/CFSI_

Prepaid_Industry_Scorecard_2014.pdf. 

a. Benefits and Costs to Consumers 

In general, the potential benefits to 

consumers arising from the proposed 

requirements include reduced risk 

(relative to a baseline where some 

programs do not offer the proposed 

protections) and reduced uncertainty 

regarding responsibilities and liabilities 

among market participants. With respect 

to consumer uncertainty, the Bureau 

does not have information that would 

permit it to quantify the extent to which 

some consumers may overestimate the 

risks associated with using prepaid 

accounts (and so may underutilize 

them) or the extent to which other 

consumers may underestimate the risks 

(and therefore may fail to take certain 

precautions if they utilize them). Both 

groups would benefit from the reduced 

uncertainty regarding limited liability 

and error resolution protections that 

would result from the proposed rule. 

Consumers using prepaid accounts 

would further benefit from any 

reduction in expected financial losses 

incurred due to unauthorized electronic 

fund transfers or other errors that would 

result from the adoption of the proposed 

rule. Although providers typically offer 

limited liability and error resolution 

protections in connection with prepaid 

accounts, the proposed rule would 

largely eliminate any remaining losses 

as well as ensure that errors are 

investigated expeditiously and that 

consumers regain access to funds more 

quickly. Thus, this potential benefit to 

consumers would depend on the 

following: (a) The number of consumers 

with prepaid accounts that do not 

follow the limited liability and error 

resolution regime, including access to 

provisional credit, that is described in 

the proposed rule; (b) the average 

magnitude of the financial losses 

consumers would experience from 

unauthorized transfers or other errors 

absent the proposed rule; and (c) the 

probability that these unauthorized 

transfers or other errors would occur 

absent the proposed rule. The Bureau 

notes that these benefits could be 

concentrated among certain segments of 

the population were the proposed rule 

adopted.467

In order to quantify the potential 

benefits to consumers from the 

proposed requirements, the Bureau 

would need the quantities in (a), (b), 

and (c) or a database of representative 

market information from which to 

construct these quantities. To the 

Bureau’s knowledge, neither these 

quantities nor the required database 

currently exists. However, industry 

studies provide some insight into the 

magnitude and distribution of these 

determinants of the potential benefits 

from these provisions. 

The Bureau first considers the number 

of consumers with prepaid accounts 

that currently do not offer the limited 

liability and error resolution 

protections, including access to 

provisional credit, which the proposed 

rule would require for registered 

prepaid accounts (and would continue 

to require for all payroll card accounts 

and government benefit accounts). As 

described above, surveys suggest that 

between eight and 16 percent of 

consumers have used a general purpose 

prepaid card in the past 12 months.468

Providers of these products are probably 

not required, at present, to offer any of 

the limited liability and error resolution 

protections required by the proposed 

rule to consumers, except for those 

consumers with prepaid accounts that 

receive Federal payments (and therefore 

are covered by the FMS Rule). 

However, financial institutions 

offering prepaid accounts may (and 

often do) voluntarily offer these 

protections. As discussed above, the 

Bureau’s Study of Prepaid Account 

Agreements found that the vast majority 

of programs reviewed follow Regulation 

E’s limited liability protections. In 

addition, most prepaid programs appear 

to follow Regulation E’s error resolution 

regime, including provisional credit 

requirements. Excluding payroll card 

account programs and government 

benefit account programs (which are 

currently required to comply), over twothirds of included programs provide 

error resolution protections, with 

provisional credit, consistently with 

Regulation E. The majority of the 

remainder offered some form of error 

resolution, albeit with limitations on the 

conditions under which provisional 

credit is offered. Among the programs 

reviewed that were offered by the largest 

GPR providers, the Study of Prepaid 

Account Agreements found that roughly 

80 percent currently offer error 

resolution with provisional credit and 

all offer limited liability protections. 

Most remaining programs offer full error 

resolution with provisional credit in 

limited circumstances. 

For the foregoing reasons, the Bureau 

believes that the number of consumers 

with prepaid accounts that do not 

currently offer the limited liability and 

error resolution (including provisional 

credit) protections that would be 

required by the proposed rule is 

small.469 However, the proposed rule 

would provide consumers who lack 

these protections with important 

benefits. Further, since financial 

institutions that voluntarily offer these 

protections could change their terms 

and conditions at any time, the 

proposed rule would remove the risk to 

consumers that these protections would 

be discontinued. 

The Bureau believes that data 

describing the average size of the 

financial losses consumers currently 

experience from unauthorized transfers 

or other errors that would be covered by 

the proposed rule or the frequency with 

which these events occur are not 

available. However, these quantities 

may be associated with certain 


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470The Bureau recognizes that the risk of loss is 

likely different for different types of transactions. 

For example, one study using data from a large 

program manager’s GPR card portfolio shows that 

fraud rates differ by transaction type. See Kansas 

City Fed Study, at 72 tbl.6.1. Thus, the size of a 

typical transaction need not be similar to the size 

of a typical loss on a transaction (conditional on a 

loss occurring) since the types of transactions most 

susceptible to fraud may be relatively high-value or 

low-value. 

471See id. at 43 tbl.2.1. It is worth noting that the 

shares of load types reported in Table 2.1 of this 

study add up to 102 percent. 

472See id. at 43 tbl.2.1, 59 tbl.4.9. 

473See Kansas City Fed Study, at 47 tbl.4.1. 

474See 2012 FRB Philadelphia Study, at 67. 

475Prepaid cards with periodic self-funded 

reloads average 5.7 purchases and 6.5 debits per 

month. Prepaid cards with occasional reloads 

average 2.0 purchases and 2.3 debits per month, 

and prepaid cards with periodic non-government 

direct deposits have 18.1 purchases and 21 debits 

per month, on average. Kansas City Fed Study, at 

50 tbl.4.3, 59 tbl.4.9. 

476 Kansas City Fed Study, at 72 tbl.4.9. 

477Mercator Advisory Grp., Tenth Annual U.S. 

Prepaid Cards Market Forecasts, 2013–2016, at 16 

(Oct. 2013). The graph reports the growth rate in the 

aggregate amount loaded onto cards. This growth 

rate approximates the growth rate in the number of 

accounts as long as the amount loaded per account 

remains fairly stable, but it would overstate the 

growth rate in the number of accounts if the amount 

loaded per account is increasing. 

observable factors. The average size of a 

transaction is likely correlated with the 

loss to the consumer if the consumer is 

fully liable for the loss. For example, if 

a consumer were charged for a given 

purchase twice instead of once or were 

charged for a transaction that should 

have been cancelled, the loss would be 

correlated with the typical size of those 

transactions.470 Similarly, the balance 

typically held in a prepaid account 

should be correlated with the loss to the 

consumer if account access is 

compromised and the consumer is fully 

liable. Finally, the frequency of 

transactions is likely correlated with the 

probability of a loss since transacting 

with a prepaid account creates exposure 

to transaction-related errors. 

Although data that would permit the 

Bureau to quantify the potential benefits 

to consumers from the proposed 

requirements is limited, recent research 

can provide some information. One 

study analyzed prepaid accounts from 

one large program manager’s GPR card 

program and reports whether the 

prepaid accounts receive periodic 

government direct deposits (and 

therefore are subject to the FMS Rule if 

it is a Federal payment), periodic nongovernment direct deposits, periodic 

self-funded loads, occasional reloads, or 

are never reloaded.471 It found that 46 

percent of GPR cards analyzed have 

periodic self-funded reloads and 

cumulative monthly purchases of 

$266.472 The average lifespan of the 

cards that have periodic self-funded 

reloads was 256 days; the median, 

however, was only 60 days.473 An 

additional 13 percent of GPR cards 

analyzed had occasional reloads, 

cumulative monthly purchases of $94, 

an average life of 489 days, and a 

median life of 330 days; and 18 percent 

of GPR cards analyzed have periodic 

non-government direct deposit, 

cumulative monthly purchases of $660, 

an average life of 925 days, and a 

median life of 570 days. To the extent 

that these figures are representative of 

other prepaid programs, they suggest 

that approximately three-quarters of 

GPR cards may be used for significant 

purchases and are likely not within the 

current scope of Regulation E (or the 

FMS Rule). Other researchers have also 

identified programs that offer prepaid 

cards that consumers regularly load 

with funds, but are not payroll cards, 

are active for at least a year and are used 

for many thousands of dollars in 

purchases, loads, and cash 

withdrawals.474

Only limited data describing the 

frequency of transactions is available, 

and while these frequencies should 

correlate with the probability of a loss, 

the Bureau would require additional 

information to convert these frequencies 

into probabilities.475 There is, however, 

some suggestive information about the 

risk of loss in data describing the 

incidence of fraud with GPR cards 

offered by one large program manager. 

According to one study using this data, 

approximately six out of every 10,000 

transactions with GPR cards involve 

fraud, with a loss of $9.60 for every 

$10,000 transacted.476 To the extent 

consumers are the victims of these 

frauds, and to the extent these average 

figures are similar for all types of 

prepaid accounts, these numbers 

provide some information about one 

particular risk that consumers encounter 

in using prepaid cards and one benefit 

of the proposed rule. 

The Bureau believes that some 

consumers with prepaid accounts could 

receive important benefits in certain 

circumstances from the additional 

protections that would be required by 

the proposed rule. Further, the share of 

consumers with prepaid accounts who 

could potentially receive these benefits 

may grow over time. One group of 

industry analysts predicts that the GPR 

segment of prepaid accounts will grow 

on average 11 percent each year from 

2012 to 2016, and there appears to be 

sustained interest among consumers in 

using GPR cards as transaction 

accounts.477 While the voluntary 

provision of limited liability and error 

resolution (including provisional credit) 

protections might keep pace with this 

expansion, it is also possible that 

growth could lead to new forms of 

product differentiation, including 

variation in consumer protections. 

To the extent that providers sustain 

increased losses from the requirement to 

extend Regulation E’s limited liability 

and error resolution regime, including 

provisional credit requirements, to all 

prepaid accounts, the proposed 

provisions may result in decreased 

access to these products if financial 

institutions are more apt to close 

accounts that have repeated or unusual 

error claims or to limit who can open 

accounts in the first place. Additionally, 

the proposed requirements may result in 

decreased access to these accounts for 

some consumers if financial institutions 

implement more rigorous screening 

requirements. That is to say, financial 

institutions would have an increased 

incentive to identify customers who 

would be likely to make fraudulent error 

claims and deny them access to these 

accounts. This screening may, however, 

also cause some consumers who would 

not make such claims to be denied 

access to these accounts. Further, to the 

extent that the screening technology 

correctly identifies those individuals 

who are likely to make fraudulent error 

claims, negative externalities arising 

from these individuals’ fraudulent 

claims activities (which benefit these 

consumers while imposing costs on 

other consumers and market 

participants) are reduced. 

b. Benefits and Costs to Covered Persons 

In general, the potential costs to 

covered financial institutions arising 

from the proposed requirements would 

depend on their current business 

practices, the number and types of 

errors that their consumers claim, and 

any potential future changes that would 

affect the number and types of errors 

claimed, separate and apart from the 

proposed rule. Implementation of the 

proposed requirements would be 

simplified by the fact that financial 

institutions offering prepaid accounts 

generally keep a central record of 

transactions and track authorized users. 

If adopted, the proposed rule would 

require that those covered financial 

institutions that do not currently offer 

their consumers limited liability and 

error resolution protections in 

accordance with Regulation E establish 

procedures for complying with the 

proposed requirements or modify 

existing procedures (depending on their 

current practices). Specifically, covered 

financial institutions that do not 

currently offer these protections would 


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77274 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

478Covered financial institutions often rely on 

industry partners to perform some or all of these 

functions. 

479 It is possible that those institutions that 

currently offer Regulation E compliant error 

resolution on a voluntary basis would choose to 

rely on higher-skilled staff or perform additional 

reviews to assess compliance if the proposed rule 

were adopted. CFPB, Understanding the Effects of 

Certain Deposit Regulations on Financial 

Institutions’ Operations, Findings on Relative Costs 

for Systems, Personnel, and Processes at Seven 

Institutions, at 96 (Nov. 2013), available at http:// 

files.consumerfinance.gov/f/201311_cfpb_report_

findings-relative-costs.pdf . 

480 In addition, with the proposed requirement to 

extend provisional credit, there could be additional 

monetary costs associated with errors that require 

an extended timeline for investigation aside from 

the cost associated with the investigation itself. 

481Payment card network rules may require the 

merchant acquirer to reply within a specified 

timeline in certain instances and may, in turn, 

require merchants to follow the acquirer’s time 

frame for responding to such requests. See Visa Inc., 

Chargeback Management Guidelines for Visa 

Merchants at 24 (2014), available at http://

usa.visa.com/download/merchants/chargebackmanagement-guidelines-for-visa-merchants.pdf. 

482One program manager reported to the Bureau 

that, in 85 percent of cases, there were 15 or fewer 

days between the transaction date and the initial 

notification date. Another program manager 

reported that in 76 percent of cases, there were 10 

or fewer days between the transaction date and the 

dispute notification date. 

483Note that in some limited situations, payment 

card network rules permit the issuer to perform a 

merchant chargeback and be reimbursed. See Visa 

Inc., Chargeback Management Guidelines for Visa 

Merchants, at 43–88 (2014), available at http://

usa.visa.com/download/merchants/chargebackmanagement-guidelines-for-visa-merchants.pdf. 

484The Bureau spoke with several program 

managers regarding error resolution, and the rate at 

which error claims were paid out varied greatly. 

One program manager paid out roughly half of the 

claims made (including those credited by the 

merchant), with under 30 percent paid by the 

program manager. 

need to develop the capacity to give the 

required disclosures to consumers, 

receive oral or written error claims, 

investigate error claims, provide 

consumers with investigation results in 

writing, respond to any consumer 

request for copies of the documents that 

the institution relied on in making its 

determination, and correct any errors 

discovered under the required 

timeframes.478 If unable to complete 

their investigation within the required 

timeframe (generally 10 business days), 

covered financial institutions would be 

compelled to extend provisional credit 

and, in the case that a provisionally 

credited amount is subsequently 

reversed, notify the consumer. 

For those covered financial 

institutions that do not currently offer 

limited liability and error resolution 

protections in the manner required by 

the proposed rule, the extension of these 

protections would require the 

establishment or modification of 

practices and procedures, as well as 

employee training. The establishment or 

modification of these practices and 

procedures would constitute a one-time 

implementation cost for those financial 

institutions that do not currently offer 

limited liability and error resolution in 

the manner required by Regulation E, 

and implementing these procedures 

would constitute an ongoing cost for 

covered financial institutions.479 The 

costs associated with implementing 

these procedures would be a function of 

the number and types of errors that 

consumers claim which, in turn, may be 

affected by the composition of the 

customer base and how those customers 

use their prepaid accounts. 

Errors may vary on many dimensions 

that affect the cost associated with their 

investigation.480 The Bureau spoke with 

several program managers who 

immediately resolve disputes involving 

amounts below a certain de minimis 

threshold since the amount of funds at 

issue does not justify the likely cost 

associated with conducting the 

investigation. Separately, when an 

investigation is conducted, resolution 

times may be affected by the 

responsiveness of third parties, 

including merchants and ATM owners, 

and may be subject to timeframes 

established by networks or other 

standard setting bodies.481 Additionally, 

the amount of information provided by 

the consumer and the timeliness of the 

report can affect the duration of the 

investigation.482 For instance, ATM 

error claims may result from an ATM 

malfunction that causes the consumer to 

receive the wrong amount of funds or 

from unauthorized use. Error claims that 

occur when an ATM dispenses the 

incorrect amount of funds are generally 

resolved when the ATM is balanced; 

however, in cases involving 

unauthorized ATM use, it is possible 

that the investigation may include 

obtaining and consulting video 

evidence. 

Errors may also vary in terms of their 

legitimacy. Consumers may assert that 

an error occurred when one did not 

occur either to attempt to defraud the 

financial institution or due to a 

misunderstanding. Since, under EFTA, 

the burden is on the financial institution 

to establish that the transaction in 

question was not an error, it is possible 

that the financial institution would be 

liable for errors that may not be 

legitimate. Because the financial 

institution may be held liable for the 

error unless it can determine the error 

is not legitimate, it is helpful to classify 

alleged errors based on whether the 

financial institution would be 

ultimately liable for the error as 

opposed to whether the error actually 

occurred. Therefore, for the sake of 

discussion, the Bureau classifies 

disputes as either substantiated or 

unsubstantiated. 

Substantiated disputes include 

situations in which the financial 

institution credits the consumer’s 

account, either because an error 

legitimately occurred or because an 

error was illegitimately asserted and the 

financial institution could not establish 

that the transaction was authorized.483

In the case of substantiated disputes, 

covered financial institutions that do 

not currently offer limited liability and 

error resolution rights consistent with 

Regulation E would incur one-time and 

ongoing costs associated with training 

personnel, as well as one-time and 

ongoing costs associated with 

information technology support to track 

reported disputes, investigations, 

resolutions, and to produce reports for 

internal audit and potential supervisory 

review. Ongoing costs associated with 

conducting investigations would 

include compensating personnel tasked 

with dispute intake, obtaining receipts 

and other documentation from 

merchants or ATM owners, and 

communicating investigation findings to 

the consumer. When the financial 

institution can neither establish that the 

electronic fund transfer was authorized 

nor receive a credit from the merchant 

or ATM owner, covered financial 

institutions also would incur costs 

associated with paying funds to 

consumers.484

Additionally, the proposed rule 

would require covered financial 

institutions to extend provisional credit 

to consumers asserting an error claim 

when the length of the investigation 

exceeds 10 business days. In cases 

where the claim is ultimately 

substantiated, offering provisional credit 

represents little additional cost to the 

financial institution over and above any 

costs associated with error resolution 

because the amount credited is 

ultimately due to the consumer 

following the investigation. Since the 

financial institution would be required 

to pay the claim under the error 

resolution provision, the only cost to the 

financial institution associated with 

expediting the availability of funds is 

the opportunity cost of those funds as 

applied to another investment for the 

applicable period. The Bureau expects 

that this cost is generally negligible. 

In contrast, unsubstantiated disputes 

occur when the financial institution is 

able to establish that a transfer was 

authorized and, therefore, that 

institution is not ultimately required to 


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485One program manager told the Bureau that it 

was unable to reclaim provisional credit extended 

in roughly 65 percent of the cases in which a 

merchant could provide proof that the electronic 

fund transfer was authorized. 486All U.S. Visa prepaid issuing financial 

institutions and their program managers will be 

required to report into Visa’s Prepaid Clearinghouse 

Service by June 2015. See Press Release, Visa Inc., 

Visa Prepaid Clearinghouse Service Creates 

Centralized Database to Better Detect and Prevent 

Fraud Schemes on Prepaid Cards (Feb. 27, 2014), 

available at http://investor.visa.com/news/newsdetails/2014/Visa-Enhances-Industry-FraudDetection-on-Prepaid-Cards/default.aspx. While the 

Bureau supports industry efforts to reduce fraud, 

the Bureau cautions that any entities that maintain 

or furnish watch lists, screening programs, or other 

similar services should consider whether and how 

the Fair Credit Reporting Act or other statutes may 

apply to its activities. 

487Only those agreements offered to the public as 

of the last business day of the preceding calendar 

quarter that have not been previously submitted as 

well as those agreements that have been amended 

would be required to be submitted. See proposed 

§ 1005.19 (b)(1)(ii) and (iii). In addition, the issuer 

must notify the Bureau of any prepaid account 

agreement previously submitted that the issuer is 

withdrawing. See proposed § 1005.19 (b)(1)(iv). 

488See proposed § 1005.19(b)(4). 

489 If the issuer chooses to comply with this 

requirement by providing a copy of the agreement 

in response to a consumer request, the issuer would 

be required to provide the consumer with the 

ability to request a copy of the agreement by calling 

a readily available telephone line. The issuer would 

be required to send to the consumer or otherwise 

make the copy of the consumer’s agreement 

available no later than five business days after the 

issuer receives the consumer’s request. 

return funds to the consumer. In the 

case of unsubstantiated disputes, 

covered financial institutions that do 

not currently offer error resolution 

rights would incur costs associated with 

conducting investigations, and covered 

financial institutions that do not 

currently offer provisional credit would 

incur costs associated with crediting 

accounts when the length of the 

investigation exceeds 10 business days. 

Although the financial institution 

extending provisional credit could 

subsequently reverse the credit were it 

able to establish that the transfer was 

authorized, the consumer may draw 

down the funds in the interim or 

intentionally close the account and 

abscond with the funds.485 This could 

result in the financial institution losing 

all or some of the provisional credit 

formerly extended. For provisional 

credit that could be reclaimed, the 

financial institution would incur a small 

opportunity cost of those funds as 

applied to another investment for the 

period spanning when the funds were 

granted and when they could be 

reclaimed. The Bureau expects that this 

cost generally would be negligible. 

To a certain extent, financial 

institutions would be able to limit losses 

associated with error claims. In 

discussions with prepaid account 

providers, the Bureau learned that 

financial institutions often close (or 

could close) accounts that have repeated 

error claims, thereby limiting their 

exposure to potential losses, and may 

add individuals to a watch list. 

Additionally, industry partners 

sometimes share information regarding 

individuals who appear to be instigating 

fraudulent activity, and one payment 

card network has plans to create a 

centralized database to better detect 

fraud on prepaid cards.486 The presence 

or absence of direct deposit, customer 

tenure, and card use patterns— 

including the type of merchant and the 

existence of prior activity at the 

merchant or ATM—can all be used to 

predict the likelihood that fraud occurs. 

If adopted, the imposition of the 

proposed liability provisions may 

encourage covered financial institutions 

to invest in more robust systems to 

prevent errors to the extent that they do 

not currently abide by such provisions. 

Although most programs reviewed as 

part of the Bureau’s Study of Prepaid 

Account Agreements provided error 

resolution with provisional credit, there 

was some heterogeneity across programs 

with respect to the error resolution and 

provisional credit policies. To the extent 

that concern regarding the absence of a 

comprehensive Federal regulatory 

regime governing error resolution is 

currently limiting consumer adoption of 

prepaid accounts, providing for 

Regulation E limited liability and error 

resolution coverage, with provisional 

credit, for prepaid accounts—which 

include person-to-person transfer 

products—would help to facilitate 

wider adoption of these accounts and 

could benefit providers. Additionally, 

since the costs associated with 

complying with the proposed rule 

would vary across covered financial 

institutions, providers that are already 

offering these protections may benefit if 

competitors need to raise prices or 

degrade quality to cover the costs 

associated with extending these 

protections to consumers. However, 

those providers that are presently 

offering these protections on a voluntary 

basis would lose the option of ceasing 

to offer such protections to consumers 

in the future were the proposed rule 

adopted. 

4. Requiring the Posting and Provision 

of Prepaid Account Agreements 

The proposed rule would require 

issuers to submit agreements governing 

prepaid accounts that they offer to the 

Bureau on a quarterly basis for posting 

on a publicly-available Web site 

established and maintained by the 

Bureau. See generally proposed 

§ 1005.19.487 Issuers would not be 

required to submit agreements to the 

Bureau if they qualify for one of two 

exceptions; these include (1) a de 

minimis exception for those issuers that 

had fewer than 3,000 open prepaid 

accounts as of the last day of the 

calendar quarter 488 and (2) a product 

testing exception for those prepaid 

products offered to a limited group of 

consumers and otherwise meeting the 

requirements specified in proposed 

§ 1005.19(b)(5). Issuers would also be 

required to post and maintain on their 

publicly available Web site any prepaid 

account agreements that the issuer must 

submit to the Bureau. See proposed 

§ 1005.19(c). 

In addition to these requirements, 

proposed § 1009.19(d) would require 

that issuers provide access to individual 

account agreements to any consumer 

holding an open prepaid account, 

unless such agreements would be 

required to be submitted to the Bureau 

pursuant to proposed § 1005.19(b) or 

posted on the issuer’s Web site pursuant 

to proposed § 1005.19(c). An issuer 

could fulfill this requirement by posting 

and maintaining the consumer’s 

agreement on its Web site or by 

promptly providing a copy of the 

agreement in response to a consumer’s 

request.489

a. Benefits and Costs to Consumers 

The proposed provisions would 

generally increase the amount of 

information available to consumers 

regarding prepaid accounts both when 

shopping for a prepaid account and after 

acquisition of the prepaid account. 

Having internet access to account 

agreements (both on the Bureau’s Web 

site and on the issuer’s Web site) would 

enable suitably motivated consumers to 

more easily compare the fees, as well as 

other terms and conditions, of various 

prepaid account products. By placing 

this information on the Bureau’s Web 

site, side-by-side comparisons may be 

facilitated, and third parties would have 

more readily available access to this 

information should they want to 

develop shopping tools for consumer 

use. By decreasing consumer search 

costs and generally making available 

products and their terms more 

transparent, consumers seeking a 

prepaid account should benefit from 

additional competition in the market for 

such accounts. Increased competition 

could result in lower prices, higher 

quality products, or both. 

For those consumers who have 

already acquired their prepaid account, 

access to the account’s terms and 

conditions, regardless of whether the 


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490This would generally apply if the creditor 

establishes a program where the creditor reasonably 

contemplates repeated extensions of credit for 

which the creditor assesses fees. See section-bysection analysis of § 1026.2(a)(20) (the Regulation Z 

definition of open-end credit) above for more detail. 

491Transactions that are authorized on a prepaid 

account when the consumer has insufficient or 

unavailable funds at the time of authorization as 

well as transactions that are paid from a prepaid 

account when the consumer has insufficient or 

unavailable funds at the time of payment would 

generally be considered to be credit under 

Regulation Z. However, under the proposal, 

Regulation Z would not apply to overdraft services 

or other credit features accessed by a prepaid card 

that are not subject to any finance charge or fee and 

not payable by written agreement in more than four 

installments. 

492Section 1026.52(a) specifies that, other than 

periodic interest rates, most fees that are charged 

during the first year after the credit account is 

opened would be subject to a cap of 25 percent of 

the initial credit line; § 1026.52(b) would place 

limits on penalty fees, including a prohibition on 

fees for transactions that the card issuer declines to 

authorize; and § 1026.56 would prohibit over-thelimit fees unless the consumer opts-in (and the 

consumer cannot be charged more than one fee per 

month if opted-in). 

account is currently offered to the 

public, could be helpful should a 

question arise regarding the terms of the 

account. Given that some accounts are 

held for a period of years, it is possible 

that consumers might misplace the 

initial disclosures provided with their 

prepaid accounts. Having the terms and 

conditions available post-acquisition 

could be helpful if a consumer wishes 

to assert an error or if other questions 

arise regarding the account. 

Actual and potential consumer 

holders of prepaid accounts could also 

benefit from the requirement that 

issuers provide prepaid account 

agreements to the Bureau on a quarterly 

basis. In addition, knowing that 

agreements must be provided to the 

Bureau and posted on a Web site could 

serve as an impetus for prepaid account 

issuers to ensure that they are 

complying with all applicable 

regulatory requirements. 

b. Benefits and Costs to Covered Persons 

As a result of the proposed 

provisions, issuers of prepaid accounts 

that do not qualify for the de minimis 

exception would be required to review 

information for all products, except 

those qualifying for the product testing 

exception, on a quarterly basis to 

determine whether they need to provide 

any agreements to the Bureau or to 

notify the Bureau that they are 

withdrawing an agreement. In addition, 

issuers would need to ensure that any 

submission includes the elements 

described in proposed § 1005.19(b)(1). 

The Bureau expects that the burden 

imposed by this reporting requirement 

would be minimal, as issuers are 

required to maintain current account 

agreements for other purposes. 

In addition, those issuers of prepaid 

accounts that are required to submit 

prepaid account agreements to the 

Bureau would be required to post 

prepaid account agreements on their 

publicly available Web site. Many 

issuers of prepaid accounts currently 

make account agreements available on 

their Web sites, but the proposed rule 

would require that issuers that do not 

qualify for the de minimis exception 

post and maintain any agreements 

currently offered to the public that do 

not qualify for the product testing 

exception. Therefore, issuers would 

need to ensure that their Web sites 

include current agreements. The Bureau 

anticipates that some issuers would 

need to restructure their Web sites so 

that required agreements are publicly 

available. In addition, issuers of payroll 

card accounts, the terms of which are 

often individually negotiated with 

employers, would need to post the 

agreements for each account that does 

not qualify for the product testing 

exception, if the issuer does not qualify 

for the de minimis exception. 

The proposed rule would also require 

that all issuers provide consumers with 

access to the agreement for their prepaid 

account, unless such agreements would 

be required to be submitted to the 

Bureau pursuant to proposed 

§ 1005.19(b) or posted on the issuer’s 

Web site pursuant to proposed 

§ 1005.19(c). For those issuers choosing 

to comply with this requirement by 

posting the relevant agreements online, 

the issuer would need to ensure that its 

Web site includes all agreements for 

open accounts and to ensure that the 

online agreements posted online were 

complete and up-to-date should product 

offerings evolve. For those issuers 

choosing to comply with the 

requirement by mailing a paper copy of 

the agreement or otherwise making a 

copy of the agreement available in 

response to a consumer request, the cost 

associated with this provision would 

depend on the frequency with which 

consumers make requests for such 

information. Costs associated with 

fulfilling such requests could consist of 

customer service agent time spent 

receiving and responding to a request 

made via telephone, as well as postage 

or other materials should the issuer 

respond to the inquiry with a paper 

copy of the agreement. Those issuers 

choosing to comply in this manner 

would also potentially incur 

implementation costs associated with 

training customer service agents to 

handle such requests and/or changing 

existing IVR menu options. 

5. Requirements Relating to Overdraft 

Services and Other Credit Features 

Offered in Connection With Prepaid 

Accounts 

The proposed rule would address 

overdraft services and other credit 

features offered in connection with 

prepaid accounts. Under the proposed 

revisions to Regulation Z, the Bureau 

anticipates that, to the extent overdraft 

services or other credit features are 

offered in connection with prepaid 

accounts, those features would meet the 

definition of ‘‘open-end credit.’’ 490 In 

addition, under the proposal, a prepaid 

card or account number that accesses 

such an overdraft service or other credit 

feature generally would be a ‘‘credit 

card’’ under Regulation Z, and the 

overdraft services and other credit 

features (‘‘credit card plans’’) described 

above would therefore be governed by 

subparts A, B, D, and G of the 

regulation.491 In addition, the proposal 

includes modifications to Regulation E 

that would be applicable to prepaid 

accounts that may offer such credit 

features in connection with the account. 

As a result of these changes, financial 

institutions and card issuers would be 

newly subject to a number of 

requirements, as summarized below. 

Of particular importance to assessing 

potential impacts, the proposed rule 

includes provisions that would restrict 

the type and structure of fees that may 

be imposed by issuers in connection 

with credit card plans or by financial 

institutions in connection with prepaid 

accounts which are associated with 

such plans.492 For example, Regulation 

Z generally requires card issuers to limit 

fees (as opposed to periodic interest 

rates) to 25 percent of the credit limit 

during the first year after the consumer 

opens the credit card account. See 

§ 1026.52(a). This limit would apply to 

any per-transaction fees. In addition, the 

proposed rule would modify Regulation 

E to specify that on a prepaid account 

product where a credit card plan may be 

offered at any point to the consumer in 

connection with the prepaid account, a 

financial institution that establishes or 

holds such a prepaid account may not 

apply terms and conditions (to 

transactions solely accessing the 

prepaid account)—including fee 

schedules—that differ depending on 

whether the consumer elects to link 

such a credit card plan to the prepaid 

account. See proposed § 1005.18(g)(2). 

In addition to these restrictions on fee 

structure, certain provisions of 

Regulation E and Regulation Z, which 

would be newly applicable to such 

accounts and plans, would restrict how 


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493However, a creditor may offer an incentive to 

consumers to agree to repayment by recurring, 

preauthorized EFTs. 

494See section-by-section analysis of 

§§ 1026.5(b)(2)(ii) and 1026.7(b)(11) above. 

495 In addition, as mentioned above, § 1026.5(b)(2) 

specifies that periodic statements would need to be 

mailed or delivered at least 21 days prior to the 

payment due date on the statement. 

496 Irrespective of whether a transaction is subject 

to the liability limitations of Regulation Z or those 

of Regulation E, payment card networks’ ‘‘zero 

liability’’ programs may further limit consumers’ 

liability for unauthorized transactions. 

497For those transactions that occur using a 

prepaid account that does not draw at all on the line 

of credit, Regulation E’s liability limitations and 

error resolution procedures would apply. 498The Bureau has discretion in future 

rulemakings to choose the relevant provisions to 

discuss and the most appropriate baseline for that 

particular rulemaking. 499As noted above, some account agreements 

reserve the right to impose negative balance fees, 

which may fall under the proposed credit 

provisions. However, the Bureau believes that most 

providers would withdraw such requirements, 

which would have minimal impact since these 

charges do not appear to be imposed frequently at 

any rate. 

a balance incurred on a credit card plan 

linked to a prepaid account may be 

repaid. In Regulation E, the proposal 

would apply the EFTA compulsory use 

provision to prepaid accounts with 

credit features. Accordingly, creditors 

would not be able to require the 

repayment of credit extended under a 

credit feature by electronic means on a 

preauthorized, recurring basis.493 In 

particular, creditors would be required 

to offer prepaid account consumers a 

means to repay their outstanding credit 

balances other than by automatic 

repayment from the prepaid account 

(such as by means of a transfer of funds 

from the asset account to the credit 

account that the consumer initiates on 

the prepaid account’s online banking 

Web site). See proposed § 1005.10(e)(1). 

Further, within Regulation Z, the 

proposal would require that under an 

authorized repayment plan where 

issuers may periodically deduct 

payments from the consumer’s deposit 

account, issuers may not deduct a 

payment more frequently than once per 

calendar month and must obtain the 

consumer’s written, signed agreement to 

automatic repayment. See proposed 

§ 1026.12(d). In addition, the proposal 

would require that periodic statements 

for the credit card account be mailed or 

delivered 21 days prior to the payment 

due date.494 This ensures a time gap 

between when a debt is incurred and 

when it is due to be repaid for all credit 

card accounts, including those not 

subject to an authorized repayment 

plan. 

Pursuant to Regulation Z, persons 

offering such credit card plans would 

additionally be required to comply with 

a number of requirements governing 

solicitation, disclosure, liability, and 

error resolution. Further, in providing a 

credit card plan, a card issuer would be 

required by § 1026.51(a) to establish and 

maintain reasonable written policies 

and procedures to consider the 

consumer’s ability to make the required 

minimum periodic payments under the 

terms of the plan, based on the 

consumer’s income or assets and the 

consumer’s current obligations. In 

addition, proposed § 1005.18(g) and 

proposed § 1026.12(h) would prohibit 

an issuer from opening a credit card 

account in connection with a prepaid 

account, or providing a solicitation or 

an application for a credit card plan in 

connection with a prepaid account, any 

time prior to 30 days after the consumer 

has registered the prepaid account. 

Consumers with prepaid accounts who 

wish to add a credit card plan would be 

required to make an explicit request or 

application for the credit line. See 

§ 1026.12(a)(1). Were an issuer or other 

person to offer an overdraft service or 

other credit feature in connection with 

a prepaid account, credit card 

applications and solicitations would 

need to comply with the requirements 

specified in § 1026.60. Credit card 

issuers would also be required to 

provide the account-opening disclosures 

required by § 1026.6(b) before the first 

transaction is made under the credit 

plan. 

Regulation Z also includes a number 

of disclosure requirements that would 

apply to credit card plans offered in 

connection with prepaid accounts in 

addition to the solicitation or 

application disclosures and the accountopening disclosures discussed above. 

Persons offering a credit card plan in 

connection with a prepaid account 

would be required by § 1026.7 to 

provide a periodic statement for each 

billing cycle in which the account has 

a debit or credit balance of more than 

$1 or a finance charge has been 

imposed. The Regulation Z periodic 

statement requirements would be in 

addition to those of Regulation E for the 

prepaid account.495 Issuers generally 

would also be obligated to provide the 

disclosures described in § 1026.9 when 

changing terms on the credit card 

account. 

Transactions performed using a credit 

line established in connection with an 

overdraft service or other credit feature 

may be subject to additional liability 

and error resolution protections that 

extend beyond those protections 

afforded to transactions involving funds 

drawn from a prepaid account. For 

those transactions subject to Regulation 

Z’s liability limitations, existing 

§ 1026.12(b) restricts consumer liability 

to $50. By contrast, Regulation E’s 

liability limitations permit a financial 

institution to hold a consumer liable for 

up to $500 if the consumer does not 

report the loss in a timely manner.496

See existing § 1005.6(b). Regulation Z’s 

definition of error is more expansive 

than Regulation E’s definition of error 

and includes an extension of credit for 

property or services not accepted by the 

consumer or the consumer’s designee or 

not delivered as agreed. See existing 

§ 1026.13(a). Since Regulation Z and 

Regulation E specify different liability 

limitations and error resolution 

procedures, the proposed rule specifies 

which limitations and procedures 

would apply to transactions involving a 

prepaid account that has a credit 

feature. For those transactions that 

exclusively draw on a credit feature, the 

proposed rule specifies that Regulation 

Z’s liability limitations and error 

resolution procedures would apply.497

For those transactions that both debit a 

prepaid account and draw on a credit 

feature, Regulation E’s liability 

limitations and error resolution rules, as 

well as part of Regulation Z’s error 

resolution rules, described in existing 

§ 1026.13(d) and (g), would apply to the 

transaction. For those transactions that 

solely debit a prepaid account, the 

Regulation E liability limits and error 

resolution rules apply. 

In the Bureau’s consideration of 

benefits, costs, and impacts arising from 

these proposed provisions, the baseline 

for discussion of these provisions is the 

current market for prepaid accounts.498

In addition, in order to more fully 

inform the proposed rulemaking, the 

Bureau also discusses, further below, 

the potential future impacts relative to 

how the market might evolve absent the 

proposed rule. Consistent with the 

discussion of other provisions in this 

proposal, this baseline incorporates both 

the existing regulatory structure as well 

as other economic attributes of the 

relevant market, most notably the 

current set of incumbent firms and 

potential entrants and the underlying 

preferences of consumers. 

The Bureau’s understanding is that, at 

present, a number of providers offer 

prepaid accounts to consumers. The 

vast majority of these providers do not 

offer any credit features in connection 

with prepaid accounts, and thus would 

be largely unaffected by the various 

credit provisions described above.499

However, one of the largest providers of 

prepaid accounts offers an overdraft 

service in connection with its prepaid 


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500Although NetSpend is a significant provider of 

prepaid accounts, a recent news article reported 

that only six percent of NetSpend’s customers 

regularly use overdraft. See Suzanne Kapner, 

Prepaid Plastic is Creeping Into Credit, Wall Street 

J. (Sept. 5, 2012), http://online.wsj.com/news/

articles/SB100008723963904436860045776334723

58255602. In addition, a larger percentage of 

accounts would potentially be eligible for their 

overdraft program. A recent financial filing 

suggested that NetSpend had 3.4 million active 

cards as of June 30, 2014 and 47 percent of those 

active cards had direct deposit. See Total Sys. Serv. 

Inc., Form 10–Q, at 28, available at http://www.sec.

gov/Archives/edgar/data/721683/000119312

514300851/d737574d10q.htm (for the quarterly 

period ended June 30, 2014). One projection 

estimates that there are 22.4 million active prepaid 

debit and payroll cards in the United States as of 

2014. See Aite Grp. LLC, The Contenders: Prepaid 

Debit and Payroll Cards Reach Ubiquity, at 13 (Nov. 

2012). 

501That is, consumers may either (1) meet the 

eligibility requirements and use the service; (2) not 

meet the eligibility requirements and desire to use 

the service; (3) meet the eligibility requirements and 

not desire to use the service; or (4) not meet the 

eligibility requirements and not desire to use the 

service. 

502Several studies as well as the Bureau’s focus 

group research indicate that some consumers view 

spending control or budgeting as a benefit offered 

by prepaid accounts. See, e.g., 2014 Pew Survey; 

The Pew Charitable Trusts, Key Focus Group 

Findings on Prepaid Debit Cards (Apr. 2012), 

available at http://www.pewtrusts.org/∼/media/

legacy/uploadedfiles/pcs_assets/2012/

FSP1201420Pew20DebitCardsR10A4512pdf.pdf; see 

also ICF Report, at 5. 

503Prepaid accounts generally do not require a 

minimum balance, so balances held in these 

accounts can be quite low. According to one large 

program manager, the average account balance is 

less than $100 for prepaid accounts they offer. See 

Examining Issues in the Prepaid Card Market: 

Hearing before the Subcomm. On Fin. Inst. And 

Consumer Prot., S. Comm. On Banking, Housing 

and Urban Affairs, 112th Cong. 2 (2012) (Remarks 

of Daniel R. Henry, Chief Executive Officer, 

NetSpend Holdings, Inc.), available at http://www.

banking.senate.gov/public/index.cfm?FuseAction=

Hearings.Testimony&Hearing_ID=2bf6b634-fbf6–

40d8-a859–3af59300f9d0&Witness_ID=b5fbcae3- 

a234-4d44-b13a-4f990befafe7 (stating that ‘‘They 

typically put a few hundred dollars into their card 

accounts every couple of weeks, and maintain an 

average balance of less the $100 [SIC].’’). As a 

result, consumers may have insufficient funds for 

even relatively modest purchases. 

504Although providers may limit the number of 

fees incurred within a specified time period or opt 

not to charge for overdrafts that cause an account 

to go negative by a de minimis amount, this choice 

is voluntary. 

accounts (which include GPR cards and 

payroll card accounts). Although the 

number of consumers who are eligible 

for overdraft services in connection with 

such accounts is not negligible, those 

regularly using overdraft services 

represent only a small minority of 

consumers with prepaid accounts, even 

for that one provider. A reasonable 

estimate of the current market indicates 

that less than one percent of prepaid 

account holders regularly use overdraft 

or other credit features.500 For that 

reason, the benefits, costs, and impacts 

arising from these prepaid credit 

provisions would have only a limited 

effect on prepaid account consumers 

generally, as described more fully 

below. 

For the small number of prepaid 

providers that currently offer overdraft 

services, the Bureau understands that 

providers of these accounts condition 

eligibility on receipt of a regularlyoccurring direct deposit over a 

predetermined amount. Additionally, 

consumers must affirmatively choose 

(opt-in to) the service. Therefore, given 

the current market baseline, consumers 

may find themselves in one of four 

categories depending on whether they 

access (or desire to access) the overdraft 

service or not and whether they meet 

the eligibility requirements or not.501

In order to more fully inform the 

proposed rulemaking, the Bureau also 

discusses potential future impacts 

relative to how the market might evolve 

absent the proposed rule. As discussed 

above, the Bureau’s understanding is 

that few providers currently offer 

overdraft services in connection with 

prepaid accounts. The Bureau 

understands that other firms might be 

considering doing so in the future, and 

the proposed provisions could affect the 

projected future profitability of business 

plans. 

a. Benefits and Costs to Consumers 

As detailed further below, the Bureau 

believes that the proposed requirements 

concerning disclosures, account 

opening, liability limitations, and error 

resolution procedures would provide a 

number of consumer benefits, mirroring 

the same benefits that Congress 

conferred on credit card account holders 

under Federal law. In some cases the 

proposals would heighten consumer 

protections relative to current industry 

practices, and in other cases the 

proposal would codify requirements 

that are largely consistent with current 

practices but not required as a matter of 

Federal law. In light of the modest 

credit limits currently offered in the 

market, the Bureau believes that these 

provisions would have minimal impacts 

on which consumers have access to the 

credit features, the amount of credit 

offered, or the payment terms. 

The proposed rule includes certain 

other provisions that, in contrast, would 

likely incentivize those providers 

offering a credit feature to change how 

their prepaid accounts are priced and 

the terms on which these credit features 

are offered. These changes could 

potentially affect which consumers have 

access to these credit features or which 

consumers desire these features. In 

addition, the proposed rule would 

provide consumers who use such credit 

features with the recognized benefits 

associated with the disclosure 

provisions, liability limitations, billing 

error rights, and other protections that 

are provided to consumer holders of 

credit card accounts. 

The benefits, costs, and impacts 

arising from the proposed provisions 

would likely vary with the intensity of 

the consumer’s use of overdraft services. 

Consumers who use prepaid accounts 

may do so to fulfill different needs. 

Some consumers who rely on prepaid 

accounts choose such products to help 

them control spending or as a budgeting 

aid.502 Given this use, some of these 

consumers likely would not choose to 

use overdraft or other credit features in 

connection with their prepaid accounts. 

Other consumers may desire access to 

overdraft or other credit features but do 

not meet current eligibility requirements 

for such services. 

As discussed below, the impacts 

would be most directly felt by those 

consumers who presently use prepaid 

accounts offered by the limited number 

of providers that offer overdraft services. 

Among those consumers who use the 

overdraft services from these providers, 

some may knowingly rely on overdraft 

services only occasionally. Other 

consumers may knowingly overdraft 

frequently, choosing to rely on these 

services as a source of credit with 

regularity. Once an overdraft service is 

activated, consumers may also 

unintentionally overdraw their prepaid 

accounts if they are not closely 

monitoring their account balances.503

Some providers currently mitigate this 

possibility by requiring users to sign up 

for text or email alerts or by other 

mechanisms, although they are not 

required to do so by Federal law. 

The Bureau expects that the proposed 

restrictions on certain fees that may be 

charged to credit card accounts offered 

in connection with prepaid accounts 

would incentivize those providers 

offering credit features to change their 

pricing structures. Most notably, other 

than periodic interest rates, most fees 

charged during the first year after the 

credit card account is opened would be 

subject to the cap of 25 percent of the 

initial credit line, which already applies 

to credit cards pursuant to the CARD 

Act. Similar to the fee structure 

typically used for checking account 

overdraft products, those consumers 

currently utilizing an overdraft service 

in connection with a prepaid account 

are generally charged a per transaction 

fee that does not vary with the size of 

the overdraft.504 These fees can be high 

relative to the amount of credit 


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505For instance, consumers may pay $15 per 

overdrawn transaction to access a credit line of 

$100. See, Comment Letter, Nat’l Consumer Law 

Ctr. et al., NCLC Prepaid Card Comments Final, 

Consumer Financial Protection Bureau docket 

CFPB–2012–009, at 8 (resubmitted July 23, 2012), 

available at http://www.regulations.gov/#!document

Detail;D=CFPB-2012-0019-0218. 

506Under the assumption that prepaid account 

providers are profit-maximizing firms, the fact that 

providers that offer credit features in connection 

with their prepaid accounts are not offering such a 

fee structure at present suggests that these 

providers’ profits would decrease with this 

alternative fee structure. 

507This could result from moving from an addon pricing model to a model where the cost for 

access to the credit feature is borne upfront (and is 

therefore more salient for consumers). At present, 

the Bureau does not believe that consumers are 

presently charged a fee for opting in to overdraft 

services or other credit features offered in 

connection with prepaid accounts. 

508The extent to which this is true would depend 

on the size of the fee charged to establish access to 

the credit feature and the size of the credit line 

available. 

The fees charged presently for overdraft services 

in connection with prepaid accounts, which 

generally range from $15 to $25 per transaction, are 

generally lower than chose charged for overdrafts 

from a checking account. According to data 

obtained from one research firm, the Bureau found 

that the median overdraft fee among the 33 

institutions that the source monitors was $34 in 

2012 and the median overdraft fee across nearly 800 

smaller banks and credit unions was $30 in 2012. 

See CFPB Overdraft White Paper, at 52. 

509According to one study, 41 percent of prepaid 

users who have ever had a checking account have 

either closed a checking account themselves or have 

had an account closed by an institution because of 

overdraft or bounced check fees. See 2014 Pew 

Survey, at 8. 

510As discussed above, once a consumer has 

opted-in to a credit feature offered in association 

with a prepaid account, these consumers generally 

pay a per-transaction fee per overdraft that does not 

vary with the size of the overdraft. At present, there 

is generally no fee associated with opting-in to a 

credit feature offered in association with a prepaid 

account. 

extended. As a consequence, for all but 

infrequent users of the credit card 

account, the proposed restriction on fees 

charged in the first year would be a 

binding constraint that would translate 

directly into lower transaction fees to 

consumers during the first year of their 

credit card account (conditional on 

consumers continuing to be eligible for 

and using a credit feature).505

Since this constraint would restrict 

the level of certain fees, it is possible 

that providers that offer credit features 

would respond by raising fees that are 

not subject to this constraint.506 These 

providers could either charge an 

application fee for access to a credit 

card account (that would be assessed to 

the prepaid account prior to the opening 

of the credit card account), or they 

could raise other fees charged in 

connection with the prepaid account 

that do not relate to the credit feature. 

Since, under the proposal, a provider 

offering credit features would be 

required to offer the same terms and 

conditions for transactions accessing the 

prepaid account to all consumers 

regardless of whether they accept a 

credit feature, raising fees charged in 

connection with the prepaid account 

could result in a decrease in the 

quantity of prepaid accounts demanded 

from these providers, while raising an 

application fee could lead to a decrease 

in the number of consumers demanding 

credit.507 Therefore, fewer consumers 

may choose to access prepaid accounts 

from these providers or credit features 

offered in connection with these 

providers’ accounts if the proposal is 

finalized and affected providers impose 

or increase fees not subject to the 

restriction, as discussed above. It is also 

possible that providers may choose not 

to offer credit features in connection 

with prepaid accounts, or to offer them 

on different terms or to a more select set 

of consumers, relative to the present. 

Those consumers who use overdraft 

services infrequently may pay higher 

prices or use less credit as a 

consequence of these provisions. For 

instance, if providers respond to the 

pricing restrictions by adopting a high 

application fee for the credit feature, 

those consumers who anticipate 

occasional use may not be willing to pay 

a salient and transparent up-front fee 

(unless they highly value the possibility 

of having this credit readily available), 

and therefore would cease to access the 

credit feature. This would be a benefit 

to some consumers, as it may prevent 

these consumers from inadvertently 

accessing a credit feature (after having 

opted-in) and incurring the attendant 

fees or may cause consumers to avoid 

accessing this particular form of credit. 

If an unanticipated need for funds were 

to arise, however, some of these 

consumers may need to rely on other 

potentially higher cost or less 

convenient credit sources since they 

would be unlikely to have the funds to 

pay an application fee at that point.508

A consumer’s need to manage a 

relationship with an additional financial 

services provider could also result in 

some efficiency losses and could render 

understanding the provider’s terms and 

conditions more taxing and tracking 

account balances and due dates more 

costly. 

As noted, some consumers who 

utilize overdraft services with great 

frequency may do so due to poor 

account management skills.509 Other 

consumers who frequently utilize these 

services may accurately anticipate their 

use of these services but still prefer to 

use an overdraft service or other credit 

feature associated with a prepaid 

account because they perceive it to be 

their best available option for receiving 

short-term credit. Regardless of the 

consumer’s motivation for frequent use 

of the credit line, both types of 

consumers would likely pay lower fees 

in connection with these services (to the 

extent that they are able to access such 

services). As described above, the 

current fee structure offered by 

providers would not be permitted for all 

but occasional users of credit features in 

their first year of their account 

(assuming that the size of the credit 

lines offered remain unchanged).510

Although providers may impose an 

application fee or raise other fees 

associated with the account, such 

upfront fees are salient to consumers, 

and a one-time fee of the magnitude of 

the total fees incurred by a consumer 

who overdrafts his account frequently is 

unlikely to be paid by many consumers. 

For current frequent users adopting 

credit card plans under the revised 

pricing structure, the marginal cost 

associated with accessing the credit card 

account would likely be lower, and 

these consumers would have increased 

incentive to utilize the credit card 

account once obtained relative to the 

present. 

These changes to the pricing structure 

could also affect consumers not 

currently using overdraft. Along with 

changes in pricing structure, it is likely 

that the firms offering overdraft services 

or considering doing so would also alter 

their own eligibility criteria and that 

some consumers who are currently 

eligible or would otherwise become 

eligible may lose or not obtain 

eligibility. The change in pricing 

structure could also change the opt-in 

trade-offs among consumers who 

currently have not opted-in. 

Restricting how a balance incurred on 

a credit feature offered in connection 

with a prepaid account may be repaid 

would provide potential benefits to 

consumers. Specifically, the prohibition 

on offsets that would apply to the credit 

card account would permit consumers 

additional discretion over how funds 

deposited into prepaid accounts are 

used to pay off debts incurred on an 

associated credit card account. 

Consumers would have access to the 

funds in their prepaid account before a 

creditor, and they could decide whether 

those funds should be used to pay off 

any outstanding debts or for another 

use. Card issuers only would be 

permitted to sweep funds periodically 

from the prepaid asset account with the 

consumer’s written authorization (and 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77280 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

511The proposed rule would introduce 

restrictions on the magnitude of certain fees 

charged in connection with these credit card 

accounts. 

512A consumer would be prevented from 

completing the application process for a credit card 

account offered in connection with a prepaid 

account until after 30 days had elapsed following 

the completion of the customer verification 

processes for the associated prepaid account. 

513Those transactions that access both the 

prepaid asset account and the credit card account 

generally would be subject to Regulation E’s 

liability limitations and error resolution procedures, 

as well as part of Regulation Z’s error resolution 

rules, described in existing § 1026.13(d) and (g). 

no more often than once per calendar 

month), meaning that consumers could 

benefit from additional control of their 

funds during the intervening period. In 

addition, the proposal would require 

that periodic statements for the credit 

card account be mailed or delivered 21 

days prior to the payment due date. 

Practically speaking, this requirement 

would ensure a gap between when debts 

are incurred and when they are due to 

be repaid and would enable consumers 

to have access to funds that may 

ultimately be used to pay off a balance 

in the credit card account during the 

intervening period. 

Decreasing the likelihood that debt 

payments are automatic would increase 

the onus on the consumer to remember 

to pay a debt and to budget for the 

debt’s payment. This could result in 

some consumers unintentionally not 

paying the credit card debt and 

incurring more or higher fees (if, for 

example, providers offering credit 

features were to begin to assess late 

fees), or experiencing other adverse 

effects such as an inability to access 

additional credit, although consumers 

could conversely choose to spend the 

funds in their prepaid account on 

something they deem to be a higher 

priority than the credit card debt. 

At the same time, the proposed rule’s 

restrictions on the ability of a card 

issuer to apply the funds in the prepaid 

asset account to debts outstanding in the 

credit card account would increase the 

risk borne by providers and (at least in 

the absence of countervailing measures) 

would generally make offering credit 

features in connection with prepaid 

accounts less profitable for providers. 

Consumers could incur some of these 

costs since, in order to compensate for 

that risk, those card issuers offering a 

credit feature could offer less credit to 

consumers, charge higher fees for credit 

extended, or both relative to the 

present.511

The proposed rule would require that 

persons offering credit card plans in 

connection with prepaid accounts 

adhere to certain timing restrictions 

governing when a credit feature may be 

opened or offered to a consumer which 

provides some transparency to the 

consumer and assurance that the 

consumer has the opportunity to 

become informed and consider options 

when applying for credit.512

Additionally, credit card issuers would 

be required to establish and maintain 

reasonable written policies and 

procedures to consider the consumer’s 

ability to make required minimum 

payments when deciding to offer a 

credit card account to a consumer. 

These requirements are not expected to 

impact consumer access to credit 

generally beyond the impacts of other 

provisions already mentioned. Creditors 

can assess consumers’ ability to pay at 

low cost, and as long as credit limits 

remain low it would be relatively easy 

for consumers who have or are eligible 

to have prepaid overdraft to be deemed 

able to make the minimum periodic 

payment on the small amount of credit 

currently extended in connection with 

these services. 

The impact of the requirement to 

consider the consumer’s ability to make 

required minimum payments when 

deciding to offer a credit card account 

to a consumer would also be attenuated 

should the proposed rule’s restrictions 

on the ability of a card issuer to apply 

the funds in the prepaid asset account 

to debts outstanding in the credit card 

account be adopted. As noted, these 

latter provisions would increase the risk 

borne by providers and, as a result, they 

should have an increased incentive to 

verify the consumer’s ability to pay, 

even absent this new provision. 

Under the proposed rule, overdraft 

services and other credit features offered 

in connection with prepaid accounts 

would be characterized as credit, and 

fees assessed for accessing that credit 

would be characterized as finance 

charges. The proposed rule would 

impose distinct requirements for 

disclosure, liability limitations, and 

error resolution procedures for the 

prepaid account and the credit feature. 

These protections would directly benefit 

consumer holders of prepaid accounts 

that have a credit feature. 

Periodic statements and other 

disclosures required by the proposed 

rule would enable consumers to monitor 

their credit card accounts. Consumers 

would potentially receive separate 

periodic statements for their credit card 

account and their prepaid account (or 

for the prepaid account, an electronic 

history of transactions), though 

providers are permitted to combine the 

two periodic statements if the 

requirements of Regulation E and 

Regulation Z are met in the combined 

statement. The periodic statement 

requirement would ensure that 

consumers receive important 

information regarding transactions 

performed and fees incurred using their 

credit card account. Providers may not 

disclose all information that would be 

required regarding the credit card 

account absent this requirement. As 

noted above, transactions solely 

accessing the credit card account would 

be subject to different, stronger limited 

liability and error resolution protections 

than those transactions that do not 

access the credit card account.513

As an alternative, the Bureau also 

considered, among other options, 

extending the Regulation E overdraft 

opt-in regime (§ 1005.17) to prepaid 

accounts. To the extent that current 

providers of overdraft services offered in 

connection with prepaid accounts 

appear to be providing overdraft 

services consistently with these 

requirements, any impacts on 

consumers would be limited using the 

current market as the baseline for 

analysis, though this approach would 

forgo all of the benefits to consumers of 

applying the requirements of Regulation 

Z to prepaid accounts, as discussed 

above. 

b. Benefits and Costs to Covered Persons 

This discussion covers many of the 

same issues already addressed in the 

preceding section. As noted above, the 

proposed rule would introduce 

additional requirements for the 

relatively few providers that currently 

offer overdraft services or other credit 

features to consumers in connection 

with prepaid accounts. By restricting 

the terms on which credit features 

offered in connection with prepaid 

accounts may be offered to consumers, 

this may threaten the economic viability 

of certain business practices or business 

plans among the small number of 

providers currently offering credit 

features in connection with a prepaid 

account. In addition, the proposed rule 

would require that covered persons 

provide certain disclosures and adhere 

to certain processes in connection with 

the solicitation of consumers and the 

subsequent extension of credit, which 

would likely require restructuring 

existing programs to meet the 

requirements of the proposed rule. In 

addition, these provisions would affect 

any plans by other providers to offer 

credit card accounts in connection with 

prepaid accounts in the future, by 

precluding such providers from offering 

credit features in a manner that is 

inconsistent with the proposal’s 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77281 

514At present, providers have the option of 

offering consumers a fee schedule that would be 

compliant with the proposed rule’s provisions. 

These additional restrictions could only constrain 

providers relative to the present. 

515As described above, current transaction-based 

charges for overdrafts (in excess of those for de 

minimis amounts) range from $15 to $25. Assuming 

a credit line of $100, this means that at most one 

overdraft fee (or $25) could be collected in the first 

year with the new restriction. It is possible that 

providers would be willing to extend larger credit 

lines, but they would incur more risk in doing so 

and would likely need to develop more robust 

underwriting procedures to ensure a sufficient 

return and compliance with Regulation Z’s ability 

to pay requirement. 

516Sweeps additionally require the consumer’s 

consent. Firms would lose access to funds for a 

longer period of time due to delays in repayment 

time and would incur a small opportunity cost 

associated with losing access to these funds. Some 

of these costs may be passed on to consumers in 

the form of higher prices. 

requirements but potentially more 

profitable for the providers. For 

example, the proposed rule’s provision 

preventing providers from offering 

terms and conditions that vary 

according to whether the consumer 

accepts a credit card account would 

preclude providers from offering certain 

pricing structures. These additional 

restraints are neutral at best and would 

most likely reduce potential profits 

relative to options that providers could 

choose to implement in the absence of 

such a requirement. 

The proposed rule would limit the 

types of fees that may be charged during 

the first year after the credit card 

account is opened. Among other things, 

most fees (other than periodic interest 

rates) charged during the first year after 

the credit card account is opened would 

be subject to a cap of 25 percent of the 

initial credit line. As discussed above, 

this could result in some consumers 

paying less in fees covered by the cap, 

but any resulting reduction in revenue 

could be offset to some extent if 

providers of overdraft services and other 

credit features offered in connection 

with prepaid accounts were to decide to 

restructure their fee schedules away 

from the current pricing structure that 

relies on transaction-based fees. 

Providers may adopt a pricing structure 

in which a fee is collected during the 

application process and prior to the 

establishment of the credit card account 

(and thus is not subject to the cap) or 

one which raises other fees that are 

unrelated to the credit feature, though 

the latter approach would potentially 

put these providers at a competitive 

disadvantage with respect to those 

consumers who do not desire overdraft 

services or other credit features in 

connection with their prepaid accounts. 

With the restructured fee schedules, 

the small group of providers that 

currently offer overdraft would likely 

earn less revenue from offering overdraft 

services or other credit features in 

connection with prepaid accounts than 

they do at present.514 For current 

product offerings, a fee cap at 25 percent 

of credit line would be binding for any 

consumer who incurs more than one 

overdraft fee per year.515 When faced 

with the option of paying for overdraft 

services prior to an overdraft being 

incurred, consumers may be less willing 

to incur upfront charges for the service. 

Since these providers would be required 

to offer the same terms and conditions 

to all consumers regardless of whether 

they accept a credit feature in 

connection with their account, raising 

fees aside from an application fee could 

decrease the overall quantity of prepaid 

accounts demanded by consumers from 

these providers. 

In addition to these costs, the 

proposed rule would restrict a creditor’s 

ability to access a consumer’s prepaid 

account to pay debts incurred on the 

associated credit card as well as the 

requirement that funds may be swept 

from the prepaid account only 

periodically to repay a debt, which 

would increase the risk of default.516 In 

addition, the proposed rule’s 

requirement that periodic statements for 

the credit card account be mailed 21 

days before the due date for any 

payment ensures a delay between when 

a debt is incurred and when it must be 

repaid. To manage this additional risk, 

those card issuers with a credit offering, 

or those considering doing so, may 

choose to offer less credit to consumers, 

to charge higher fees for credit 

extended, or both. 

To comply with the proposed rule, 

the relatively few providers that 

currently offer overdraft services and 

other credit features in connection with 

prepaid accounts would incur 

implementation costs in transitioning 

and educating consumers about any 

product changes, in developing new 

disclosures, and in designing and 

implementing new procedures. Card 

issuers wishing to offer credit card 

accounts in connection with prepaid 

accounts would need to ensure that 

solicitations and application materials 

conform to the requirements specified 

in Regulation Z. This may require the 

production of a new disclosure or the 

modification of an existing disclosure. 

Card issuers additionally would be 

required to ensure that any opening of 

a credit card account in connection with 

a prepaid account, or any solicitation or 

application to open such a credit card 

account provided to a consumer holder 

of a prepaid account, does not violate 

the timing requirements specified in the 

proposed rule. 

Card issuers would be required to 

establish and maintain reasonable 

written policies and procedures to 

consider the consumer’s ability to make 

required minimum payments when 

deciding to offer a credit card account 

to a consumer in connection with a 

prepaid account. As noted above, these 

provisions should involve minimal 

additional burden beyond the impacts 

of other provisions already mentioned 

as creditors can assess consumers’ 

ability to pay at low cost and virtually 

all consumers who have or are eligible 

to have prepaid overdraft today likely 

could be deemed to have the ability to 

make the minimum periodic payment 

on the small amount of credit currently 

extended on prepaid overdraft. 

Once a credit card account is 

established in connection with a 

prepaid account, card issuers would 

incur some ongoing costs as a result of 

the proposed provisions. These include 

costs associated with the proposed 

rule’s periodic statement requirement as 

well as the requirement that additional 

disclosures be provided in certain 

circumstances, such as when certain 

account terms are changed. Specifically, 

card issuers would incur costs 

associated with designing these 

disclosures and ensuring that such 

disclosures comply with Regulation Z. 

In certain instances, card issuers would 

incur costs associated with printing and 

distributing these disclosures, though 

they could mitigate some of these costs 

by obtaining E-Sign consent from the 

consumer. Finally, to the extent that 

Regulation Z’s liability limitations and 

error resolution provisions apply, card 

issuers may incur additional costs due 

to more restrictive limitations on 

consumer liability and an expanded 

definition of error as compared to 

Regulation E. 

The new requirements, described 

above, could impact consumer choice. 

As a consequence, the small number of 

providers that currently offer credit in 

connection with prepaid accounts may 

experience changes in the size or 

composition of the customer base 

seeking to associate a credit feature with 

a prepaid account and could experience 

revenue impacts arising from these 

changes. An individual provider may 

experience such revenue impacts due to 

adjustments in aggregate market 

demand or due to substitution by 

consumers to or from other providers 

within the market. For instance, if the 

proposed provisions result in providers 

that offer overdraft charging higher fees 

for their prepaid accounts more 

generally or ceasing to offer overdraft 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77282 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

517See 76 FR 43394 (July 20, 2011). 

518The de minimis exception for providing 

prepaid account agreements to the Bureau and 

posting them to a Web site is a function of the 

number of open accounts, not the asset size of the 

issuer. 

519Figures were obtained using asset sizes 

reported as of December 2013. Depository 

institutions and credit unions offering white label 

programs and programs through certain agent 

relationships were not included in arriving at this 

statistic. 

520Broadband availability may be more limited in 

rural areas. See Nat’l Telecomm. and Info. Admin., 

U.S. Broadband Availability: June 2010—June 2012 

at 10, (May 2013), available at http://

www.ntia.doc.gov/files/ntia/publications/usbb_

avail_report_05102013.pdf. 

521One study finds that consumers living in rural 

areas were more likely to deposit tax refunds onto 

a prepaid card than consumers in urban areas. See 

Caroline Ratcliff, et al., Urban Inst., Prepaid Cards 

at Tax Time and Beyond, at 26, (Mar. 2014), 

available at http://www.urban.org/UploadedPDF/

413082-prepaid-cards-at-tax-time-report.pdf. 

Another study reports prepaid debit card use by 

metropolitan status. There was not a robust 

relationship between whether a household was in 

a metropolitan area and prepaid debit card use. See 

Fed. Deposit Ins. Corp., 2013 FDIC National Survey 

of Unbanked and Underbanked Households: 

Appendices, at 41 (Oct. 2014) available at https:// 

fdic.gov/householdsurvey/2013appendix.pdf. 

services (and therefore offering a 

product that may be regarded as less 

desirable by consumers who value the 

overdraft feature), prepaid account 

providers that do not offer overdraft 

services presently could benefit as 

consumers substitute away from those 

providers that offer overdraft services. 

In terms of alternatives, the Bureau 

also considered extending the 

Regulation E opt-in regime to prepaid 

accounts. To the extent that current 

providers of overdraft services offered in 

connection with prepaid accounts 

appear to be providing overdraft 

services consistently with these 

requirements, the benefits, costs, and 

impacts arising from such an approach 

would be limited, though again it would 

not bring these products into 

compliance with the requirements of 

Regulation Z, as discussed above. 

F. Potential Specific Impacts of the 

Proposed Rule 

1. Depository Institutions and Credit 

Unions With $10 Billion or Less in Total 

Assets, as Described in Section 1026 

With respect to most provisions, the 

Bureau does not expect that the 

proposed rule would have a unique 

impact on depository institutions and 

credit unions with $10 billion or less in 

total assets as described in Section 1026. 

One exception pertains to the provisions 

addressing overdraft services or other 

credit features offered in connection 

with prepaid accounts. Issuers with 

consolidated assets of less than $10 

billion are exempt from Regulation II’s 

restrictions on debit interchange fees. 

See § 235.5(a). Additionally, interchange 

restrictions do not apply to electronic 

debit transactions made using debit 

cards provided pursuant to certain 

government-administered payment 

programs and certain reloadable, 

general-use prepaid cards not marketed 

or labeled as a gift card or gift 

certificate. See § 235.5(b) and § 235.5(c). 

However, these exemptions do not 

apply if a fee or charge for an overdraft, 

including a shortage of funds or a 

transaction processed for an amount 

exceeding the account balance, may be 

charged to a cardholder (unless the fee 

or charge is imposed for transferring 

funds from another asset account to 

cover a shortfall in the account accessed 

by the card). See § 235.5(d)(1).517 Since 

institutions with greater than $10 billion 

in assets that offer overdraft services in 

connection with a prepaid account 

would be subject to Regulation II’s 

restrictions on debit interchange fees, 

they presently have less incentive to 

offer such credit features than similarlysituated depository institutions with 

less than $10 billion in assets. 

Therefore, the new consumer 

protections applicable to credit card 

accounts articulated in this proposal are 

more likely to impact those institutions 

with less than $10 billion in assets. 

The proposed requirements would be 

applied uniformly across covered 

financial institutions without regard for 

their asset size.518 Among those 

depository institutions and credit 

unions that the Bureau believes would 

be potentially affected by the proposed 

rule, roughly 72 percent have $10 

billion or less in total assets.519 The 

impact of the proposed rule on 

depository institutions and credit 

unions would depend on a number of 

factors, including whether the 

institution offers prepaid accounts, the 

relative contribution of prepaid 

accounts to firm revenues, and the cost 

of complying with the rule—which 

would depend on the present prepaid 

account offerings as well as regulations 

to which those accounts are currently 

subject. 

The Bureau solicits comment 

regarding the proposed rule’s impact on 

those depository institutions and credit 

unions with $10 billion or less in total 

assets and how those impacts may be 

distinct from those experienced by 

institutions of larger size. 

2. Impact of the Proposed Provisions on 

Consumers in Rural Areas 

Consumers in rural areas may 

experience benefits from the proposed 

rule that are different in certain respects 

from the benefits experienced by 

consumers in general. Consumers in 

rural areas may differ from other 

consumers in terms of their reliance on 

prepaid accounts as well as their ability 

to use online disclosures for shopping 

by accessing the internet.520 The Bureau 

is not aware of evidence which states 

whether consumers in rural areas are 

more likely to acquire prepaid accounts, 

to use prepaid accounts that do not 

presently follow Regulation E’s limited 

liability and error resolution regime, or 

to use prepaid accounts that offer 

overdraft services or other credit 

features.521 The Bureau requests 

comment regarding these issues. 

G. Request for Information 

The Bureau will further consider the 

benefits, costs, and impacts of the 

proposed provisions before finalizing 

the proposal. As noted above, there are 

a number of areas where additional 

information would allow the Bureau to 

better estimate the benefits, costs, and 

impacts of this proposal and more fully 

inform the rulemaking. The Bureau asks 

interested parties to provide comment 

on various aspects of the proposed rule, 

as detailed in the section-by-section 

analysis discussion above. The Bureau 

specifically requests precise cost or 

operational data that would permit it to 

better evaluate the potential 

implementation costs and ongoing 

operational costs imposed by the 

proposed provisions as well as any 

alternatives under consideration. The 

most significant of these include 

information or data addressing: 

• The benefits and costs associated 

with the proposed provisions 

addressing overdraft services and other 

credit features offered in connection 

with prepaid accounts; 

• The impact of the proposed 

provisions addressing overdraft services 

and other credit features on consumer 

access to credit; 

• The benefits and costs associated 

with extending provisional credit to all 

covered accounts; 

• The impact of extending 

provisional credit to all covered 

accounts on consumer access to prepaid 

accounts generally; 

• The benefits and costs associated 

with implementing the disclosure 

requirements articulated in the 

proposal; 

• The Study of Prepaid Account 

Agreements and the extent to which its 

findings are or are not representative of 

the market for prepaid accounts as a 

whole; and 

• The impact of the proposed rule on 

consumers in rural areas and 


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522 5 U.S.C. 601 et seq. 

523 5 U.S.C. 609. 

524 5 U.S.C. 605(b). 

525For purposes of assessing the impacts of the 

proposed rule on small entities, ‘‘small entities’’ is 

defined in the RFA to include small businesses, 

small not-for-profit organizations, and small 

government jurisdictions. 5 U.S.C. 601(6). A ‘‘small 

business’’ is determined by application of the Small 

Business Administration regulations and reference 

to the North American Industry Classification 

System (‘‘NAICS’’) classifications and size 

standards. 5 U.S.C. 601(3). A ‘‘small organization’’ 

is any ‘‘not-for-profit enterprise which is 

independently owned and operated and is not 

dominant in its field.’’ 5 U.S.C. 601(4). A ‘‘small 

governmental jurisdiction’’ is the government of a 

city, county, town, township, village, school 

district, or special district with a population of less 

than 50,000. 5 U.S.C. 601(5). Aside from credit 

unions, the Bureau does not believe that any small 

not-for-profit organizations would be regulated by 

the proposed rule for RFA purposes. In its Study 

of Prepaid Account Agreements, the Bureau did not 

locate any small governmental jurisdictions that 

would be regulated by the proposed rule for RFA 

purposes. 

526Excluding those banks and credit unions 

relying on white-label solutions and agent-based 

relationships, the Bureau identified 19 directly 

affected small (or potentially small) banks and six 

directly affected small credit unions. For the 

purpose of this discussion, the Bureau considers an 

entity to be directly affected if it presently offers 

prepaid accounts to consumers. 

527As discussed below, some of these non-bank 

entities provide limited liability protections that are 

less comprehensive than those required by 

Regulation E. In addition, some of these non-bank 

entities that otherwise provide error resolution 

protections consistently with Regulation E offer 

provisional credit with limitations or do not 

mention provisional credit in their account terms 

and conditions. 

528As discussed below, in determining whether 

the economic impact is significant, the Bureau 

compares the total revenues earned by both the 

program manager and the issuer to the total costs 

incurred by these entities. In some cases, the same 

entity performs both the issuing and program 

management functions, and in other cases, different 

entities perform these functions. 529This compilation includes all issuers and 

program managers whose prepaid account 

agreements were included in the Study of Prepaid 

Account Agreements. The Bureau also included 

other issuers and program managers identified even 

though account agreements for their prepaid 

programs were not located by the Bureau in its 

review of publicly available information and 

outreach to industry. 

530The North American Industry Classification 

System (‘‘NAICS’’) is the standard used by the SBA 

to match small business size standards to 

industries. 

531According to the Census Bureau, NAICS code 

522320 corresponds to ‘‘establishments primarily 

engaged in providing one or more of the following: 

(1) Financial transaction processing (except central 

bank); (2) reserve and liquidity services (except 

central bank); and/or (3) check or other financial 

instrument clearinghouse services (except central 

bank).’’ One illustrative example given by the 

Census Bureau is ‘‘electronic funds [sic] transfer 

services.’’ See U.S. Census Bureau, 2007 NAICS 

Definition, available at http://www.census.gov/cgibin/sssd/naics/ 

naicsrch?code=522320&search=2007. 

NAICS code 522320 was relied upon in FinCEN’s 

Prepaid Access Rule. See 76 FR 45403, 45414 (July 

29, 2011). 

532See U.S. Small Bus. Admin., Table of Small 

Business Size Standards Matched to North 

American Industry Classification System Codes 

(July 2014), available at http://www.sba.gov/sites/ 

default/files/files/Size_Standards_Table.pdf. 

specifically how these impacts may 

differ from those experienced by other 

consumers. 

Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

generally requires an agency to conduct 

an initial regulatory flexibility analysis 

(IRFA) and a final regulatory flexibility 

analysis (FRFA) of any rule subject to 

notice-and-comment rulemaking 

requirements, unless the agency certifies 

that the rule would not have a 

significant economic impact on a 

substantial number of small entities.522

The Bureau also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.523

An IRFA is not required for this 

proposed rule because the proposal, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities.524

A. Overview of Analysis 

The analysis below evaluates the 

potential economic impact of the 

proposed rule on small entities as 

defined by the RFA.525 It establishes 

that the only small entities that are 

likely to potentially experience a 

significant economic impact from the 

proposed rule are those that currently 

(1) do not provide limited liability 

protections to consumers, (2) do not 

provide error resolution protections to 

consumers, or (3) offer overdraft 

services or other credit features in 

connection with prepaid accounts. 

Based on the Bureau’s understanding 

of the market, which was arrived at 

through the Study of Prepaid Account 

Agreements, outreach to interested 

stakeholders and other regulatory 

agencies, and review of existing 

industry studies, the Bureau has 

determined that very few small banks or 

credit unions are likely to be directly 

affected by the proposed rule.526 As 

discussed in detail below, these small 

banks and credit unions each represent 

a fraction of one percent of all small 

banks and credit unions. In addition, 

the Bureau identified 96 small or 

potentially small non-bank entities that 

would be likely to be directly affected 

by the proposed rule. The Bureau has 

also determined that almost all such 

entities presently provide limited 

liability and error resolution protections 

to consumers, and very few presently 

offer overdraft services or other credit 

features in connection with prepaid 

accounts.527 As discussed in detail 

below, the number of small or 

potentially small non-bank entities that 

would experience a significant 

economic impact is a very small 

percentage of all relevant small nonbank entities. Therefore, the Bureau 

concludes that the proposed rule, if 

adopted, would not have a significant 

economic impact on a substantial 

number of small entities. 

B. Number and Classes of Directly 

Affected Entities 

The provisions of the proposed rule 

would apply to any account that meets 

the criteria described in proposed 

§ 1005.2(b)(3). Providers of these 

products include issuers and program 

managers. Prepaid account issuers are 

typically banks and credit unions, and 

program managers are typically nonbanks. Some issuers act as program 

manager for some or all of their 

programs as well. While the proposed 

rule does not directly regulate prepaid 

program managers for RFA purposes, 

the Bureau exercises its discretion to 

take a comprehensive approach and to 

consider both prepaid account issuers 

and program managers in determining 

whether the proposed rule would have 

a significant economic impact on a 

substantial number of small entities.528

Since the Bureau is not aware of a 

comprehensive list of entities that 

actively issue or manage prepaid 

accounts or a comprehensive list of 

prepaid account programs, the Bureau 

compiled its own list of known prepaid 

account issuers and program managers 

based on its review of publicly available 

information and outreach to industry.529

The number of banks, credit unions, and 

non-bank entities identified by the 

Bureau as likely to be directly affected 

by the proposed rule are reflected in 

Table 1. Table 1 also gives context to 

those counts by also reporting the total 

number of entities, as well as the total 

number of small entities, within each 

relevant NAICS code.530 For the 

purpose of this analysis, the Bureau 

considers directly affected non-bank 

entities to fall within NAICS code 

522320 (Financial transactions 

processing, reserve, and clearinghouse 

activities).531 The Small Business 

Administration (SBA) considers those 

banks and credit unions with less than 

$550 million in assets and those nonbank entities within NAICS code 

522320 with average annual receipts 

less than $38.5 million to be small.532

Table 1 also reports the number of 

directly affected entities the Bureau 


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533Since many of the directly affected non-bank 

entities are privately-held firms, information 

regarding their size was difficult to obtain, so a 

reliable size classification could not be made in 

many instances. In addition, there were multiple 

banks with the same name in one instance, and a 

size classification could not be obtained. Therefore, 

out of an abundance of caution, the Bureau’s 

analysis considers any entity for which a size 

classification could not be made to be ‘‘potentially 

small.’’ 

534The Bureau uses revenue estimates to proxy 

for receipts. 

535When available, the Bureau used publicly 

available revenue estimates for 2012. If revenue 

estimates from 2012 were not available, available 

information from recent years was used. 

536Although the Bureau includes the common 

issuer of record and program manager for prepaid 

accounts offered through white-label programs, 

agent-mediated relationships, or other similar 

arrangements in the entity counts reported in Table 

1, the Bureau does not include individual agent or 

member banks and credit unions in these counts (to 

the extent that they could be identified as such by 

the Bureau). In the traditional white label model, 

banks and credit unions rely upon another 

institution to issue prepaid accounts, which may be 

branded with the bank or credit union’s name. 

There are a handful of such programs through 

which banks and credit unions, including some that 

are small, offer prepaid accounts (typically as a 

convenience to their customers or members). In 

addition, the Bureau is aware of a program in which 

the participant bank is the prepaid account issuer, 

but the bank relies on an external party for BIN 

sponsorship. While inclusion of these entities 

would result in a larger number of directly affected 

small banks and credit unions than is reported in 

Table 1, the Bureau believes that few of these 

entities, if any, would experience a significant 

economic impact from the proposed rule, as the 

Bureau’s understanding is that prepaid accounts 

offered through these arrangements generally 

provide limited liability and error resolution 

protections, and overdraft services or other credit 

features are not offered in connection with these 

prepaid accounts. 

537 In its Regulatory Flexibility Act analysis, 

FinCEN narrowed its count to those entities that are 

within NAICS code 522320 and perform either 

electronic fund transfers or electronic financial 

payment services, relying on commercial database 

information (Dun and Bradstreet, D&B Duns Market 

Identifiers Plus (US)). FinCEN estimated that there 

were 700 entities that shared this classification. 

Using the SBA threshold of $7 million in average 

annual receipts that was in effect at the time, 

FinCEN estimated that 93 percent, or 651, of these 

entities were small. 

Using the denominator relied upon by FinCEN in 

its rulemaking, referenced above, directly affected 

small or potentially small non-bank entities 

comprise, at most, 15 percent of all small entities 

within that narrower set of entities. At present, the 

SBA considers entities within NAICS code 522320 

with under $38.5 million in average annual receipts 

to be small. Therefore, assuming the total number 

of entities meeting the criterion for this narrower 

classification is unchanged, at least 651 entities 

would be considered to be small since the threshold 

has increased. 

believes to be small or ‘‘potentially 

small.’’ 533 In order to determine which 

directly affected entities are small or 

potentially small, the Bureau compiled 

asset size information for directly 

affected banks and credit unions and 

receipt estimates for directly affected 

non-bank entities.534 For banks and 

credit unions, assets were determined 

by averaging the assets reported in the 

institution’s four quarterly Call Report 

entries for 2012, and institutions 

reporting an average of under $550 

million in assets across the four quarters 

were considered to be small. Receipt 

estimates for non-bank entities were 

obtained by reviewing publicly 

available information regarding firm 

revenues, and those entities estimated to 

have under $38.5 million in average 

annual receipts were considered to be 

small.535

As shown in Table 1, the Bureau 

identified 19 directly affected small or 

potentially small banks and six directly 

affected small credit unions. These 

entities constitute less than one percent 

of small banks and credit unions.536

This fraction does not comprise a 

substantial number of small entities 

under the RFA. 

Directly affected non-bank entities are 

primarily prepaid program managers, 

although there are issuers of P2P 

payment products and other non-Visa or 

MasterCard branded prepaid products 

as well. The Bureau has identified a 

total of 127 non-bank entities likely to 

be directly affected by the proposed 

rule. Among those, a size classification 

could be made for 44 entities, with 

approximately 30 percent of those 

entities for which a classification could 

be made (13 entities) classified as small. 

It is likely, however, that many of the 

83 non-bank entities for which a 

classification could not be made are 

small as well and are thus referred to 

herein as ‘‘potentially small.’’ Applying 

the conservative assumption that all of 

the non-bank entities that could not be 

classified are small, the number of 

directly affected small or potentially 

small non-bank entities is a modest 

percentage of all small entities within 

the relevant NAICS code (four 

percent).537 This does not comprise a 

substantial number of small entities 

under the Regulatory Flexibility Act. 


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538When the functions required to offer prepaid 

accounts are not performed by one, verticallyintegrated firm, the exact division of revenue 

streams between the issuer and the program 

manager for a given prepaid program varies. In this 

analysis, the Bureau does not take a position as to 

whether the prepaid account issuer or the program 

manager assumes the burdens imposed by the 

proposed provisions. However, it is worth noting 

that a program manager that assumes fraud risk 

likely has the ability to control fees charged to 

consumers, to control screening procedures, or to 

take other actions to mitigate fraud losses. 

539These protections are currently required for 

payroll card accounts and government benefit 

accounts. The proposed exception for unverified 

accounts would not extend to any payroll card 

accounts or government benefit accounts. 

540As discussed above, the Study of Prepaid 

Account Agreements suggested that some prepaid 

programs, according to their terms and conditions, 

reserve the right to impose a fee for a negative 

balance on a prepaid account. (These programs’ 

agreements typically state that the cardholder is not 

permitted to spend beyond the balance in the 

prepaid account, but if circumstances were to occur 

that cause the balance to go negative, a fee will or 

may be imposed. Some agreements state that 

repeated attempts to spend beyond the card balance 

will or may result in the prepaid account being 

closed). Roughly 10 percent of reviewed agreements 

noted such a charge. Based on its outreach, the 

Bureau has doubts as to whether, in practice, these 

charges are assessed and requests comment 

regarding current industry practice. 

In addition, one source suggests that overdraft 

fees may be collected by a handful of government 

benefit card programs, but the Bureau is not certain 

whether such fees are currently being assessed as 

it understands several such programs have ceased 

charging overdraft fees, and the aggregate value of 

these fees is relatively modest. See Bd. of Governors 

of the Fed. Reserve Sys., Report to Congress on 

Government-Administered, General Use Prepaid 

Cards, at 9, (July 2014), available at http:// 

Continued 

C. Impacts of Proposed Provisions on 

Directly Affected Entities 

To determine whether the economic 

impact of the proposed rule is likely to 

be significant for directly affected small 

entities, the Bureau compares the costs 

potentially incurred by these entities as 

a result of the proposed provisions to an 

estimate of revenues earned.538 Less 

than one percent of small banks and 

credit unions and roughly four percent 

of small or potentially small non-bank 

entities—a non-substantial number 

under the RFA—could be directly 

affected by the proposed rule. 

Nonetheless, to better inform the 

proposed rulemaking, the Bureau 

analyzes the impact of the proposed rule 

on directly affected small or potentially 

small non-bank entities. The Bureau 

uses the current market as the baseline. 

The major provisions of the proposed 

rule are summarized below. Although 

several proposed provisions potentially 

impose burden, the Bureau believes that 

most burdens imposed by the proposed 

rule are minimal given current business 

practices. One relevant exception 

pertains to potential burdens related to 

the proposed extension of Regulation 

E’s limited liability and error resolution 

regime, including provisional credit 

requirements, to all prepaid accounts 

(except those that have not completed 

the customer identification and 

verification process).539 A second 

exception is the potential burdens 

associated with the proposed provisions 

relating to overdraft services and other 

credit features offered in connection 

with prepaid accounts. 

The proposed rule includes additional 

provisions that are not discussed further 

since their impact on small entities is 

expected to be limited. Although the 

provisions related to overdraft services 

and other credit features potentially 

impose a significant economic impact 

on those entities offer such services in 

connection with prepaid accounts, the 

Bureau’s understanding is that, at most, 

one small or potentially small non-bank 

entity would be directly affected.540 In 


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www.federalreserve.gov/publications/files/ 

2014_Prepaid_Cards_Final.pdf (showing $2 million 

in overdraft fees in 2013). 541EFTA section 909(b). 542The timeline is somewhat different for certain 

types of transactions and for new accounts. 

543Section 1005.6(b)(3) provides, in part, that a 

consumer must report an unauthorized transfer that 

appears on a periodic statement within 60 days of 

the financial institution’s transmittal of the 

statement in order to avoid liability for subsequent 

transfers. 

544Covered government benefit programs 

currently do not need to provide periodic 

statements or online access to account information 

as long as balance information is made available to 

benefits recipients via telephone and electronic 

terminals and a written account history of at least 

60 days is given upon request (the proposed rule 

would change this). Needs-tested EBT programs 

established or administered under State or local law 

are exempt from Regulation E via § 1005.15(a). The 

proposed rule would not impact such programs. 

545See, e.g., Visa Inc., Zero Liability, http:// 

usa.visa.com/personal/security/zeroliability.jsp#anchor_2 (last visited Nov. 3, 2014). 

See, e.g., MasterCard Inc., Zero Liability Protection 

http://www.mastercard.us/zero-liability.html (last 

visited Nov. 3, 2014). 

546The Bureau did not identify any directly 

affected small or potentially small non-bank entities 

that exclusively offer government benefit programs. 

547The Bureau reviewed available prepaid 

account agreements, as described in the Study of 

Prepaid Account Agreements. In some instances, a 

small or potentially small non-bank entity is 

involved with multiple programs that appear to 

provide different levels of limited liability 

protection. When a non-bank entity offered 

multiple programs which fall into different 

categories of coverage, the entity was classified 

according to the program providing the lowest level 

of protection for consumers. This approach was also 

taken with respect to the error resolution policy 

classifications discussed below. 

548One of these six entities also does not provide 

error resolution protections (see below). 

addition, as described below, the 

proposed rule includes several preacquisition disclosure requirements. 

Industry participants have told the 

Bureau that the costs associated with 

the implementation of these 

requirements for accounts distributed 

via the retail channel are meaningful. 

However, the Bureau’s outreach to 

industry has indicated that small nonbank entities are not likely to distribute 

prepaid accounts via retail channels (or 

would distribute a limited part of their 

portfolios via this channel). Therefore, 

the Bureau does not further discuss 

such costs. 

1. Limited Liability and Error 

Resolution Requirements 

The proposed rule would require 

financial institutions offering prepaid 

accounts to comply with Regulation E’s 

limited liability and error resolution 

regime, including the requirement that 

provisional credit be extended to 

consumers in certain circumstances. For 

accounts subject to Regulation E’s 

limited liability and error resolution 

provisions, EFTA places the burden of 

proof on the financial institution to 

show that an alleged unauthorized 

transfer was, in fact, authorized.541

Specifically, after receiving notice that a 

consumer believes that an electronic 

fund transfer was unauthorized, the 

financial institution must promptly 

perform an investigation to determine 

whether an error occurred. Regulation E 

further states that, if the financial 

institution is unable to complete the 

investigation within 10 business days, 

the institution may take up to 45 days 

to complete the investigation if it 

provisionally re-credits the consumer’s 

account for the amount of the alleged 

error.542 When the financial institution 

ultimately can establish that the transfer 

in question was not an error, it can 

reverse the provisional credit. 

Under Regulation E, a consumer may 

be held liable for an unauthorized 

electronic fund transfer resulting from 

the loss or theft of an access device only 

if the financial institution has provided 

certain required disclosures and other 

conditions are met. If the consumer 

provides timely notice to the financial 

institution within two business days of 

learning of the loss or theft of the access 

device, the consumer’s liability is the 

lesser of $50 or the amount of any 

unauthorized transfers made before 

giving notice. If timely notice is not 

given, the consumer’s liability is the 

lesser of $500 or the sum of (1) the 

lesser of $50 or the amount of 

unauthorized transfers occurring within 

two business days of learning of the loss 

or theft and (2) the amount of 

unauthorized transfers that occur after 

two business days but before notice is 

given to the financial institution.543

Regulation E currently applies to 

certain types of prepaid accounts— 

namely payroll card accounts and 

certain accounts used for distribution of 

government benefits.544 Further, some 

prepaid accounts currently provide 

limited liability and error resolution 

protections even if not directly required 

to do so by Regulation E. First, the FMS 

Rule extends Regulation E’s payroll card 

account protections to prepaid accounts 

that receive Federal payments. Second, 

many providers choose to provide these 

protections to consumers by contract as 

part of their customer service offerings. 

Finally, payment card network 

association rules require that issuers 

limit consumers’ liability and remedy 

certain errors related to transactions that 

occur over their networks and may 

require that provisional credit be 

extended within a shorter timeframe for 

losses from unauthorized card use.545

Limited Liability Protections. The 

Bureau’s market research, including the 

Study of Prepaid Account Agreements, 

strongly suggested that the vast majority 

of directly affected small or potentially 

small non-bank entities presently 

extend some form of limited liability 

protections to consumers. Table 2 

summarizes the Bureau’s findings from 

the Study of Prepaid Account 

Agreements regarding current industry 

practice with respect to limited liability 

for the 96 directly affected small or 

potentially small non-bank entities 

identified by the Bureau. Of these 96 

entities, the Bureau believes that 15 

entities only offer payroll card accounts 

and therefore are required to provide 

Regulation E’s limited liability 

protections to consumers at present. Of 

the remaining 81 entities, the Bureau 

was able to locate an agreement for at 

least one prepaid account program for 

all but 14 entities. 

In the Study of Prepaid Account 

Agreements, the Bureau examined 

prepaid account agreements’ language 

addressing limitations on consumers’ 

liability for unauthorized transfers to 

assess whether each program provides 

by contract the limited liability 

protections that Regulation E provides 

with respect to the accounts to which it 

applies. For each entity for which at 

least one prepaid account agreement 

was available and that offers at least one 

program that is not a payroll card 

account program,546 the Bureau 

classified the entity’s limited liability 

protections as belonging to one of three 

categories: (1) Liability limitations 

consistent with Regulation E or better 

for all reviewed agreements; (2) some 

liability limitations but less than what is 

provided for under Regulation E; and (3) 

no limited liability protections.547

The Bureau determined that 

approximately 75 percent (16 percent + 

59 percent) of all small or potentially 

small non-bank entities likely to be 

directly affected by the proposed rule 

currently provide protections consistent 

with Regulation E or better, as reflected 

in Table 2. The Bureau found that four 

percent of small or potentially small 

non-bank entities provide some liability 

limitations but less than what is 

required for accounts under Regulation 

E for at least one of their programs, and 

six percent of small or potentially small 

entities had at least one agreement that 

does not appear to provide any limited 

liability protections.548 The Bureau was 

unable to locate any account agreements 

for the remaining 15 percent of small or 

potentially small non-bank entities. 

The final column of Table 2 reports 

the relative frequency of limited liability 

protections for the set of directly 

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549The Bureau repeated this analysis restricting 

attention to just those 13 non-bank entities that 

could be classified as small. Of these entities, 12 

provide liability limitations consistent with 

Regulation E (or only offer payroll card accounts). 

The one remaining entity did not have an available 

account agreement. 

bank entities for which the Bureau was 

able to locate an agreement for at least 

one program (or which only offer 

payroll card accounts). Within this 

narrower group of entities, 88 percent 

(18 percent + 70 percent) presently 

provide liability limitations consistent 

with Regulation E or better for all 

reviewed programs, and thus, would not 

need to change their practices if the 

proposed rule were adopted. An 

additional five percent provide some 

liability limitations for at least one of 

their programs and thus would incur 

only a portion of the total burden arising 

from the extension of limited liability 

protections.549

Error Resolution Protections. The 

Bureau’s market research, including the 

Study of Prepaid Account Agreements, 

strongly suggested that the majority of 

directly affected small or potentially 

small non-bank entities presently 

extend some form of error resolution 

protections to consumers. Table 3 

summarizes the Study’s findings 

regarding current industry practice with 

respect to error resolution and 

provisional credit for the 96 directly 

affected small or potentially small nonbank entities identified by the Bureau. 

In the Study of Prepaid Account 

Agreements, the Bureau examined 

relevant language in prepaid account 

agreements addressing error resolution 

in order to assess whether each program 

provides by contract the same error 

resolution protections that Regulation E 

provides with respect to accounts to 

which it applies. For each entity for 

which at least one prepaid account 

agreement was available and that offers 

at least one prepaid account program 

that was not a payroll card account 

program, the Bureau classified the 

entity’s error resolution protections as 

belonging to one of four categories: (1) 

Full error resolution with provisional 

credit for all consumers when the error 

is not resolved within a defined period 

of time, for all reviewed agreements; (2) 

error resolution with limitations on 

provisional credit; (3) error resolution 

with no mention of provisional credit; 

and (4) no error resolution. 


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550Note that the percentages cited in this 

paragraph may not add up to 100 percent due to 

rounding. 

551The Bureau repeated this analysis restricting 

attention to just those 13 non-bank entities that 

could be classified as small. The distribution of 

policies was as follows: 31 percent of entities 

presently comply with Regulation E because they 

only offer payroll card accounts, 46 percent provide 

full error resolution with provisional credit for all 

reviewed agreements (excluding payroll only 

providers), eight percent provide error resolution 

with limitations on provisional credit for at least 

some reviewed agreements, eight percent provide 

error resolution with no mention of provisional 

credit for at least some reviewed agreements, zero 

percent do not provide error resolution protections, 

and prepaid account agreements could not be 

located for eight percent of the small non-bank 

entities. 

The Bureau determined that 

approximately 58 percent (16 percent + 

42 percent) of all small or potentially 

small non-bank entities likely to be 

directly affected by the proposed rule 

currently provide full error resolution 

with provisional credit for all of their 

reviewed programs, as reflected in Table 

3.550 Therefore, over half of non-bank 

entities that are small or potentially 

small would not need to change their 

error resolution or provisional credit 

practices if the proposed rule were 

adopted. Further, an additional 18 

percent of entities provide error 

resolution protections but with 

provisional credit available only in 

limited circumstances. These non-bank 

entities would experience only a portion 

of the total increase in burden 

associated with the requirement that 

they extend provisional credit to all 

consumers in instances when an error is 

not resolved within a defined period of 

time. An additional eight percent of 

entities offer error resolution but would 

potentially incur the entire portion of 

the burden associated with extending 

provisional credit. Only two percent of 

small or potentially small non-bank 

entities (two entities) currently provide 

no error resolution protections for at 

least one of their prepaid programs, and 

thus would incur the entire burden 

associated with providing error 

resolution and provisional credit. 

The final column of Table 3 reports 

the relative frequency of the error 

resolution policies for the set of directly 

affected small or potentially small nonbank entities for which the Bureau 

could locate an agreement for at least 

one program (or which only offer 

payroll card accounts). Within this 

group of directly affected entities, 67 

percent (18 percent + 49 percent) 

presently provide full error resolution 

with provisional credit for all reviewed 

programs, and thus, would not need to 

change their policies if the proposed 

rule were adopted. An additional 21 

percent would incur only a portion of 

the total burden arising from the 

extension of provisional credit 

requirements.551


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552 It is worth noting that program managers may 

rely on industry partners, including processors or 

issuing banks, to perform some or all of the 

functions associated with performing error 

resolution. The Bureau’s understanding from 

discussion with industry participants is that 

processor fees can include a fixed fee per dispute 

as well as a variable component. 

553One potentially small program manager told 

the Bureau that it receives information from its 

processor regarding whether a consumer had filed 

unsubstantiated disputes with other prepaid 

programs serviced by the processor. 

554One program manager told the Bureau that 

when they extended provisional credit to all 

accounts, having previously only provided 

provisional credit to those accounts receiving 

Federal payments, their losses arising from 

providing provisional credit increased four to six 

times the previous level, and overall fraud losses 

increased 40 percent (including the increased losses 

arising from extending provisional credit). 

Assuming that there was no change in fraud losses 

not relating to provisional credit, this implies that 

provisional credit accounted for between seven and 

ten percent of the initial level of fraud losses and 

just over a third of the final fraud losses. This can 

be shown as follows. Let E=fraud losses not relating 

to provisional credit, P=fraud losses relating to 

provisional credit, and L=total fraud losses prior to 

the expansion of provisional credit coverage to all 

consumers. Therefore, it follows that L=P+E prior 

to the expansion of provisional credit coverage to 

all consumers. After the expansion of provisional 

credit to all consumers (and assuming no change in 

E), it follows that (i.) 1.4L = 5P+ E or (ii.) 1.4L = 

7P+E. The percentage of initial fraud losses 

accounted for by provisional credit is represented 

by P/L. Rearranging (i.) gives P/L = 0.4/4 = 10 

percent, and rearranging (ii.) gives P/L = 0.4/6 = 6.7 

percent. In scenario described by (i.), a four time 

increase, fraud losses not relating to provisional 

credit (E) account for 90 percent of the total fraud 

losses before the increase; in the scenario described 

by (ii.), a six time increase, (E) accounts for 93.3 

percent of the total fraud losses before the increase. 

Assuming that E does not change, the percentage of 

final fraud losses accounted for by provisional 

credit once extended to all accounts in scenario (i.) 

is 5(.10)/[5(.10)+.90] = 36 percent and 7(.067)/ 

[7(.067)+.933] = 34 percent in scenario (ii.). If 

overall fraud losses, including losses associated 

with providing provisional credit, are assumed to 

be $0.35 per active cardholder per month, it follows 

that the cost to extend provisional credit to all 

consumers is roughly $0.12 per cardholder per 

month. 

Costs Associated with Limited 

Liability and Error Resolution 

Protections. As a result of the proposed 

rule, those few directly affected small or 

potentially small non-bank entities that 

do not currently provide limited 

liability or error resolution protections 

to consumers would incur costs 

associated with offering these 

protections. As described in the Section 

1022(b)(2) discussion above, these 

entities would need to establish 

procedures for complying with the 

proposed requirements, including 

developing the capacity to give the 

required disclosures to consumers, 

receive oral or written error claims, 

investigate error claims, provide 

consumers with investigation results in 

writing, respond to any consumer 

request for copies of the documents that 

the institution relied upon in making its 

determination, and correct any errors 

discovered within the required 

timeframes. The establishment of these 

policies and procedures would 

constitute a one-time cost for those few 

small or potentially small non-bank 

entities that do not currently offer 

limited liability or error resolution, and 

implementing these procedures and 

paying out claims, as well as provisional 

credit, would constitute an ongoing 

cost.552

Those directly affected small or 

potentially small non-bank entities that 

offer limited liability and error 

resolution protections to consumers but 

do not currently provide provisional 

credit, as well as those entities that 

provide liability protections or 

provisional credit in a more limited 

form than what would be required by 

the proposed rule, would also incur 

additional costs. Directly affected 

entities offering liability protections of a 

more limited form than is required by 

Regulation E would incur additional 

costs associated with paying out claims. 

In addition, directly affected entities 

that do not offer provisional credit (or 

offer it in a more limited form) would 

incur a small opportunity cost 

associated with the funds being 

extended as provisional credit. 

Additionally, in instances where the 

entity has extended provisional credit 

and subsequently determines that an 

alleged error was, in fact, an authorized 

transfer, the entity may be unable to 

reclaim all or part of the provisional 

credit previously extended, thus 

incurring additional costs. 

The costs associated with providing 

these protections may vary across 

entities for several reasons. For instance, 

an entity’s customer base may influence 

the type of errors that are likely to be 

reported (and therefore the costs 

associated with investigations) as well 

as the ease with which the entity is able 

to reclaim provisional credit that has 

been previously extended. The initial 

screening procedures employed by a 

prepaid account provider to determine 

eligibility for an account, as well as 

ongoing monitoring of accounts, likely 

affect realized loss levels. Although 

small entities may be at a disadvantage 

with respect to fraud screening relative 

to larger entities that may have access to 

more extensive information or more 

sophisticated screening technology, 

small entities are sometimes able to rely 

on industry partners to screen for and to 

investigate potential fraud.553 Financial 

institutions may choose to limit fraud 

liability by closing accounts that have 

repeated error claims or by not offering 

accounts to individuals previously 

found to engage in potentially 

fraudulent activity. 

The Bureau conducted industry 

outreach to attempt to determine the 

costs to prepaid account providers 

associated with implementing 

Regulation E compliant error resolution, 

including provisional credit. Estimates 

of the ongoing costs associated with 

providing error resolution with 

provisional credit varied. One program 

manager that provides limited liability 

and error resolution protections with 

provisional credit to all consumers 

suggested that it reserved $0.35 per 

active cardholder per month in fraud 

losses (including both losses related to 

Regulation E error claims as well as 

other types of fraud). Another program 

manager that also provides limited 

liability and error resolution with 

provisional credit suggested total fraud 

losses related to Regulation E that 

translate to roughly $0.22 per 

cardholder per month. As described in 

the Section 1022(b)(2) discussion, those 

few entities that do not presently 

provide limited liability or error 

resolution protections to consumers 

would additionally incur one-time 

implementation costs associated with 

the establishment or modification of 

practices and procedures extending 

these protections (in addition to 

increased ongoing operational costs). 

Those small or potentially small nonbank entities that provide limited 

liability and error resolution protections 

to consumers but give provisional credit 

only in limited circumstances, or not at 

all, would sustain increased ongoing 

operational costs. The Bureau does not 

have information that explicitly 

captures the incremental cost associated 

with extending provisional credit for 

those entities that otherwise provide 

error resolution protections. However, 

estimates derived using available 

information suggest that the magnitude 

of the ongoing cost of providing these 

protections is roughly one-third of the 

total ongoing cost associated with fraud 

losses (including those specifically 

related to provisional credit).554 To the 

extent that many financial institutions 

currently provide provisional credit 

(albeit in limited circumstances), the 

cost impact arising from this provision 

would be further mitigated. 

2. Other Major Provisions Potentially 

Affecting Small Entities 

The proposed rule includes new preacquisition disclosure requirements for 

prepaid accounts which are fully 

applicable to small entities. As 

described more extensively in the 


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555Additionally, providers of payroll card 

accounts and government benefit accounts would 

be required to include a notice at the top of the 

short form disclosure stating that consumers are not 

required to accept such a card and that alternative 

methods are available by which they may receive 

their wages or benefits. 

556This is, in part, due to the potentially high 

fixed costs associated with distributing prepaid 

accounts through this channel. 

557Providers of payroll card accounts complying 

with Regulation E by using the alternative to 

providing periodic statements are currently 

required to provide consumers with electronic 

access to at least 60 days of account history, and 

the FMS Rule requires such access to be provided 

for accounts that receive Federal payments. 

Section 1022(b)(2) discussion above, the 

proposed rule would require that 

financial institutions include a specified 

subset of fees as well as a productspecific set of other commonly incurred 

fees in a specifically described 

disclosure box (the ‘‘short form’’).555 In 

addition to the short form disclosure, 

financial institutions would be required 

to provide a disclosure that includes a 

full listing of fees as well as any 

conditions under which the fees may 

change (the ‘‘long form’’). Finally, the 

fee disclosure provided as part of the 

prepaid account agreement would be 

required to follow most of the content 

and format requirements of the long 

form disclosure. 

All financial institutions would incur 

one-time implementation costs 

associated with reviewing and revising 

existing disclosures to ensure that they 

conform to the new requirements. 

Certain requirements regarding how the 

disclosures would be made available to 

consumers depend on the distribution 

channel. For those prepaid accounts 

distributed in a retail environment, the 

short form disclosure would be required 

to be included on the product’s 

packaging material, and the long form 

disclosure would be required to be 

made available both by telephone and 

online. Financial institutions 

distributing prepaid accounts online 

would be required to provide online 

access to both the long form and short 

form disclosures to consumers, and 

those institutions distributing prepaid 

accounts in person would be required to 

provide both forms in print. For 

transactions conducted by telephone, 

financial institutions would be required 

to provide the short form disclosure 

information orally, to inform consumers 

of the existence of the long form 

disclosure and its availability by 

telephone and on a Web site, and to 

provide the information in the long form 

disclosure to the consumer upon 

request. 

Accordingly, the implementation 

costs to entities arising from the 

proposed disclosure requirements 

would vary based on which distribution 

channels are used by an entity and the 

relative intensity of the entity’s reliance 

on each distribution channel. These 

channels include retail distribution, 

online distribution, and in-person 

distribution, among others. The impacts 

on financial institutions distributing via 

each of these channels are described in 

the Section 1022(b)(2) discussion above. 

Based on industry outreach, the 

Bureau believes that small entities 

typically do not rely on the retail 

channel to distribute prepaid accounts 

or, to the extent that they do, rely on 

this channel in a limited way.556 For 

products that are not distributed via the 

retail channel, providers would incur a 

one-time cost, believed to be minimal, 

to review and edit existing disclosures 

to ensure that they include all 

applicable fees and follow the specified 

formatting requirements and, in some 

cases, to print revised disclosures. 

Those entities distributing prepaid 

accounts online would incur costs, 

believed to be minimal, to update Web 

sites to include the revised disclosures. 

As described in the Section 1022(b)(2) 

discussion, the pre-acquisition 

disclosure requirements also impose 

ongoing operational costs on covered 

entities separate and apart from the 

aforementioned implementation costs. 

In order to determine the composition of 

the short form disclosure, covered 

entities would need to review data on 

an annual basis to ascertain which fees 

should be included in the incidencebased part of the short form disclosure. 

Absent a need to revise the short form 

disclosure, review of the information 

necessary to make these determinations, 

which is likely maintained in the 

ordinary course of business, should 

comprise minimal ongoing cost. If 

disclosures need to be revised due to a 

change in the required elements, 

covered entities would incur costs 

associated with these revisions. For 

those entities distributing prepaid 

accounts online, this would require a 

Web site update, or updated link, to a 

revised form. Updates to written and 

electronic disclosures would need to 

occur within 90 days. The Bureau 

believes that the costs associated with 

updates to written and electronic 

disclosures are minimal. 

Other key provisions of the proposed 

rule potentially triggering burden 

include expansions to access to account 

information requirements (largely 

extending the current periodic 

statement alternative for payroll card 

accounts to all prepaid accounts with 

certain modifications) and the 

establishment of certain additional 

disclosures related to access to account 

information. Financial institutions 

offering prepaid accounts would be 

required to comply with Regulation E’s 

periodic statement requirement; the 

proposed rule also includes an 

alternative means of compliance with 

this requirement. Specifically, the 

proposed rule states that financial 

institutions are not required to furnish 

periodic statements to consumers if they 

make available to the consumer his or 

her account balance through a readily 

available telephone line, provide the 

consumer with access to at least 18 

months of transaction history online, 

and if requested by the consumer, 

provide 18 months of written account 

history at no charge. Regardless of 

whether the financial institution 

chooses to provide periodic statements 

or implement the alternative, the 

proposed rule would impose the 

additional requirement that the 

financial institution disclose to the 

consumer a summary total of the 

amount of all fees assessed against the 

consumer’s prepaid account, the total 

amount of deposits to the account, and 

the total amount of all debits made to 

the prepaid account for both the prior 

calendar month as well as the calendar 

year to date. 

Although not all covered financial 

institutions are currently required to 

make transaction history available to 

consumers, current industry practice is 

to provide consumers with electronic 

access to at least 60 days of transaction 

history information.557 The Bureau 

understands from outreach to industry 

that some providers currently make 

available more than 60 days of 

transaction history online, ranging from 

six months or one year to the entire life 

of the prepaid account. The proposed 

rule would extend this requirement to 

18 months of electronic history for those 

financial institutions relying on the 

alternative means of complying with 

Regulation E’s periodic statement 

requirement. Additionally, financial 

institutions may have to modify existing 

transaction history reporting or periodic 

statements if they do not presently 

include the proposed summary totals. 

The nature of the costs associated 

with these proposed provisions would 

depend on the extent to which the 

entity relies on outside vendors to 

perform information technology 

functions. For those covered entities 

maintaining in-house information 

technology platforms, the cost 

associated with updating systems to 

maintain this information and providing 

additional electronic storage should be 


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558One program manager estimated that 

modifying its Web site to provide such functionality 

would cost approximately $15,000. 559One program manager that relies on a 

processor for this function told the Bureau that fees 

for data storage are charged on a per account basis 

one time at activation. The program manager did 

not have an estimate of the cost associated with 

providing 18 months of history, but costs were 

generally increasing from $0.08 per account for 

three months of transaction history to $0.19 per 

account for one year of transaction history. This 

program manager also suggested that processor 

prices decrease with scale and that it was operating 

at low scale and was consequently paying among 

the highest prices charged by the processor. 

560One program manager stated that its processor 

quoted a one-time cost of $65,000 associated with 

providing this functionality on its processor-hosted 

Web site (in response to an ad-hoc request). This 

likely represents an upper bound for the true 

development cost since this number likely includes 

a mark-up over the true cost of providing the 

service. Actual costs would be borne jointly by the 

processor and the prepaid providers relying on the 

processor for hosting services. 

561The Bureau did not separately consider the 

costs borne by small banks and credit unions since 

a substantial number of such entities are not 

directly affected by the proposed rule, as shown 

above. With respect to the determination of whether 

the economic impact experienced by non-bank 

entities is significant, the current policies of such 

entities are considered. Revenues would be earned 

and costs would be borne jointly by both issuers 

(typically banks and credit unions) and program 

managers (often non-banks). In order to determine 

whether the economic impact is significant, 

revenues and costs are considered cumulatively. 

562To the extent that the ongoing fraud loss 

estimates include the costs associated with 

providing liability limitations, the ongoing costs 

associated with these protections may be bounded. 

For instance, if the ongoing cost of providing 

limited liability, error resolution, and provisional 

credit protections is $0.35 per active cardholder per 

month, and provisional credit represents $0.12 of 

that total, then the ongoing cost associated with 

providing limited liability protections could be, at 

most, $0.23 per active cardholder per month. The 

Bureau conservatively assumes that absence of 

either limited liability protections or error 

resolution protections could imply a significant 

economic impact. 

563One entity that does not provide limited 

liability protections also does not provide error 

resolution protections. 

564Payroll only providers are excluded from the 

observed distribution when imputing the likely 

protections for those entities missing account 

agreements. 

565 In addition, such non-compliance related 

economic costs, including potential costs relating to 

disclosure, would be difficult to predict, and the 

Bureau does not have reason to believe that they 

would cause small entities to experience a 

significant economic impact. 

negligible and would consist primarily 

of an expansion of existing electronic 

storage media. Those financial 

institutions that format their own 

periodic statements or transaction 

histories and do not currently display 

the required totals on their periodic 

statements or transaction histories 

would incur a one-time implementation 

cost to modify these disclosures.558

Many small entities rely on a 

processor to provide online hosting of 

consumer account history information, 

among other functions. The Bureau’s 

understanding is that providers 

outsourcing this function pay processors 

a fee per prepaid account that may be 

a function of both the extent of the 

account history provided and the 

number of accounts that are being 

serviced by the processor.559 These 

entities would generally rely on their 

processor to modify periodic statements 

or electronic transaction histories to 

display the required summary totals.560

However, one program manager 

indicated to the Bureau that if such 

summary totals were a regulatory 

requirement, it predicted that the 

processor would offer it as part of its 

standard package of services at no 

additional cost. 

As discussed in the Section 1022(b)(2) 

consideration of benefits and costs, the 

Bureau’s understanding from industry 

outreach is that most covered financial 

institutions provide telephone access to 

balance information to consumers 

presently. Therefore, the Bureau regards 

the potential burdens associated with 

these provisions to be de minimis and 

not likely, considered separately or 

cumulatively, to constitute a significant 

economic impact. 

The proposed rule also includes the 

requirement that prepaid account 

issuers submit copies of their 

agreements to the Bureau on a quarterly 

basis and post such agreements online. 

In addition, the proposed rule would 

require all prepaid account issuers to 

respond to consumer requests for 

written agreements or to post such 

agreements online. The Bureau believes 

that the costs associated with such 

activities should be minimal. 

D. Conclusion 

To determine whether the economic 

impact of the proposed rule could be 

significant, the Bureau compared 

estimates of the cumulative costs 

imposed by the proposed provisions on 

directly affected small or potentially 

small non-bank entities to an estimate of 

revenues earned by these entities.561

As discussed above, roughly two 

percent of the directly affected small or 

potentially small non-bank entities 

identified by the Bureau, which do not 

offer any form of limited liability or 

error resolution protections to 

consumers, would sustain an increase in 

ongoing costs, which the Bureau 

estimates to be $0.22 to $0.35 per active 

cardholder per month, as well as fixed 

costs associated with implementing 

Regulation E compliant limited liability 

or error resolution procedures were the 

proposed rule adopted. For those 

entities that provide limited liability 

and error resolution protections without 

provisional credit, the Bureau estimates 

that they would experience ongoing 

costs of up to one-third of the ongoing 

costs incurred by those entities that do 

not presently provide any form of 

limited liability or error resolution 

protections (or roughly $0.12 per active 

cardholder per month). The Bureau does 

not have information that would enable 

it to separately determine the cost 

associated with extending Regulation 

E’s limited liability protections and the 

cost associated with providing error 

resolution in general.562

Excluding those entities without at 

least one prepaid account agreement, 

two percent of small or potentially small 

non-bank entities did not appear to 

provide any error resolution protections, 

and seven percent of small or 

potentially small non-bank entities did 

not appear to provide any limited 

liability protections in at least one 

reviewed prepaid account agreement.563

The Bureau uses the observed 

distribution of error resolution and 

limited liability protections to impute 

likely levels of protection for those 

entities for which no account agreement 

is available.564

The Bureau assumes that the one 

directly affected small or potentially 

small non-bank entity offers overdraft 

services or other credit features in 

connection with prepaid accounts 

would experience a significant 

economic impact from the proposed 

provisions. 

Since small non-bank entities 

typically do not distribute prepaid 

accounts via the retail channel (or tend 

to rely on that channel for a modest 

portion of their portfolio), the costs 

associated with the other provisions of 

the proposed rule are minimal. Further, 

the Bureau believes that noncompliance related economic costs, 

such as potential future changes in 

market share arising from the new 

disclosure requirements, are minimal 

for all proposed provisions aside from 

those concerning overdraft or other 

credit features offered in connection 

with prepaid accounts.565

Since both revenue information and 

metrics describing the number of active 

prepaid accounts were not generally 

available (at the entity level) for directly 

affected small or potentially small nonbank entities, the Bureau relied on 

findings from industry studies (which 

may cover programs offered by entities 

that are not small or potentially small) 

to derive an estimate of the likely fee 

and interchange revenue earned per 

cardholder per month for certain types 


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566See 2012 FRB Philadelphia Study; see also 

Kansas City Fed Study. 

567Using this approach, the Bureau obtained a 

revenue estimate of $9.14 per active cardholder per 

month for GPR cards distributed in a retail setting, 

but the Bureau notes that its understanding based 

on industry outreach is that small non-bank entities 

typically do not distribute prepaid accounts via this 

distribution channel. Estimates are obtained by 

combining information from Tables 5.7 and 5.8 

from the 2012 FRB Philadelphia Study. For 

example, the revenue estimate is calculated in the 

following manner for those general purpose 

reloadable cards distributed in an online setting. 

First, using information in Table 5.7, the net 

interchange is determined by taking the difference 

between the interchange received and the 

interchange paid ($23.35-$6.41 = $16.94). Next, the 

ratio of total revenues (assuming that these are 

composed of only cardholder fees and net 

interchange earned) to cardholder fees is obtained 

(($76.00+$16.94)/$76.00 = 1.223). This inflator is 

then applied to cardholder fees line in Table 5.8 

(1.223*$8.16 = $9.98). 

568 It is worth noting that this approach does not 

take into account the likely cost and revenue 

structure of person-to-person payment programs 

that may offer prepaid accounts to consumers. 

However, only four non-bank entities offering 

person-to-person payment programs were identified 

by the Bureau as small or potentially small. One of 

these entities is being considered by the Bureau’s 

analysis to sustain a significant economic impact 

because it does not provide error resolution 

protections for consumers. Therefore, this 

information omission, at most, could result in 

failing to attribute a significant economic impact to 

three small or potentially small non-bank entities. 

569The numerator in this calculation assumes 

that one small non-bank entity experiences a 

significant economic impact from the requirements 

relating to overdraft services and eight small nonbank entities experience a significant economic 

impact from the requirements relating to the 

imposition of Regulation E’s limited liability and 

error resolution requirements, including provisional 

credit. These eight entities include one entity that 

does not provide error resolution protections, one 

entity that does not provide error resolution or 

limited liability protections, five entities that do not 

provide limited liability protections, and one 

additional entity that does not provide limited 

liability (imputed among those entities that are 

missing account agreements based on the 

distribution of protections among those entities 

with observed agreements). 

570To derive this estimate, the Bureau assumes 

that 700 entities are within the NAICS code 522320 

and perform either electronic fund transfers or 

electronic payment services. This is consistent with 

the number relied upon in FinCEN’s Prepaid Access 

Rule. See 76 FR 45403 (July 29, 2011). Using a 

threshold of $7 million in annual receipts (the SBA 

threshold at the time), FinCEN estimated that 93 

percent, or 651, of these entities were small. At 

present, the SBA considers entities within NAICS 

code 522320 with under $38.5 million in annual 

receipts to be small. Therefore, the Bureau further 

assumes that at least 651 of these entities are small. 

The Bureau conservatively uses a denominator of 

651 to obtain this estimate. 

of prepaid accounts.566 Although 

entities offering prepaid accounts may 

derive revenue from many sources, 

including other lines of business, the 

Bureau conservatively assumed that 

small entities only derive revenues from 

fees paid by cardholders and 

interchange fees. The Bureau obtained 

revenue estimates $9.98 per active 

cardholder per month for GPR cards 

distributed online and $6.77 per active 

cardholder per month for payroll 

cards.567

Comparing these revenue estimates to 

the range of estimates available to the 

Bureau of the ongoing costs of providing 

limited liability and error resolution 

protections with provisional credit and 

considering additional implementation 

costs, the Bureau concludes that those 

few small or potentially small non-bank 

entities that provide prepaid accounts 

that do not provide limited liability 

protections or do not provide error 

resolution protections may likely 

experience a significant economic 

impact from the proposed rule.568 In 

addition, the one small or potentially 

small entity that offers overdraft 

services in connection with its prepaid 

accounts may experience a significant 

economic impact as a result of the 

proposed rule. Combined, the Bureau 

believes that there are approximately 

nine directly affected small or 

potentially small non-bank entities 

likely to experience a significant 

economic impact as a result of the 

proposed rule. Thus, the Bureau 

believes that less than one percent of all 

small non-bank entities in the relevant 

NAICS code would experience a 

significant economic impact as a result 

of the proposed rule.569 The Bureau also 

believes that less than two percent of all 

small non-bank entities in the relevant 

NAICS code that perform either 

electronic fund transfers or electronic 

payment services would experience a 

significant economic impact from the 

proposed rule.570

The Bureau seeks comment on the 

methodology for estimating burden 

described in this analysis and requests 

any relevant data, including information 

regarding the implementation costs and 

ongoing costs associated with the 

proposed rule, especially as they pertain 

to small entities. Additionally, the 

Bureau seeks comment regarding the 

revenue and cost estimates used in this 

analysis. 

Certification 

Accordingly, the undersigned certifies 

that the proposed rule, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities. 

Paperwork Reduction Act 

The Bureau’s collection of 

information requirements contained in 

this proposal, and identified as such, 

will be submitted to the Office of 

Management and Budget (OMB) for 

review under section 3507(d) of the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501, et seq.) (Paperwork 

Reduction Act or PRA) on or before 

publication of this proposal in the 

Federal Register. Notwithstanding any 

other provision of law, under the 

Paperwork Reduction Act, the Bureau 

may not conduct or sponsor, and a 

person is not required to respond to, an 

information collection unless the 

information collection displays a valid 

OMB control number. 

The proposed rule would amend 12 

CFR part 1005, Electronic Fund 

Transfers (Regulation E) and 12 CFR 

part 1026, Truth in Lending (Regulation 

Z). Regulation E and Regulation Z 

currently contain collections of 

information approved by OMB. The 

Bureau’s OMB control number for 

Regulation E is 3170–0014 (Electronic 

Fund Transfer Act (Regulation E) 12 

CFR 1005). The Bureau’s OMB control 

number for Regulation Z is 3170–0015 

(Truth in Lending Act (Regulation Z) 12 

CFR 1026). As described below, the 

proposed rule would amend the 

collections of information currently in 

Regulation E and Regulation Z subparts 

B and G. The frequency of response is 

on occasion, except for periodic 

statements and quarterly submissions of 

prepaid account agreements. These 

information collections are required to 

provide benefits for consumers and are 

mandatory. The only information the 

Bureau would collect under the 

proposal are the account agreements for 

prepaid programs, so no issue of 

confidentiality arises. The affected 

public of the proposed rule includes 

businesses, government agencies and 

other for-profit and not-for-profit 

organizations. The Bureau is not aware 

of any small not-for-profit organizations, 

aside from credit unions, that would be 

directly affected by the proposed rule. 

Under the proposed rule, the Bureau 

generally would account for the 

paperwork burden associated with 

Regulation E and Regulation Z for the 

following respondents pursuant to its 

administrative enforcement authority: 

insured depository financial institutions 

with more than $10 billion in total 

assets, their depository institution 

affiliates (together, the Bureau 

depository respondents), and certain 

non-depository financial institutions 

(the Bureau non-depository 

respondents), such as prepaid account 

program managers. The Bureau and the 

FTC generally both have enforcement 

authority over non-depository financial 

institutions under Regulation E and 

Regulation Z. Accordingly, the Bureau 

has allocated to itself half of the 

estimated burden on Bureau nondepository respondents. Other Federal 

agencies, including the FTC, are 


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571The Bureau recognizes some uncertainty 

regarding the rate at which the one-time burden on 

a program manager increases with the number of 

programs as well as uncertainty regarding the 

average number of programs per program manager. 

The Bureau welcomes comments on its PRA burden 

methodology as well as data and other factual 

information that could improve the Bureau’s 

estimates of PRA burden. 

572All prepaid cards used to distribute Federally 

administered benefits (such as Social Security and 

SSI) and State and local non-needs tested benefits 

(such as unemployment, child support, and pension 

payments) are currently covered by Regulation E. 

However, government agencies are currently not 

required to provide periodic statements or online 

access to account information for cards distributing 

State and local non-needs tested benefits, as long as 

balance information is made available to benefits 

recipients via telephone and electronic terminals 

and a written account history of at least 60 days is 

given upon request. Needs-tested EBT programs 

established or administered under State or local law 

are not currently subject to Regulation E pursuant 

to existing § 1005.15(a). The Bureau’s proposed rule 

would not change this. 

573The Bureau notes that Regulation DD requires 

that a periodic statement disclose all fees debited 

to accounts covered by that regulation. 

§ 1030.6(a)(3). Regulation DD defines ‘‘account’’ to 

mean ‘‘a deposit account at a depository institution 

that is held by or offered to a consumer. It includes 

time, demand, savings, and negotiable order of 

withdrawal accounts.’’ § 1030.2(a). Because some 

prepaid accounts, as proposed herein to be defined 

under Regulation E, may not also constitute 

accounts as defined under Regulation DD, the 

Bureau is proposing new § 1005.18(c)(3) to ensure 

that periodic statements and histories of account 

transactions for prepaid accounts include all fees, 

not just those related to electronic fund transfers 

and account maintenance. As noted above, this 

proposed revision is authorized under EFTA 

Continued 

responsible for estimating and reporting 

to OMB the total paperwork burden for 

the financial institutions for which they 

have administrative enforcement 

authority. They may, but are not 

required to, use the Bureau’s burden 

estimation methodology. 

For Regulation E, using the Bureau’s 

burden estimation methodology 

discussed below, the estimated burden 

for the approximately 181 prepaid 

providers likely subject to the proposal, 

including Bureau respondents, would 

be one-time burden of 35,398 hours and 

ongoing burden of 10,376 hours. The 

Bureau allocates to itself 16,538 hours of 

one-time burden: Bureau depository 

respondents account for 4,450 hours 

while Bureau non-depository 

respondents account for 24,177 hours, 

half of which the Bureau allocates to 

itself and half to the FTC. The 

remaining one-time burden (35,398 ¥ 

4,450 ¥ 24,177 = 6,771 hours) is 

allocated to the other federal agencies 

that have administrative enforcement 

authority over banks and credit unions 

not subject to the Bureau’s 

administrative enforcement authority. 

Similarly, the Bureau allocates to itself 

4,494 hours of ongoing burden: Bureau 

depository respondents account for 

1,761 hours while Bureau nondepository respondents account for 

5,466 hours, half of which the Bureau 

allocates to itself and half to the FTC. 

The remaining ongoing burden (10,376 

¥ 1,761 ¥ 5,466 = 3,149 hours) is 

allocated to the other federal agencies 

that have administrative enforcement 

authority over banks and credit unions 

not subject to the Bureau’s 

administrative enforcement authority. 

For Regulation Z, using the Bureau’s 

burden estimation methodology 

discussed below, the estimated burden 

for two non-depository institutions 

subject to the proposal would be onetime burden of 384 hours and ongoing 

burden of 5,641 hours. The Bureau 

allocates to itself half of both these 

burden estimates (192 hours and 2,821 

hours, respectively) and half to the FTC. 

The aggregate estimates of total 

burdens presented in this part are based 

on estimated burden hours that are 

averages across respondents. The 

Bureau expects that the amount of time 

required to implement each of the 

proposed changes for a given institution 

may vary based on the size, complexity, 

and practices of the respondent. The 

Bureau used existing burden estimates 

as well as information obtained through 

industry research and outreach to 

develop the figures presented below. 

The Bureau’s PRA estimation 

methodology assumes that one-time 

burden increases with the number of 

programs operated by a program 

manager.571 Ongoing burden may 

increase with the number of programs, 

the number of customers, or both. 

However, both one-time and ongoing 

PRA burden from the proposed rule is 

minimal. Most prepaid account 

programs already comply with the 

current requirements of Regulation E, as 

they apply to payroll card accounts. The 

additional proposed requirements 

would generally require small 

extensions or revisions to existing 

practices. Finally, there may be several 

participants in the prepaid account 

supply chain and the activities of the 

participants may vary across prepaid 

programs. The Bureau understands that, 

in general, the respondents for purposes 

of PRA are program managers, except 

for the collection required by § 1005.19 

(internet posting of prepaid account 

agreements and submission to the 

Bureau), where the respondents will 

likely be prepaid account issuers. 

Regulation E 

As discussed further below, the 

Bureau proposes to require providers to 

make available to consumers disclosures 

before a consumer agrees to acquire a 

prepaid account. These disclosures 

would take two forms: a short form 

highlighting key fees that the Bureau 

believes are most important for 

consumers to know about prior to 

acquisition and a long form that would 

set forth all of the prepaid account’s fees 

and the conditions under which those 

fees could be imposed. Second, the 

Bureau is proposing to extend, with 

certain modifications, existing error 

resolution and limited liability 

provisions for payroll card accounts and 

certain government benefit accounts to 

all prepaid accounts.572 Third, the 

proposed rule would adopt provisions 

requiring prepaid account issuers to 

post agreements for prepaid accounts on 

the issuers’ Web sites and to submit 

those agreements to the Bureau for 

posting on a publicly-available Web site 

established and maintained by the 

Bureau. Finally, the Bureau is proposing 

to revise Regulation E (both subparts A 

and B) in various places to reflect the 

new provisions adopted for prepaid 

accounts including proposed revisions 

to provisions currently applicable to 

payroll card accounts and certain 

government benefit accounts. 

The Bureau is proposing to extend, 

with certain modifications, existing 

provisions for payroll card accounts and 

certain government benefit accounts to 

all prepaid accounts. The Bureau’s 

Study of Prepaid Account Agreements 

and review of industry research found 

that most programs of GPR prepaid 

accounts currently comply with the 

major provisions of the payroll card 

requirements of Regulation E. These 

accounts would be affected mostly by 

proposed modifications to the current 

provisions for payroll card accounts. 

The Bureau believes that providers of 

prepaid accounts generally provide 

account opening disclosures, change in 

terms notices, and annual error 

resolution notices that meet the current 

requirements of Regulation E. However, 

the Bureau is proposing to expand the 

account opening requirements of 

§ 1005.7(b)(5) as applied to prepaid 

accounts to require the disclosure of all 

fees, not just fees for electronic fund 

transfers. The one-time and ongoing 

burden from this requirement should be 

minimal. Regulation DD already 

requires banks to disclose all fees for 

accounts covered by that regulation 

(Credit Unions are subject to a similar 

requirement). Program managers for 

prepaid accounts that may not 

constitute accounts under Regulation 

DD may need to adjust their account 

opening disclosures. The Bureau 

believes the one-time and ongoing cost 

of implementing this change would be 

minimal.573


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section 904(c) and section 1032(a) of the DoddFrank Act. The Bureau solicits comment on this 

portion of the proposal. 

574For a period of 12 months after the final rule 

is published in the Federal Register, financial 

institutions would be permitted to continue selling 

prepaid accounts that do not comply with the final 

rule’s pre-acquisition disclosure requirements, if 

the account and its packaging material were printed 

prior to the proposed effective date. Based on 

discussions with industry, the Bureau understands 

that after 12 months approximately 40 percent of 

stock would remain in stores and would have to be 

located, shipped, and destroyed. 

575Proposed § 1005.18(b)(2)(ii)(B) would require 

that the long form disclosure include the 

disclosures described in § 1026.60, regarding credit 

card applications and solicitations, if at any point 

a credit plan may be offered in connection with the 

prepaid account. This burden would be minimal 

give the Bureau’s burden estimation methodology 

for Regulation Z, as explained below. Under 

proposed § 1005.18(b)(6), if a person principally 

uses a foreign language on a package in a retail 

store, on the telephone or on the Web site the 

consumer utilizes to acquire a prepaid account, 

then both the short form and long form disclosures 

would need to be provided in that foreign language. 

Discussions with industry indicate that providers 

generally adopt this practice. The long form 

disclosure would also need to be provided in 

English, but this would be a minimal one-time and 

ongoing expense. 

576The Bureau is proposing an exception from 

these requirements for prepaid accounts (other than 

payroll card accounts and government benefit 

accounts) for which the financial institution has not 

completed its collection of consumer identifying 

information and identity verification, provided the 

financial institution has disclosed to the consumer 

the risks of not registering the prepaid account. 

Providers offering certain electronic 

fund transfer services for prepaid 

accounts would also need to provide 

transaction disclosures. For example, a 

disclosure would be required for 

transactions conducted at an automated 

teller machine. These disclosures 

impose minimal burden as they are 

machine-generated and do not involve 

an employee of the institution. For 

preauthorized transfers to the 

consumer’s account occurring at least 

once every 60 days, such as direct 

deposit, the institution would be 

required to provide notice as to whether 

the transfer occurred unless positive 

notice was provided by the payor. In 

lieu of sending a notice of deposit, the 

institution may provide a readily 

available telephone number that the 

consumer can call to verify receipt of 

the deposit. Thus, the burden of this 

requirement is also minimal. For 

preauthorized transfers from the 

account, either the institution or the 

payee would need to notify the 

consumer of payment variations. 

Because in the vast majority of instances 

the payee, rather than the account 

provider, would satisfy this obligation, 

the burden on providers is minimal. 

The Bureau is proposing that, subject 

to certain exceptions provided in 

proposed § 1005.18(b)(1)(ii), a provider 

would be required to make available a 

short form and a long form disclosure 

required by § 1005.18(b)(2)(i) and (ii) 

before the consumer acquires the 

prepaid account. The Bureau estimates 

that providers, including Bureau 

respondents, would take 40 hours per 

prepaid account program, on average, to 

develop the short form disclosure and to 

update systems. The Bureau also 

recognizes a one-time cost of replacing 

and disposing of cards in stores of 

approximately $17 million.574 Providers 

would take 8 hours annually per 

prepaid account program to evaluate 

and if necessary update incidence-based 

fees on the short form disclosure. 

Providers would incur no other ongoing 

costs for the short form disclosure since 

they already offer consumers a preacquisition disclosure. The Bureau 

estimates that providers, including 

Bureau respondents, would take on 

average 8 hours per prepaid account 

program to develop the long form 

disclosure and update systems. The long 

form disclosure is substantially the 

same as disclosures already provided in 

prepaid account agreements.575

Proposed § 1005.18(b)(7) would 

require that certain disclosures be made 

on the actual prepaid account access 

device. These include the name of the 

financial institution and the URL of a 

Web site and a telephone number that 

the consumer can use to contact the 

financial institution about the prepaid 

account. The Bureau believes that 

currently all prepaid account access 

devices provide these disclosures. 

The Bureau’s proposal would require 

providers offering prepaid accounts to 

provide periodic statements unless they 

use the alternative method of 

compliance in proposed § 1005.18(c)(1). 

The Bureau expects that most providers 

would use the alternative method of 

compliance. The Bureau’s Study of 

Prepaid Account Agreements and its 

industry research found that most 

programs provide electronic access to 

account information. However, few 

provide at least 18 months of prepaid 

account transaction history. Further, the 

Bureau currently understands that 

prepaid programs generally do not 

provide a summary total of all fees 

posted to the consumer’s prepaid 

account, the total amount of all deposits 

to the account, and the total amount of 

all debits to the account for the prior 

calendar month and for the calendar 

year to date. The Bureau estimates that 

providers would take on average 24 

hours per prepaid account program to 

implement these changes. 

The Bureau is proposing to extend to 

all prepaid accounts the limited liability 

and error resolution provisions of 

Regulation E, as they apply to payroll 

card accounts.576 As discussed above, 

the Bureau’s Study of Prepaid Account 

Agreements and its industry research 

found that most providers of prepaid 

accounts provide limited liability and 

error resolution protections (including 

provisional credit) generally consistent 

with the Regulation E requirements for 

payroll card accounts. The Bureau 

estimates that providers (including 

Bureau respondents) that do not fully 

comply with the payroll card rule’s 

limited liability and error resolution 

provisions would require 8 hours per 

non-compliant program to develop fully 

compliant limited liability and error 

resolution procedures. Regarding 

ongoing costs, Bureau outreach 

indicates that providers receive perhaps 

one call per month per customer who 

actively uses a card and that 95 percent 

of those calls are resolved without 

requiring time from a customer service 

agent. Of the remaining five percent, 

very few calls involve assertions of 

error, but escalated calls are time 

consuming and respondents incur an 

ongoing burden. 

Finally, the Bureau is proposing in 

§ 1005.19(b) to require certain issuers to 

send the Bureau copies of the account 

agreements for their prepaid account 

programs. The Bureau estimates each 

issuer would take on average 40 hours 

one-time to upload agreements and then 

8 hours each quarter on an ongoing 

basis. 

The estimated burden on Bureau 

respondents from the proposed changes 

to Regulation E are summarized below. 


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577The Bureau is aware of two providers of 

overdraft services or credit features on prepaid 

accounts and believes that NetSpend is the only 

significant provider. NetSpend is an operating 

segment of TSYS, Inc., for which the 10–Q report 

for the quarter ending June 20, 2014 states that 

NetSpend has approximately 3.4 million active 

cards; See Total Sys. Serv. Inc., Form 10–Q, 

available at http://www.sec.gov/Archives/edgar/ 

data/721683/000119312514300851/

d737574d10q.htm. In a recent news article, 

NetSpend reported that only about six percent of its 

customers regularly use overdraft. See Suzanne 

Kapner, Prepaid Plastic is Creeping Into Credit, 

Wall Street J. (Sept. 5, 2012), http://online.wsj.com/ 

news/articles/SB10000872396390443686004

577633472358255602. Assuming each NetSpend 

customer has overdraft protection on only one 

account, there are 204,000 prepaid accounts with 

overdraft protection. No data is available for the 

second provider, Insight Card Services. The Bureau 

believes, based on industry data, that the median 

provider of prepaid accounts likely has about 

10,000 customers. Assuming 10% have an overdraft 

service or credit feature on one prepaid account 

gives an additional 1,000 accounts with overdraft 

protection. 

578Current data on the size of the market for 

credit features on prepaid accounts has limited 

usefulness in predicting the size of the market if the 

proposal is finalized, since both eligibility criteria 

and credit features may change as a result. See the 

previous discussions in this preamble. 

579This would apply if the creditor establishes a 

program where the creditor routinely extends credit 

and may impose finance charges from time to time 

on an outstanding unpaid balance for credit. 

580Transactions that are authorized on a prepaid 

account when the consumer has insufficient or 

unavailable funds at the time of authorization as 

well as transactions that are paid from a prepaid 

account when the consumer has insufficient or 

unavailable funds at the time of payment would 

generally be considered to be credit under 

Regulation Z. However, under the proposal, 

Regulation Z would not apply to overdraft services 

or other credit plans that are accessed by a prepaid 

card if the prepaid card only accesses credit that is 

not subject to any fee and is not payable by written 

agreement in more than four installments. 

581 In one recent analysis, the median life span for 

GPR cards with occasional reloads was 330 days 

and 570 days for GPR cards with periodic nongovernment direct deposit. See Fumiko Hayashi 

and Emily Cuddy, General Purpose Reloadable 

Prepaid Cards: Penetration, Use, Fees, and Fraud 

Continued 

Regulation Z 

For the proposed requirements under 

Regulation Z, the Bureau understands 

that approximately 205,000 consumers 

currently have a form of overdraft 

protection on their GPR and payroll 

cards.577 The Bureau’s PRA estimation 

methodology assumes that the same 

number would use a credit feature if the 

proposed rule were finalized.578

Further, the methodology generally 

assumes that the per-respondent and 

per-transaction burdens would be 

consistent with those currently reported 

for credit card accounts in Regulation Z. 

As described in greater detail above, 

under the proposed rule, if adopted, the 

Bureau anticipates that most overdraft 

services and credit features offered in 

connection with a prepaid account, 

including where extensions of credit are 

only permitted to be deposited into 

particular prepaid accounts specified by 

the creditor, would meet the definition 

of ‘‘open-end credit.’’ 579 In addition, 

under the proposal, a prepaid account 

that accesses such an overdraft service 

or credit plan generally would be a 

‘‘credit card’’ under Regulation Z. Under 

the proposal, the overdraft services or 

other credit card plans described above 

would be governed by subparts A, B, D 

and G of Regulation Z.580 Pursuant to 

Regulation Z, persons offering such 

plans would be required to comply with 

the requirements governing information 

collections. These requirements are as 

follows. 

Persons offering an overdraft service 

or other credit feature in connection 

with a prepaid account would be 

required to inform consumers of costs 

and terms before they use the plan and 

in general to inform them of certain 

subsequent changes in the terms of the 

plan. Initial information would need to 

include the finance charge and other 

charges, the annual percentage rate 

(APR), a description of how balances on 

which a finance charge is based would 

be calculated, and any collateral that 

would secure repayment. If the card 

issuer changed any term initially 

disclosed, or increased the minimum 

periodic payment, a written change-interm notice generally would need to be 

provided to the consumer at least fifteen 

days prior to the effective date of the 

change. Consistent with estimates 

currently reported for credit card 

accounts in Regulation Z, the Bureau 

estimates 8 hours of one-time burden 

per respondent to develop these 

disclosures and a small ongoing burden 

per account. The Bureau also assumes 

that for these accounts, the number of 

account opening disclosures equals the 

number of accounts in any year.581


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.003</GPH>
77296 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

Risks, Federal Reserve Bank of Kansas City, 

February 2014, at 47. 

582The recordkeeping requirement in § 1026.25 

does not specify the kind of records that must be 

retained, so for purposes of PRA the paperwork 

burden is minimal. 

Card issuers would be required to 

provide a written statement of activity 

for each billing cycle. The statement 

would have to be provided for each 

account that has a balance of more than 

$1 or on which a finance charge is 

imposed, and it would have to include 

a description of activity on the account, 

opening and closing balances, finance 

charges imposed, and payment 

information. Consistent with estimates 

currently reported for credit card 

accounts in Regulation Z, the Bureau 

estimates 80 hours of one-time burden 

per respondent to develop these 

disclosures and a small ongoing burden 

per account. 

Card issuers would be required to 

notify consumers about their rights and 

responsibilities regarding billing 

problems. Card issuers would have to 

provide either a complete statement of 

billing rights each year or a summary on 

each periodic statement. If a consumer 

alleged a billing error, the card issuer 

would need to provide an 

acknowledgment, within thirty days of 

receipt, that the card issuer received the 

consumer’s error notice and would need 

to report on the results of its 

investigation within ninety days. If a 

billing error did not occur, the card 

issuer would need to provide an 

explanation as to why the card issuer 

believed an error did not occur and 

provide documentary evidence to the 

consumer upon request. The card issuer 

would also have to give notice of the 

portion of the disputed amount and 

related finance or other charges that the 

consumer still owed and notice of when 

payment was due. The Bureau estimates 

8 hours of one-time burden per 

respondent to develop these disclosures 

and a small ongoing burden per 

account. The Bureau further assumes, 

based on discussions with industry, that 

in any year 1.5 percent of customers 

will assert errors that require significant 

time from customer service 

representatives. 

Persons offering an overdraft service 

or other credit feature in connection 

with a prepaid account would be 

required, when advertising their 

product, to include certain basic credit 

information if the advertisement refers 

to specified credit terms or costs. The 

Bureau estimates 8 hours of one-time 

burden per respondent to develop these 

disclosures and small ongoing burden to 

maintain or revise these disclosures. 

Persons offering an overdraft service 

or other credit feature in connection 

with a prepaid account would be 

required to send the Bureau copies of 

the overdraft service or program 

agreement. The Bureau estimates each 

issuer would take on average 40 hours 

one-time to upload agreements and then 

8 hours each quarter on an ongoing 

basis. 

Finally, persons offering a credit 

feature in connection with a prepaid 

account would also need to provide 

additional disclosures with solicitations 

and applications. Such persons would 

need to disclose key terms of the 

account, such as the APR, information 

about variable rates, and fees such as 

annual fees, minimum finance charges, 

and transaction fees for purchases. The 

Bureau estimates 8 hours of one-time 

burden per respondent to develop these 

disclosures and small ongoing burden to 

maintain or revise these disclosures.582

The estimated burden on Bureau 

respondents from the proposed changes 

to Regulation Z are summarized below. 


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Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77297 

Comments regarding the burden 

estimate, or any other aspect of these 

collections of information, including 

suggestions for reducing the burden, 

should be sent to: The Office of 

Management and Budget (OMB), 

Attention: Desk Officer for the 

Consumer Financial Protection Bureau, 

Office of Information and Regulatory 

Affairs, Washington, DC 20503, or by 

the Internet to submissions@

omb.eop.gov. If you wish to share your 

comments with the Bureau, please send 

a copy of these comments to the docket 

for this proposed rule at 

www.regulations.gov. The ICR 

submitted to OMB requesting approval 

under the PRA for the information 

collection requirements contained 

herein is available both at 

www.regulations.gov as well as OMB’s 

public-facing docket at www.reginfo.gov. 

List of Subjects 

12 CFR part 1005 

Banking, Banks, Consumer protection, 

Credit unions, Electronic fund transfers, 

National banks, Remittance transfers, 

Reporting and recordkeeping 

requirements, Savings associations. 

12 CFR part 1026 

Advertising, Consumer protection, 

Credit, Credit unions, Mortgages, 

National banks, Reporting and 

recordkeeping requirements, Savings 

associations, Truth in lending. 

Authority and Issuance 

For the reasons set forth in the 

preamble, the Bureau proposes to 

amend 12 CFR parts 1005 and 1026, as 

follows: 

PART 1005—ELECTRONIC FUND 

TRANSFERS (REGULATION E) 

■ 1. The authority citation for part 1005 

is amended to read as follows: 

Authority: 12 U.S.C. 5512, 5532, 5581; 15 

U.S.C. 1693b. Subpart B is also issued under 

12 U.S.C. 5601 and 15 U.S.C. 1693o–1. 

Subpart A—General 

■ 2. Section 1005.2 is amended by 

revising paragraphs (b)(2) and (b)(3) to 

read as follows: 

§ 1005.2 Definitions. 

* * * * * 

(b) (1) * * * 

(2) The term does not include an 

account held by a financial institution 

under a bona fide trust agreement. 

(3) The term includes a ‘‘prepaid 

account.’’ 

(i) A prepaid account is a card, code, 

or other device, not otherwise an 

account under paragraph (b)(1) of this 

section, which is established primarily 

for personal, family, or household 

purposes, and which: 

(A) is either issued on a prepaid basis 

to a consumer in a specified amount or 

not issued on a prepaid basis but 

capable of being loaded with funds 

thereafter; 

(B) is redeemable upon presentation 

at multiple, unaffiliated merchants for 

goods or services, usable at automated 

teller machines, or usable for person-toperson transfers; and 

(C) is not: (1) A gift certificate as 

defined in § 1005.20(a)(1) and (b); 

(2) a store gift card as defined in 

§ 1005.20(a)(2) and (b); 

(3) a loyalty, award, or promotional 

gift card as defined in § 1005.20(a)(4) 

and (b); or 

(4) a general-use prepaid card as 

defined in § 1005.20(a)(3) and (b) that is 

both marketed and labeled as a gift card 

or gift certificate. 

(ii) The term ‘‘prepaid account’’ 

includes a ‘‘payroll card account,’’ 

which is an account that is directly or 

indirectly established through an 

employer and to which electronic fund 

transfers of the consumer’s wages, 

salary, or other employee compensation 

(such as commissions) are made on a 

recurring basis, whether the account is 

operated or managed by the employer, 

a third-party payroll processor, a 

depository institution, or any other 

person. 

(iii) The term ‘‘prepaid account’’ 

includes a ‘‘government benefit 

account,’’ as defined in § 1005.15(a)(2). 

(iv) The term ‘‘prepaid account’’ does 

not include a health savings account, 

flexible spending account, medical 

savings account, or a health 

reimbursement arrangement. 

* * * * * 

■ 3. Section 1005.10 is amended by 

revising paragraph (e)(1) to read as 

follows: 

§ 1005.10 Preauthorized transfers. 

* * * * * 

(e) Compulsory use—(1) Credit. No 

financial institution or other person may 

condition an extension of credit to a 

consumer on the consumer’s repayment 

by preauthorized electronic fund 

transfers, except for credit extended 

under an overdraft credit plan or 

extended to maintain a specified 

minimum balance in the consumer’s 

account. This exception does not apply 

to a credit plan that is a credit card 

account accessed by an access device for 

a prepaid account where the access 

device is a credit card under Regulation 

Z (12 CFR part 1026), or is accessed by 

an account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. 

* * * * * 

■ 4. Section 1005.12 is amended by 

revising paragraphs (a)(1)(ii), (a)(1)(iii), 

(a)(1)(iv), and (a)(2)(i) to read as follows: 

§ 1005.12 Relation to other laws. 

(a) * * * 

(1) * * * 

(ii) The issuance of an access device 

(other than an access device for a 

prepaid account) that permits credit 

extensions (under a preexisting 

agreement between a consumer and a 

financial institution) only when the 

consumer’s account is overdrawn or to 

maintain a specified minimum balance 

in the consumer’s account, or under an 

overdraft service, as defined in 

§ 1005.17(a) of this part; 

(iii) The addition of an overdraft 

service, as defined in § 1005.17(a), to an 

accepted access device (other than an 

access device for a prepaid account); 

and 

(iv) A consumer’s liability for an 

unauthorized electronic fund transfer 

and the investigation of errors 

involving: 

(A) With respect to an account other 

than a prepaid account, an extension of 

credit that is incident to an electronic 

fund transfer that occurs under an 

agreement between the consumer and a 

financial institution to extend credit 

when the consumer’s account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

account, or under an overdraft service, 

as defined in § 1005.17(a); and 

(B) With respect to a prepaid account, 

an extension of credit under a credit 

plan that is subject to Regulation Z 

subpart B that is incident to an 

electronic fund transfer when the 

consumer’s prepaid account is 

overdrawn. 

(2) * * * 

(i) The addition of a credit feature or 

plan to an accepted access device, 

including an access device for a prepaid 

account, that would make the access 

device into a credit card under 

Regulation Z (12 CFR part 1026); and 

* * * * * 

■ 5. Section 1005.15 is revised to read 

as follows: 

§ 1005.15 Electronic fund transfer of 

government benefits. 

(a) Government agency subject to 

regulation. (1) A government agency is 

deemed to be a financial institution for 

purposes of the Act and this part if 

directly or indirectly it issues an access 

device to a consumer for use in 

initiating an electronic fund transfer of 


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government benefits from an account, 

other than needs-tested benefits in a 

program established under state or local 

law or administered by a state or local 

agency. The agency shall comply with 

all applicable requirements of the Act 

and this part except as modified by this 

section. 

(2) For purposes of this section, the 

term ‘‘account’’ or ‘‘government benefit 

account’’ means an account established 

by a government agency for distributing 

government benefits to a consumer 

electronically, such as through 

automated teller machines or point-ofsale terminals, but does not include an 

account for distributing needs-tested 

benefits in a program established under 

state or local law or administered by a 

state or local agency. 

(b) Issuance of access devices. For 

purposes of this section, a consumer is 

deemed to request an access device 

when the consumer applies for 

government benefits that the agency 

disburses or will disburse by means of 

an electronic fund transfer. The agency 

shall verify the identity of the consumer 

receiving the device by reasonable 

means before the device is activated. 

(c) Pre-acquisition disclosure 

requirements. (1) Before a consumer 

acquires a government benefit account, 

a government agency shall comply with 

the pre-acquisition disclosure 

requirements applicable to prepaid 

accounts as set forth in § 1005.18(b), in 

accordance with the timing 

requirements of § 1005.18(h). 

(2) As part of its short form preacquisition disclosures, the agency must 

provide a statement that the consumer 

does not have to accept the government 

benefit account and that the consumer 

can ask about other ways to get their 

benefit payments from the agency 

instead of receiving them through the 

account, in a form substantially similar 

to Model Form A–10(a) in appendix A 

of this part. 

(d) Access to account information— 

(1) Periodic statement alternative. A 

government agency need not furnish 

periodic statements required by 

§ 1005.9(b) if the agency makes available 

to the consumer: 

(i) The consumer’s account balance, 

through a readily available telephone 

line and at a terminal (such as by 

providing balance information at a 

balance-inquiry terminal or providing it, 

routinely or upon request, on a terminal 

receipt at the time of an electronic fund 

transfer); 

(ii) An electronic history of the 

consumer’s account transactions, such 

as through a Web site, that covers at 

least 18 months preceding the date the 

consumer electronically accesses the 

account; and 

(iii) A written history of the 

consumer’s account transactions that is 

provided promptly in response to an 

oral or written request and that covers 

at least 18 months preceding the date 

the agency receives the consumer’s 

request. 

(2) Additional access to account 

information requirements. For 

government benefit accounts, a 

government agency shall comply with 

the account information requirements 

applicable to prepaid accounts as set 

forth in § 1005.18(c)(2) through (4). 

(e) Modified disclosure requirements. 

A government agency that provides 

information under paragraph (d)(1) of 

this section shall comply with the 

following: 

(1) Initial disclosures. The agency 

shall modify the disclosures under 

§ 1005.7(b) by disclosing: 

(i) Access to account information. A 

telephone number that the consumer 

may call to obtain the account balance, 

the means by which the consumer can 

obtain an electronic account history, 

such as the address of a Web site, and 

a summary of the consumer’s right to 

receive a written account history upon 

request (in place of the summary of the 

right to receive a periodic statement 

required by § 1005.7(b)(6)), including a 

telephone number to call to request a 

history. The disclosure required by this 

paragraph (e)(1)(i) may be made by 

providing a notice substantially similar 

to the notice contained in paragraph (a) 

of appendix A–5 of this part. 

(ii) Error resolution. A notice 

concerning error resolution that is 

substantially similar to the notice 

contained in paragraph (b) of appendix 

A–5 of this part, in place of the notice 

required by § 1005.7(b)(10). 

(2) Annual error resolution notice. 

The agency shall provide an annual 

notice concerning error resolution that 

is substantially similar to the notice 

contained in paragraph (b) of appendix 

A–5 of this part, in place of the notice 

required by § 1005.8(b). Alternatively, 

the agency may include on or with each 

electronic or written history provided in 

accordance with paragraph (d)(1) of this 

section, a notice substantially similar to 

the abbreviated notice for periodic 

statements contained in paragraph (b) in 

appendix A–3 of this part, modified as 

necessary to reflect the error resolution 

provisions set forth in this section. 

(3) Modified limitations on liability 

requirements. (i) For purposes of 

§ 1005.6(b)(3), the 60-day period for 

reporting any unauthorized transfer 

shall begin on the earlier of: 

(A) The date the consumer 

electronically accesses the consumer’s 

account under paragraph (d)(1)(ii) of 

this section, provided that the electronic 

history made available to the consumer 

reflects the unauthorized transfer; or 

(B) The date the agency sends a 

written history of the consumer’s 

account transactions requested by the 

consumer under paragraph (d)(1)(iii) of 

this section in which the unauthorized 

transfer is first reflected. 

(ii) An agency may comply with 

paragraph (e)(3)(i) of this section by 

limiting the consumer’s liability for an 

unauthorized transfer as provided under 

§ 1005.6(b)(3) for any transfer reported 

by the consumer within 120 days after 

the transfer was credited or debited to 

the consumer’s account. 

(4) Modified error resolution 

requirements. (i) The agency shall 

comply with the requirements of 

§ 1005.11 in response to an oral or 

written notice of an error from the 

consumer that is received by the earlier 

of: 

(A) Sixty days after the date the 

consumer electronically accesses the 

consumer’s account under paragraph 

(d)(1)(ii) of this section, provided that 

the electronic history made available to 

the consumer reflects the alleged error; 

or 

(B) Sixty days after the date the 

agency sends a written history of the 

consumer’s account transactions 

requested by the consumer under 

paragraph (d)(1)(iii) of this section in 

which the alleged error is first reflected. 

(ii) In lieu of following the procedures 

in paragraph (e)(4)(i) of this section, an 

agency complies with the requirements 

for resolving errors in § 1005.11 if it 

investigates any oral or written notice of 

an error from the consumer that is 

received by the agency within 120 days 

after the transfer allegedly in error was 

credited or debited to the consumer’s 

account. 

(f) Initial disclosure of fees and other 

key information. For government benefit 

accounts, a government agency shall 

comply with the initial disclosure 

requirement for fees and other key 

information applicable to prepaid 

accounts as set forth in § 1005.18(f) in 

accordance with the timing 

requirements of § 1005.18(h). 

(g) Credit card plans linked to 

government benefit accounts. For credit 

plans linked to government benefit 

accounts, a government agency shall 

comply with prohibitions and 

requirements applicable to prepaid 

accounts as set forth in § 1005.18(g). 

■ 6. Section 1005.17 is amended by 

revising paragraph (a)(1) to read as 

follows: 


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§ 1005.17 Requirements for overdraft 

services. 

(a) * * * 

(1) A line of credit or credit plan 

subject to Regulation Z (12 CFR part 

1026), including transfers from a credit 

card account, home equity line of credit, 

overdraft line of credit, or a credit plan 

that is accessed by an access device for 

a prepaid account where the access 

device is a credit card under Regulation 

Z; 

* * * * * 

■ 7. Section 1005.18 is revised to read 

as follows: 

§ 1005.18 Requirements for financial 

institutions offering prepaid accounts. 

(a) Coverage. A financial institution 

shall comply with all applicable 

requirements of the Act and this part 

with respect to prepaid accounts except 

as modified by this section. For rules 

governing government benefit accounts, 

see § 1005.15. 

(b) Pre-acquisition disclosure 

requirements—(1) Timing of 

disclosures—(i) General. Except as 

provided in paragraphs (b)(1)(ii) or (iii) 

of this section, a financial institution 

shall provide the disclosures required 

by paragraphs (b)(2)(i) and (ii) of this 

section before a consumer acquires a 

prepaid account. 

(ii) Disclosures for prepaid accounts 

acquired in retail stores. A financial 

institution must provide a written form 

of the disclosures required by paragraph 

(b)(2)(i) of this section before a 

consumer acquires a prepaid account in 

person in a retail store. A financial 

institution may provide the disclosures 

required by paragraph (b)(2)(ii) of this 

section after a consumer acquires a 

prepaid account in person in a retail 

store if the following conditions are met: 

(A) The prepaid account access device 

is inside of packaging material. 

(B) The disclosures required by 

paragraph (b)(2)(i) of this section are 

provided on or are visible through an 

outward-facing, external surface of a 

prepaid account access device’s 

packaging material in the tabular format 

described in paragraph (b)(3)(iii) of this 

section. 

(C) The disclosure required by 

paragraph (b)(2)(i) of this section 

includes the information set forth in 

paragraph (b)(2)(i)(B)(11) of this section 

that allows a consumer to access the 

information required to be disclosed by 

paragraph (b)(2)(ii) of this section by 

telephone and via a Web site. 

(iii) Disclosures for prepaid accounts 

acquired orally by telephone. Before a 

consumer acquires a prepaid account 

orally by telephone, a financial 

institution must disclose orally the 

information required by paragraph 

(b)(2)(i) of this section. A financial 

institution may provide the disclosures 

required by paragraph (b)(2)(ii) of this 

section after a consumer acquires a 

prepaid account orally by telephone if 

the financial institution communicates 

to a consumer orally, before a consumer 

acquires the prepaid account, that the 

information required to be disclosed by 

paragraph (b)(2)(ii) of this section is 

available both by telephone and on a 

Web site. 

(2) Content of disclosures—(i) Short 

form content requirements. In 

accordance with paragraph (b)(1) of this 

section, a financial institution shall 

provide a disclosure setting forth only 

the following fees, information and 

notices, as applicable: 

(A) Payroll card account notices. 

When offering a payroll card account, a 

statement that a consumer does not have 

to accept the payroll card account and 

that a consumer can ask about other 

ways to get wages or salary from the 

employer instead of receiving them via 

the payroll card account, in a form 

substantially similar to Model Form A– 

10(b) in appendix A of this part. For 

requirements regarding what notice to 

give a consumer when offering a 

government benefit account, see 

§ 1005.15(c)(2). 

(B) Fees and other information—(1) 

Periodic fee. A periodic fee charged for 

holding a prepaid account, assessed on 

a monthly or other periodic basis, using 

the term ‘‘Monthly fee,’’ ‘‘Annual fee,’’ 

or a substantially similar term. 

(2) Per purchase fees. Two fees for 

making a purchase using a prepaid 

account, both when a consumer uses a 

personal identification number and 

when a consumer provides a signature, 

including at point-of-sale terminals, by 

telephone, on a Web site, or by any 

other means, using the term ‘‘Per 

purchase’’ or a substantially similar 

term, and ‘‘with PIN’’ or ‘‘with sig.,’’ or 

substantially similar terms. 

(3) ATM withdrawal fees. Two fees for 

using an automated teller machine to 

initiate a withdrawal of cash in the 

United States from a prepaid account, 

both within and outside of the financial 

institution’s network or a network 

affiliated with the financial institution, 

using the term ‘‘ATM withdrawal’’ or a 

substantially similar term, and ‘‘innetwork’’ or ‘‘out-of-network,’’ or 

substantially similar terms. 

(4) Cash reload fee. A fee for loading 

cash into a prepaid account using the 

term ‘‘Cash reload’’ or a substantially 

similar term. 

(5) ATM balance inquiry fees. Two 

fees for using an automated teller 

machine to check the balance of a 

consumer’s prepaid account in the 

United States, both within and outside 

of the financial institution’s network or 

a network affiliated with the financial 

institution, using the term ‘‘ATM 

balance inquiry’’ or a substantially 

similar term, and ‘‘in-network’’ or ‘‘outof-network,’’ or substantially similar 

terms. 

(6) Customer service fee. A fee for 

calling the financial institution or its 

service provider, including an 

interactive voice response system, about 

a consumer’s prepaid account, using the 

term ‘‘Customer service,’’ or a 

substantially similar term. 

(7) Inactivity fee. A fee for non-use, 

dormancy, or inactivity on a prepaid 

account, using the term ‘‘Inactivity’’ or 

a substantially similar term, as well as 

the duration of inactivity that triggers a 

financial institution to impose such an 

inactivity fee. 

(8) Incidence-based fee disclosures— 

(I) Generally. Except as provided in 

paragraph (b)(2)(i)(B)(8)(II) or (III) of this 

section, up to three fees, other than any 

of those fees disclosed pursuant to 

paragraphs (b)(2)(i)(B)(1) through (7) of 

this section, that were incurred most 

frequently in the prior 12-month period 

by consumers of that particular prepaid 

account product. At the same time each 

year, in accordance with the timing 

requirements of paragraph (h) of this 

section, a financial institution must 

assess whether the incidence-based fees 

disclosed pursuant to this paragraph 

were the most frequently incurred fees 

in the prior 12-month period and, if 

necessary, within 90 days, revise the 

incidence-based fees on disclosures 

provided in written, electronic, or oral 

form pursuant to paragraph (b)(1)(i) of 

this section. Disclosures provided on 

the packaging material of prepaid 

account access devices, for example, in 

retail stores pursuant to paragraph 

(b)(1)(ii) of this section, or in other 

locations, must be revised when the 

financial institution is printing new 

packaging material for its prepaid 

account access devices, in accordance 

with the timing requirements of 

paragraph (h) of this section. All 

disclosures provided pursuant to this 

paragraph and created after a financial 

institution makes an incidence-based 

fee assessment and determines changes 

are necessary must include such 

changes, in accordance with the timing 

requirements of paragraph (h) of this 

section. 

(II) New prepaid account products. If 

a particular prepaid account product 

was not offered by the financial 

institution during the prior 12-month 

period, the financial institution must 

disclose up to three fees, other than any 


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77300 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

of those fees disclosed pursuant to 

paragraphs (b)(2)(i)(B)(1) through (7) of 

this section, that it reasonably 

anticipates will be incurred by 

consumers most frequently during the 

next 12-month period. The incidencebased fee disclosures for newly-created 

prepaid account products must be 

included on all disclosures created for 

the prepaid account product, whether 

the disclosure is written, electronic, or 

on the packaging material of a prepaid 

account product sold in a retail store, in 

accordance with the timing 

requirements of paragraph (h) of this 

section. 

(III) Revised prepaid account 

products. If the financial institution 

changes an existing prepaid account 

product’s fee schedule at any point after 

assessing its incidence-based fee 

disclosure for the prior 12-month period 

pursuant to paragraph (b)(2)(i)(B)(8)(I) of 

this section, it must determine whether, 

after making such changes, it reasonably 

anticipates that the existing incidencebased fee disclosure will represent the 

most commonly incurred fees for the 

remainder of the 12-month period. If the 

financial institution reasonably 

anticipates that the current incidencebased fee disclosure will not represent 

the most commonly incurred fees for the 

remainder of the current 12-month 

period, it must update the incidencebased fee disclosure within 90 days for 

disclosures provided in written or 

electronic form, in accordance with the 

timing requirements of paragraph (h) of 

this section. Disclosures provided on a 

prepaid account product’s packaging 

material, for example, in retail stores 

pursuant to paragraph (b)(1)(ii) of this 

section, or in other locations, must be 

revised when the financial institution is 

printing new packaging material for its 

prepaid accounts, in accordance with 

the timing requirements of paragraph (h) 

of this section. All disclosures provided 

pursuant to this paragraph and created 

after a financial institution makes an 

incidence-based fee assessment and 

determines changes are necessary must 

include such changes, in accordance 

with the timing requirements of 

paragraph (h) of this section. 

(9) Overdraft services and other credit 

features. A statement that credit-related 

fees may apply, in a form substantially 

similar to the clause set forth in Model 

Form A–10(c) in appendix A of this 

part, if, at any point, a credit plan that 

would be a credit card account under 

Regulation Z, 12 CFR part 1026 may be 

offered in connection with the prepaid 

account. Such a credit plan could be 

accessed by a credit card under 

Regulation Z, 12 CFR 1026.2(a)(15)(i), 

that also is an access device that 

accesses the prepaid account, or a credit 

plan could be accessed by an account 

number that is a credit card under 

Regulation Z, where extensions of credit 

are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor offering the 

plan. If neither of these two types of 

credit plans will be offered in 

connection with the prepaid account at 

any point, a statement that no overdraft 

or credit-related fees will be charged, in 

a form substantially similar to the clause 

set forth in the Model Form A–10(d) in 

appendix A) of this part. 

(10) Statement regarding other fees. A 

statement regarding the number of fees, 

other than those listed on the short form 

pursuant to paragraphs (b)(2)(i)(B)(1) 

through (8) of this section, listed in the 

long form pursuant to paragraph 

18(b)(2)(ii)(A) of this section that could 

be imposed upon a consumer, in a form 

substantially similar to the clause set 

forth in Model Forms A–10(a) through 

(d) in appendix A of this part. 

(11) Telephone number and Web site. 

A telephone number and the unique 

URL of a Web site that a consumer may 

use to access the disclosure required 

under paragraph (b)(2)(ii) of this section, 

in a form substantially similar to the 

clauses set forth in Model Forms A– 

10(c) and (d) in appendix A of this part. 

This disclosure is required only when a 

financial institution chooses not to 

provide a written form of the 

disclosures required by paragraph 

(b)(2)(ii) of this section before a 

consumer acquires a prepaid account, as 

described in paragraph (b)(1)(ii) of this 

section. 

(12) Statement regarding registration. 

A statement that communicates to a 

consumer that a prepaid account must 

register with a financial institution or 

service provider in order for the funds 

loaded into the account to be protected, 

in a form substantially similar to the 

clauses set forth in Model Forms A– 

10(a) through (d) in appendix A of this 

part. 

(13) Statement regarding FDIC (or 

NCUSIF) insurance. If a prepaid account 

product is not set up to be eligible for 

FDIC deposit or NCUSIF share 

insurance, a statement that FDIC deposit 

insurance or NCUSIF share insurance, 

as appropriate, does not protect funds 

loaded into the prepaid account, in a 

form substantially similar to the clause 

set forth in Model Forms A–10(c) and 

(d) in appendix A of this part. 

(14) CFPB Web site. The URL of the 

Web site of the Consumer Financial 

Protection Bureau, in a form 

substantially similar to the clause set 

forth in Model Forms A–10(a) through 

(d) in appendix A of this part. 

(C) Disclosing variable fees. If the 

amount of the fee that a financial 

institution imposes for each of the fee 

types disclosed pursuant to paragraphs 

(b)(2)(i)(B) of this section could vary, a 

financial institution must disclose the 

highest fee it could impose on a 

consumer for utilizing the service 

associated with the fee, along with a 

symbol, such as an asterisk, to indicate 

that a lower fee might apply, and text 

explaining that the fee could be lower, 

in a form substantially similar to the 

clause set forth in Model Forms A–10(a) 

through (d) in appendix A of this part. 

A financial institution must use the 

same symbol and text for all fees that 

could be lower, but may use any other 

part of the prepaid account product’s 

packaging material or its Web site to 

provide more detail about how a 

specific fee type may be lower. A 

financial institution must not disclose 

any additional third party fees imposed 

in connection with any of the fees 

disclosed pursuant to paragraphs 

(b)(2)(i)(B)(1) through (8) of this section. 

(ii) Long form content requirements. 

In accordance with paragraph (b)(1) of 

this section, a financial institution shall 

provide the following disclosures: 

(A) Fees. All fees that may be imposed 

by the financial institution in 

connection with a prepaid account. For 

each fee type, the financial institution 

must disclose the amount of the fee, the 

conditions, if any, under which the fee 

may be imposed, waived, or reduced, 

including, to the extent known, any 

third party fee amounts that may apply. 

If such third party fees may apply but 

the amount of those fees are not known, 

a financial institution must instead 

include a statement indicating that third 

party fees may apply without specifying 

the fee amount. A financial institution 

may not utilize any symbols, such as 

asterisks, to explain conditions under 

which any fee may be imposed. A fee 

imposed by a third party who acts as an 

agent of the financial institution for 

purposes of the prepaid account must 

always be disclosed. 

(B) Overdraft services and other credit 

features. The disclosures described in 

Regulation Z,12 CFR 1026.60(a), (b), and 

(c), if, at any point, a credit plan that 

would be a credit card account under 

Regulation Z, 12 CFR part 1026, may be 

offered in connection with the prepaid 

account. Such a credit plan could be 

accessed by a credit card under 

Regulation Z, 12 CFR 1026.2(a)(15), that 

also is an access device that accesses the 

prepaid account, or a credit plan could 

be accessed by an account number that 

is a credit card under Regulation Z 

where extensions of credit are permitted 

to be deposited directly only into 


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particular prepaid accounts specified by 

the creditor offering the plan. 

(C) Telephone number, Web site and 

mailing address. The telephone number, 

Web site, and mailing address of the 

person or office that a consumer may 

contact to learn about the terms and 

conditions of the prepaid account, to 

obtain prepaid account balance 

information, to request a copy of 

transaction history pursuant to 

paragraph (c)(1)(iii) of this section if the 

financial institution does not provide 

periodic statements pursuant to 

§ 1005.9(b), or to notify the person or 

office when a consumer believes that an 

unauthorized electronic fund transfer 

occurred as required by § 1005.7(b)(2) 

and paragraph (d)(1)(ii) of this section. 

(D) Statement regarding FDIC (or 

NCUSIF) insurance. The disclosure 

required under paragraph (b)(2)(i)(B)(13) 

of this section. 

(E) CFPB Web site and telephone 

number. The URL of the Web site of the 

Consumer Financial Protection Bureau, 

and a telephone number a consumer can 

contact and the URL a consumer can 

visit to submit a complaint related to a 

prepaid account. 

(3) Form of pre-acquisition 

disclosures—(i) General—(A) Written 

disclosures. Except as provided in 

paragraphs (b)(3)(i)(B) and (C) of this 

section, disclosures required by 

paragraphs (b)(2)(i) and (ii) of this 

section must be in writing. 

(B) Electronic disclosures. Disclosures 

required by paragraphs (b)(2)(i) and (ii) 

of this section must be provided in 

electronic form when a consumer 

acquires a prepaid account through the 

Internet, including via a mobile 

application. Disclosures required by 

paragraphs (b)(2)(i) and (ii) must be 

provided electronically in a manner 

which is reasonably expected to be 

accessible in light of how a consumer is 

acquiring the prepaid account. These 

electronic disclosures need not meet the 

consumer consent and other applicable 

provisions of the Electronic Signatures 

in Global and National Commerce Act 

(E-Sign Act) (15 U.S.C. 7001 et seq.). 

Disclosures provided to a consumer 

through a Web site where required by 

paragraph (b)(1)(ii)(C) and as described 

in paragraph (b)(2)(i)(B)(11) of this 

section must be made in an electronic 

form using a machine-readable text 

format that is accessible via both Web 

browsers and screen readers. 

(C) Oral disclosures. Disclosures 

required by paragraph (b)(2)(i) of this 

section must be provided orally when a 

consumer acquires a prepaid account 

orally by telephone as described in 

paragraph (b)(2)(iii) of this section. 

Disclosures provided to a consumer 

through the telephone number 

described in paragraph (b)(2)(i)(B)(11) of 

this section also must be made orally. 

(ii) Retainable form. Except for 

disclosures provided to a consumer 

through the telephone number 

described in paragraph (b)(2)(i)(B)(11) of 

this section or disclosures provided 

orally pursuant to paragraph (b)(1)(iii) of 

this section, disclosures required by 

paragraphs (b)(2)(i) and (ii) of this 

section must be made in a retainable 

form. 

(iii) Tabular format—(A) General. 

Except as provided in paragraph 

(b)(3)(iii)(B) of this section, disclosures 

required by paragraph (b)(2)(i)(B) of this 

section that are provided in writing or 

electronically shall be in the form of a 

table substantially similar to Model 

Forms A–10(a) through (d) in appendix 

A of this part, as applicable. Disclosures 

required by paragraph (b)(2)(ii) of this 

section that are provided in writing or 

electronically shall be in a form of a 

table substantially similar to Sample 

Form A–10(e) in appendix A of this 

part. 

(B) Disclosures for prepaid account 

products offering multiple service 

plans—(1) Short form. When a financial 

institution offers multiple service plans 

for a particular prepaid account product 

and each plan has a different fee 

schedule, the information required by 

paragraphs (b)(2)(i)(B)(1) through (7) of 

this section may be provided for each 

service plan together in one table, in a 

form substantially similar to Model 

Form A–10(f) in appendix A of this part, 

and must include descriptions of each 

service plan included in the table, using 

the terms, ‘‘Pay-as-you-go plan,’’ 

‘‘Monthly plan,’’ ‘‘Annual plan,’’ or 

substantially similar terms. When 

disclosing multiple service plans on one 

short form, the information required by 

paragraph (b)(2)(i)(B)(8) of this section 

must only be disclosed once in the 

table. Alternatively, a financial 

institution may disclose the information 

required by paragraph (b)(2)(i)(B)(1) 

through (8) of this section for only the 

service plan in which a consumer is 

enrolled automatically by default upon 

acquiring the prepaid account, in the 

form of a table substantially similar to 

Model Forms A–10(c) or (d) in appendix 

A of this part. Regardless of whether a 

financial institution discloses fee 

information for all service plans on one 

form or chooses only to disclose the 

service plan in which a consumer is 

enrolled by default, the disclosures 

required by paragraphs (b)(2)(i)(B)(9) 

through (14) of this section must be 

disclosed only once. 

(2) Long form. The information 

required by paragraph (b)(2)(ii) of this 

section must be presented for all service 

plans in the form of a table substantially 

similar to the Sample Form in appendix 

A–10(g) of this part. 

(4) Specific formatting requirements— 

(i) Grouping—(A) Short form 

disclosures. The information required 

by paragraph (b)(2)(i)(A) of this section 

or by § 1005.15(c)(2), when applicable, 

must be grouped together. The 

information required by paragraphs 

(b)(2)(i)(B)(1) through (4) of this section 

must be generally grouped together and 

in the order they appear in the form of 

Model Forms A–10(a) through (d) in 

appendix A of this part. The 

information required by paragraphs 

(b)(2)(i)(B)(5) through (9) of this section 

must be generally grouped together and 

in the order they appear in the form of 

Model Forms A–10(a) through (d) in 

appendix A of this part. The textual 

information required by paragraphs 

(b)(2)(i)(B)(10) through (14) of this 

section must be generally grouped 

together and in the order they appear in 

Model Forms A–10(a) through (d) in 

appendix A of this part. The URL of the 

Web site disclosed pursuant to 

paragraph (b)(2)(i)(B)(11) of this section 

must not exceed twenty-two characters, 

and must be meaningfully named. 

(B) Long form disclosures. The 

information required by paragraph 

(b)(2)(ii)(A) of this section must be 

generally grouped together and 

organized by categories of function for 

which a consumer would utilize the 

service associated with each fee. Text 

describing the conditions under which 

a fee may be imposed must appear in 

the table directly to the right of the 

numeric fee amount disclosed pursuant 

to paragraph (b)(2)(ii)(A) of this section. 

The information required by paragraph 

(b)(2)(ii)(B) of this section must be 

generally grouped together. The 

information required by paragraphs 

(b)(2)(ii)(C) through (E) of this section 

must be generally grouped together. 

(C) Multiple service plan disclosures. 

When providing disclosures in 

compliance with paragraph 

(b)(3)(iii)(B)(1) of this section and 

disclosing the fee schedules of multiple 

service plans together on one form, the 

fees required to be listed pursuant to 

paragraphs (b)(2)(i)(B)(1) through (7) of 

this section that vary among service 

plans must be generally grouped 

together, and the fees that are the same 

across all service plans must be grouped 

together. If the periodic fee varies 

between service plans, the financial 

institution must use the term ‘‘plan fee,’’ 

or a substantially similar term when 

disclosing the periodic fee for each 

service plan. When providing 

disclosures for multiple service plans on 


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one short form in compliance with 

paragraph (b)(3)(iii)(B)(1) of this section, 

the fees disclosed pursuant to paragraph 

(b)(2)(i)(B)(8) of this section must be 

grouped with the fees that are the same 

across all service plans. 

(ii) Prominence and size—(A) 

General. All text used to disclose 

information pursuant to paragraph (b)(2) 

of this section must be in a single, easyto-read typeface. All text included in the 

tables required to be disclosed pursuant 

to paragraph (b)(3)(iii) of this section 

must be all black or one color type and 

printed on a white or other neutral 

contrasting background whenever 

practical. 

(B) Short form—(1) Payroll card 

account and government benefit 

account notices. The information 

required by paragraph (b)(2)(i)(A) of this 

section and § 1005.15(c)(2), when 

applicable, must appear in a minimum 

eight-point font or the corresponding 

pixel size and appear in no larger a font 

than what is used for the information 

required to be disclosed by paragraphs 

(b)(2)(i)(B)(1) through (4) of this section. 

(2) Fees and other information. Fee 

amounts disclosed pursuant to 

paragraphs (b)(2)(i)(B)(1) through (4) of 

this section must be more prominent 

than the other parts of the disclosures 

required by paragraph (b)(2)(i) of this 

section and appear in a minimum 

eleven-point font or the corresponding 

pixel size. Disclosures required by 

paragraphs (b)(2)(i)(B)(5) through (9) of 

this section must appear in a minimum 

eight-point font or the corresponding 

pixel size and appear in no larger a font 

than what is used for the information 

required to be disclosed by paragraphs 

(b)(2)(i)(B)(1) through (4) of this section. 

Disclosures required by paragraphs 

(b)(2)(i)(B)(10) through (14) of this 

section must appear in a minimum 

seven-point font or the corresponding 

pixel size and appear in no larger a font 

than what is used for the information 

required to be disclosed by paragraphs 

(b)(2)(i)(B)(5) through (8) of this section. 

Additionally, the statement disclosed 

pursuant to paragraph (b)(2)(i)(B)(10) of 

this section, and the telephone number 

and URL disclosed pursuant to 

paragraph (b)(2)(i)(B)(11) of this section 

must be more prominent than the 

information disclosed pursuant to 

paragraphs (b)(2)(i)(B)(12) through (14) 

of this section and paragraph (b)(2)(i)(C) 

of this section. Text used to distinguish 

each of the two fees that are required to 

be disclosed by paragraphs 

(b)(2)(i)(B)(2), (3), and (5) of this section, 

or to explain the duration of inactivity 

that triggers a financial institution to 

impose an inactivity fee as required by 

paragraph (b)(2)(i)(B)(7) of this section 

must appear in a minimum six-point 

font or the corresponding pixel size and 

appear in no larger a font than what is 

used for the information required to be 

disclosed by paragraphs (b)(2)(i)(B)(9) 

through (12) of this section. 

(3) Disclosing variable fees. The 

explanatory text disclosed pursuant to 

paragraph (b)(2)(i)(C) of this section, 

when applicable, must appear in a 

minimum seven-point font or the 

corresponding pixel size and appear in 

no larger a font than what is used for the 

information required to be disclosed by 

paragraphs (b)(2)(i)(B)(5) through (8) of 

this section. 

(C) Long form. Disclosures required by 

paragraph (b)(2)(ii) of this section must 

appear in a minimum eight-point font or 

the corresponding pixel size. 

(D) Multiple service plan short form. 

When providing disclosures in 

compliance with paragraph 

(b)(3)(iii)(B)(1) of this section and 

disclosing the fee schedules of multiple 

service plans together in one form, 

disclosures required by paragraphs 

(b)(2)(i)(B)(1) through (9) must appear in 

a minimum seven-point font or the 

corresponding pixel size. Disclosures 

required by paragraphs (b)(2)(i)(B)(10) 

through (14) of this section must appear 

in the font sizes set forth in paragraph 

(b)(4)(ii)(B)(2) of this section. 

(5) Segregation. Disclosures required 

by this section that are provided in 

writing or electronically must be 

segregated from everything else and 

must contain only information that is 

directly related to the disclosures 

required under this section. 

(6) Prepaid accounts acquired in 

foreign languages. If a financial 

institution principally uses a foreign 

language on prepaid account packaging 

material, by telephone, in person, or on 

the Web site a consumer utilizes to 

acquire a prepaid account, then 

disclosures made pursuant to 

paragraphs (b)(2)(i) and (b)(2)(ii) of this 

section must be provided in that same 

foreign language. A financial institution 

must also provide the information 

required to be disclosed by paragraph 

(b)(2)(ii) of this section in English upon 

a consumer’s request and on any part of 

the Web site where it provides the long 

form disclosure in a foreign language. 

(7) Disclosures on prepaid account 

access devices. The name of the 

financial institution and the URL of the 

Web site and a telephone number a 

consumer can use to contact the 

financial institution about the prepaid 

account must be disclosed on the 

prepaid account access device. If a 

financial institution does not provide a 

physical access device in connection 

with a prepaid account, the disclosure 

must appear at the URL or other entry 

point a consumer must visit to access 

the prepaid account electronically. A 

disclosure made on an accompanying 

document, such as a terms and 

conditions document, on packaging 

material surrounding an access device, 

or on a sticker or other label affixed to 

an access device does not constitute a 

disclosure on the access device. 

(c) Access to prepaid account 

information—(1) Periodic statement 

alternative. A financial institution need 

not furnish periodic statements required 

by § 1005.9(b) if the institution makes 

available to the consumer: 

(i) The consumer’s account balance, 

through a readily available telephone 

line; 

(ii) An electronic history of the 

consumer’s account transactions, such 

as through a Web site, that covers at 

least 18 months preceding the date the 

consumer electronically accesses the 

account; and 

(iii) A written history of the 

consumer’s account transactions that is 

provided promptly in response to an 

oral or written request and that covers 

at least 18 months preceding the date 

the financial institution receives the 

consumer’s request. 

(2) Information included on electronic 

or written histories. The history of 

account transactions provided under 

paragraphs (c)(1)(ii) and (iii) of this 

section must include the information set 

forth in § 1005.9(b). 

(3) Inclusion of all fees charged. A 

periodic statement furnished pursuant 

to § 1005.9(b) for a prepaid account, an 

electronic history of account 

transactions whether provided under 

paragraph (c)(1)(ii) of this section or 

otherwise, and a written history of 

account transactions provided under 

paragraph (c)(1)(iii) of this section must 

disclose the amount of any fees assessed 

against the account, whether for 

electronic fund transfers or otherwise. 

(4) Summary totals of fees, deposits, 

and debits. A periodic statement 

furnished pursuant to § 1005.9(b) for a 

prepaid account, an electronic history of 

account transactions whether provided 

under paragraph (c)(1)(ii) of this section 

or otherwise, and a written history of 

account transactions provided under 

paragraph (c)(1)(iii) of this section must 

include a summary total of the amount 

of all fees assessed against the 

consumer’s prepaid account, the total 

amount of all deposits to the account, 

and the total amount of all debits from 

the account, for the prior calendar 

month and for the calendar year to date. 

(d) Modified disclosure requirements. 

A financial institution that provides 

information under paragraph (c)(1) of 


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this section shall comply with the 

following: 

(1) Initial disclosures. The financial 

institution shall modify the disclosures 

under § 1005.7(b) by disclosing: 

(i) Access to account information. A 

telephone number that the consumer 

may call to obtain the account balance, 

the means by which the consumer can 

obtain an electronic account history, 

such as the address of a Web site, and 

a summary of the consumer’s right to 

receive a written account history upon 

request (in place of the summary of the 

right to receive a periodic statement 

required by § 1005.7(b)(6)), including a 

telephone number to call to request a 

history. The disclosure required by this 

paragraph (d)(1)(i) may be made by 

providing a notice substantially similar 

to the notice contained in paragraph (a) 

of appendix A–7 of this part. 

(ii) Error resolution. A notice 

concerning error resolution that is 

substantially similar to the notice 

contained in paragraph (b) of appendix 

A–7 of this part, in place of the notice 

required by § 1005.7(b)(10). 

(2) Annual error resolution notice. 

The financial institution shall provide 

an annual notice concerning error 

resolution that is substantially similar to 

the notice contained in paragraph (b) of 

appendix A–7 of this part, in place of 

the notice required by § 1005.8(b). 

Alternatively, a financial institution 

may include on or with each electronic 

and written history provided in 

accordance with paragraph (c)(1) of this 

section, a notice substantially similar to 

the abbreviated notice for periodic 

statements contained in paragraph (b) of 

appendix A–3 of this part, modified as 

necessary to reflect the error resolution 

provisions set forth in paragraph (e) of 

this section. 

(e) Modified limitations on liability 

and error resolution requirements—(1) 

Modified limitations on liability 

requirements. A financial institution 

that provides information under 

paragraph (c)(1) of this section shall 

comply with the following: 

(i) For purposes of § 1005.6(b)(3), the 

60-day period for reporting any 

unauthorized transfer shall begin on the 

earlier of: 

(A) The date the consumer 

electronically accesses the consumer’s 

account under paragraph (c)(1)(ii) of this 

section, provided that the electronic 

history made available to the consumer 

reflects the unauthorized transfer; or 

(B) The date the financial institution 

sends a written history of the 

consumer’s account transactions 

requested by the consumer under 

paragraph (c)(1)(iii) of this section in 

which the unauthorized transfer is first 

reflected. 

(ii) A financial institution may 

comply with paragraph (e)(1)(i) of this 

section by limiting the consumer’s 

liability for an unauthorized transfer as 

provided under § 1005.6(b)(3) for any 

transfer reported by the consumer 

within 120 days after the transfer was 

credited or debited to the consumer’s 

account. 

(2) Modified error resolution 

requirements. A financial institution 

that provides information under 

paragraph (c)(1) of this section shall 

comply with the following: 

(i) The financial institution shall 

comply with the requirements of 

§ 1005.11 in response to an oral or 

written notice of an error from the 

consumer that is received by the earlier 

of: 

(A) Sixty days after the date the 

consumer electronically accesses the 

consumer’s account under paragraph 

(c)(1)(ii) of this section, provided that 

the electronic history made available to 

the consumer reflects the alleged error; 

or 

(B) Sixty days after the date the 

financial institution sends a written 

history of the consumer’s account 

transactions requested by the consumer 

under paragraph (c)(1)(iii) of this section 

in which the alleged error is first 

reflected. 

(ii) In lieu of following the procedures 

in paragraph (e)(2)(i) of this section, a 

financial institution complies with the 

requirements for resolving errors in 

§ 1005.11 if it investigates any oral or 

written notice of an error from the 

consumer that is received by the 

institution within 120 days after the 

transfer allegedly in error was credited 

or debited to the consumer’s account. 

(3) Limitations on liability and error 

resolution for unverified accounts. For 

prepaid accounts that are not payroll 

card accounts or government benefit 

accounts, if a financial institution 

discloses to the consumer the risks of 

not registering a prepaid account using 

a notice that is substantially similar to 

the model notice contained in paragraph 

(c) of appendix A–7 of this part, a 

financial institution is not required to 

comply with the liability limits and 

error resolution requirements under 

§§ 1005.6 and 1005.11 for any prepaid 

account for which it has not completed 

its collection of consumer identifying 

information and identity verification. 

Once a consumer’s identity has been 

verified, however, a financial institution 

must limit the consumer’s liability for 

unauthorized transfers and resolve any 

errors that occurred prior to verification 

that satisfy the timing requirements of 

§§ 1005.6 or 1005.11, or the modified 

timing requirements in this paragraph 

(e), as applicable. 

(f) Initial disclosure of fees and other 

key information. In addition to 

disclosing any fees imposed by a 

financial institution for electronic fund 

transfers or for the right to make 

electronic fund transfers, a financial 

institution must also include in its 

initial disclosures given pursuant to 

§ 1005.7(b)(5) all other fees imposed by 

the financial institution in connection 

with a prepaid account. For each fee, a 

financial institution must disclose the 

amount of the fee, the conditions, if any, 

under which the fee may be imposed, 

waived, or reduced, and, to the extent 

known, whether any third party fees 

may apply. These disclosures must 

include all of the information required 

to be disclosed pursuant to paragraph 

(b)(2)(ii)(B) of this section and must be 

provided in a form substantially similar 

to Sample Form A–10(e) in appendix A 

of this part. 

(g) Credit card plans linked to prepaid 

accounts—(1) Prohibitions. A financial 

institution that establishes or holds a 

prepaid account shall not— 

(i) Prior to 30 calendar days after the 

prepaid account has been registered, 

open a credit card account subject to 

Regulation Z (12 CFR part 1026) for a 

holder of a prepaid account, or provide 

a solicitation or an application to the 

holder of the prepaid account to open a 

credit card account subject to 

Regulation Z, that would be accessed by 

an access device for the prepaid account 

where the access device is a credit card 

subject to Regulation Z or accessed by 

an account number that is a credit card 

under Regulation Z where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor. For 

purposes of this paragraph, the term 

solicitation means an offer by the person 

to open a credit or charge card account 

subject to Regulation Z that does not 

require the consumer to complete an 

application. A ‘‘firm offer of credit’’ as 

defined in section 603(l) of the Fair 

Credit Reporting Act (15 U.S.C. 

1681a(l)) for a credit or charge card is 

a solicitation for purposes of this 

paragraph. 

(ii) Allow a prepaid account access 

device to access a credit plan subject to 

Regulation Z (12 CFR part 1026) that 

would make the prepaid account access 

device into a credit card at any time 

prior to 30 calendar days after the 

prepaid account has been registered. 

(iii) Prior to 30 calendar days after the 

prepaid account has been registered, 

allow credit extensions from a credit 

plan subject to Regulation Z (12 CFR 


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part 1026) to be deposited in the 

prepaid account, where the credit plan 

is accessed by an account number that 

is a credit card under Regulation Z 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor. 

(2) Requirements. Where a credit card 

plan subject to Regulation Z (12 CFR 

part 1026) may be offered at any point 

to a consumer with respect to a prepaid 

account that is accessed by an access 

device for the prepaid account where 

the access device is a credit card under 

Regulation Z or is accessed by an 

account number that is a credit card 

where extensions of credit are permitted 

to be deposited directly only into 

particular prepaid accounts specified by 

the creditor, a financial institution that 

establishes or holds such a prepaid 

account may not apply different terms 

and conditions to a consumer’s account 

that do not relate to an extension of 

credit, carrying a credit balance, or 

credit availability, depending on 

whether the consumer elects to link 

such a credit card plan to the prepaid 

account. 

(h) Compliance dates—(1) Effective 

date for non-disclosure requirements 

and for disclosures on newly created 

prepaid account packaging or materials. 

Except as provided in paragraph (h)(2) 

of this section, the requirements of the 

Act and this subpart, as modified by this 

section, apply to prepaid accounts on 

and after [date that is nine months from 

the date a final rule is published in the 

Federal Register]. The requirements of 

paragraphs (b) and (f)(2) of this section 

apply to prepaid account packaging, 

access devices, and other physical 

materials that are manufactured, 

printed, or otherwise prepared in 

connection with a prepaid account on 

and after nine months, as well as to 

disclosures and other information made 

available to consumers online or by 

telephone after nine months. 

(2) Prohibition on sale or distribution 

of non-compliant prepaid account 

packaging access devices, or other 

physical materials. After [date that is 12 

months from the date a final rule is 

published in the Federal Register], all 

prepaid accounts and related packaging, 

access devices, and other physical 

materials that are offered, sold, or 

otherwise made available to consumers 

in connection with a prepaid account 

must comply with the requirements of 

this section. 

■ 8. Add § 1005.19 to read as follows: 

§ 1005.19 Internet posting of prepaid 

account agreements. 

(a) Definitions—(1) Agreement. For 

purposes of this section, ‘‘agreement’’ or 

‘‘prepaid account agreement’’ means the 

written document or documents 

evidencing the terms of the legal 

obligation, or the prospective legal 

obligation, between a prepaid account 

issuer and a consumer for a prepaid 

account. ‘‘Agreement’’ or ‘‘prepaid 

account agreement’’ also includes fee 

information, as defined in paragraph 

(a)(3) of this section. 

(2) Amends. For purposes of this 

section, an issuer ‘‘amends’’ an 

agreement if it makes a substantive 

change (an ‘‘amendment’’) to the 

agreement. A change is substantive if it 

alters the rights or obligations of the 

issuer or the consumer under the 

agreement. Any change in the fee 

information, as defined in paragraph 

(a)(3) of this section, is deemed to be 

substantive. 

(3) Fee information. For purposes of 

this section, ‘‘fee information’’ means 

the information required to be disclosed 

by § 1005.18(b)(2)(ii). 

(4) Issuer. For purposes of this 

section, ‘‘issuer’’ or ‘‘prepaid account 

issuer’’ means the entity to which a 

consumer is legally obligated, or would 

be legally obligated, under the terms of 

a prepaid account agreement. 

(5) Offers. For purposes of this 

section, an issuer ‘‘offers’’ or ‘‘offers to 

the public’’ an agreement if the issuer 

solicits applications for or otherwise 

makes available prepaid accounts that 

would be subject to that agreement. 

(6) Open account. For purposes of this 

section, a prepaid account is an ‘‘open 

account’’ or ‘‘open prepaid account’’ if 

(i) there is an outstanding balance in the 

account; (ii) the consumer can load 

funds to the account even if the account 

does not currently hold a balance; or 

(iii) the consumer can access credit 

through a credit plan that would be a 

credit card account under Regulation Z, 

12 CFR part 1026 that is offered in 

connection with a prepaid account. A 

prepaid account that has been 

suspended temporarily (for example, 

due to a report by the consumer of 

unauthorized use of the card) is 

considered an ‘‘open account’’ or ‘‘open 

prepaid account.’’ 

(7) Prepaid account. For purposes of 

this section, ‘‘prepaid account’’ means a 

prepaid account as defined in 

§ 1005.2(b)(3). 

(b) Submission of agreements to the 

Bureau—(1) Quarterly submissions. An 

issuer must make quarterly submissions 

to the Bureau, in the form and manner 

specified by the Bureau. Quarterly 

submissions must be sent to the Bureau 

no later than the first business day on 

or after January 31, April 30, July 31, 

and October 31 of each year. Each 

submission must contain: 

(i) Identifying information about the 

issuer and the agreements submitted, 

including the issuer’s name, address, 

and identifying number (such as an 

RSSD ID number or tax identification 

number), and the name of the program 

manager, if any, for each agreement; 

(ii) The prepaid account agreements 

that the issuer offered to the public as 

of the last business day of the preceding 

calendar quarter that the issuer has not 

previously submitted to the Bureau; 

(iii) Any prepaid account agreement 

previously submitted to the Bureau that 

was amended during the preceding 

calendar quarter and that the issuer 

offered to the public as of the last 

business day of the preceding calendar 

quarter, as described in paragraph (b)(2) 

of this section; and 

(iv) Notification regarding any 

prepaid account agreement previously 

submitted to the Bureau that the issuer 

is withdrawing, as described in 

paragraphs (b)(3), (4)(iii), and (5)(iii) of 

this section. 

(2) Amended agreements. If a prepaid 

account agreement has been submitted 

to the Bureau, the agreement has not 

been amended, and the issuer continues 

to offer the agreement to the public, no 

additional submission regarding that 

agreement is required. If a prepaid 

account agreement that previously has 

been submitted to the Bureau is 

amended, and the issuer offered the 

amended agreement to the public as of 

the last business day of the calendar 

quarter in which the change became 

effective, the issuer must submit the 

entire amended agreement to the 

Bureau, in the form and manner 

specified by the Bureau, by the first 

quarterly submission deadline after the 

last day of the calendar quarter in which 

the change became effective. 

(3) Withdrawal of agreements. If an 

issuer no longer offers to the public a 

prepaid account agreement that 

previously has been submitted to the 

Bureau, the issuer must notify the 

Bureau, in the form and manner 

specified by the Bureau, by the first 

quarterly submission deadline after the 

last day of the calendar quarter in which 

the issuer ceased to offer the agreement. 

(4) De minimis exception. (i) An 

issuer is not required to submit any 

prepaid account agreements to the 

Bureau if the issuer had fewer than 

3,000 open prepaid accounts as of the 

last business day of the calendar 

quarter. 

(ii) If an issuer that previously 

qualified for the de minimis exception 


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ceases to qualify, the issuer must begin 

making quarterly submissions to the 

Bureau no later than the first quarterly 

submission deadline after the date as of 

which the issuer ceased to qualify. 

(iii) If an issuer that did not 

previously qualify for the de minimis 

exception newly qualifies for the de 

minimis exception, the issuer must 

continue to make quarterly submissions 

to the Bureau until the issuer notifies 

the Bureau that it is withdrawing all 

agreements it previously submitted to 

the Bureau. 

(5) Product testing exception. (i) An 

issuer is not required to submit to the 

Bureau a prepaid account agreement if, 

as of the last business day of the 

calendar quarter, the agreement: 

(A) Is offered as part of a product test 

offered to only a limited group of 

consumers for a limited period of time; 

(B) Is used for fewer than 3,000 open 

prepaid accounts; and 

(C) Is not offered to the public other 

than in connection with such a product 

test. 

(ii) If an agreement that previously 

qualified for the product testing 

exception ceases to qualify, the issuer 

must submit the agreement to the 

Bureau no later than the first quarterly 

submission deadline after the date as of 

which the agreement ceased to qualify. 

(iii) If an agreement that did not 

previously qualify for the product 

testing exception newly qualifies for the 

exception, the issuer must continue to 

make quarterly submissions to the 

Bureau with respect to that agreement 

until the issuer notifies the Bureau that 

the agreement is being withdrawn. 

(6) Form and content of agreements 

submitted to the Bureau—(i) Form and 

content generally. (A) Each agreement 

must contain the provisions of the 

agreement and the fee information in 

effect as of the last business day of the 

preceding calendar quarter. 

(B) Agreements must not include any 

personally identifiable information 

relating to any consumer, such as name, 

address, telephone number, or account 

number. 

(C) The following are not deemed to 

be part of the agreement for purposes of 

this section, and therefore are not 

required to be included in submissions 

to the Bureau: 

(1) Ancillary disclosures required by 

state or Federal law, such as affiliate 

marketing notices, privacy policies, or 

disclosures under the E-Sign Act; 

(2) Solicitation or marketing 

materials; 

(3) Periodic statements; and 

(4) Documents that may be sent to the 

consumer along with the prepaid 

account or prepaid account agreement 

such as a cover letter, a validation 

sticker on the card, or other information 

about card security. 

(D) Agreements must be presented in 

a clear and legible font. 

(ii) Fee information. Fee information 

must be set forth either in the prepaid 

account agreement or in a single 

addendum to that agreement. The 

agreement or addendum thereto must 

contain all of the fee information, as 

defined by paragraph (a)(3) of this 

section. 

(iii) Integrated agreement. Issuers may 

not provide provisions of the agreement 

or fee information to the Bureau in the 

form of change-in-terms notices or 

riders (other than the optional fee 

information addendum). Changes in 

provisions or fee information must be 

integrated into the text of the agreement, 

or the optional fee information 

addendum, as appropriate. 

(7) Bureau posting of prepaid account 

agreements. The Bureau shall receive 

the prepaid account agreements 

submitted by prepaid account issuers 

pursuant to paragraph (b) of this section, 

and shall post such agreements on a 

publicly-available Web site established 

and maintained by the Bureau. 

(c) Posting of agreements offered to 

the public. (1) Except as provided 

below, an issuer must post and maintain 

on its publicly available Web site the 

prepaid account agreements that the 

issuer is required to submit to the 

Bureau under paragraph (b) of this 

section. 

(2) Agreements posted pursuant to 

this paragraph (c) must conform to the 

form and content requirements for 

agreements submitted to the Bureau 

specified in paragraphs (b)(6)(i)(B) 

through (D) of this section. 

(3) Agreements posted pursuant to 

this paragraph (c) must be accurate and 

updated whenever changes are made. 

(4) Agreements posted pursuant to 

this paragraph (c) may be posted in any 

electronic format that is readily usable 

by the general public. Agreements must 

be placed in a location that is prominent 

and readily accessible by the public and 

must be accessible without submission 

of personally identifiable information. 

(d) Agreements for all open 

accounts—(1) Availability of individual 

consumer’s prepaid account agreement. 

With respect to any open prepaid 

account, unless the prepaid account 

agreement is provided to the Bureau 

pursuant to paragraph (b) of this section 

and posted to the issuer’s publicly 

available Web site pursuant to 

paragraph (c) of this section, an issuer 

must either: 

(i) Post and maintain the consumer’s 

agreement on its Web site; or 

(ii) Promptly provide a copy of the 

consumer’s agreement to the consumer 

upon the consumer’s request. If the 

issuer makes an agreement available 

upon request, the issuer must provide 

the consumer with the ability to request 

a copy of the agreement by telephone. 

The issuer must send to the consumer 

a copy of the consumer’s prepaid 

account agreement no later than five 

business days after the issuer receives 

the consumer’s request. 

(2) Form and content of agreements. 

(i) Except as provided in this paragraph 

(d), agreements posted on the issuer’s 

Web site pursuant to paragraph (d)(1)(i) 

of this section or sent to the consumer 

upon the consumer’s request pursuant 

to paragraph (d)(1)(ii) of this section 

must conform to the form and content 

requirements for agreements submitted 

to the Bureau as specified in paragraph 

(b)(6) of this section. 

(ii) If the issuer posts an agreement on 

its Web site under paragraph (d)(1)(i) of 

this section, the agreement may be 

posted in any electronic format that is 

readily usable by the general public and 

must be placed in a location that is 

prominent and readily accessible to the 

consumer. 

(iii) Agreements posted or otherwise 

provided pursuant to this paragraph (d) 

may contain personally identifiable 

information relating to the consumer, 

such as name, address, telephone 

number, or account number, provided 

that the issuer takes appropriate 

measures to make the agreement 

accessible only to the consumer or other 

authorized persons. 

(iv) Agreements posted or otherwise 

provided pursuant to this paragraph (d) 

must set forth the specific provisions 

and fee information applicable to the 

particular consumer. 

(v) Agreements posted pursuant to 

paragraph (d)(1)(i) of this section must 

be accurate and updated whenever 

changes are made. Agreements provided 

upon consumer request pursuant to 

paragraph (d)(1)(ii) of this section must 

be accurate as of the date the agreement 

is mailed or electronically delivered to 

the consumer. 

(vi) Agreements provided upon 

consumer request pursuant to paragraph 

(d)(1)(ii) of this section must be 

provided by the issuer in paper form, 

unless the consumer agrees to receive 

the agreement electronically. 

(e) E-Sign Act requirements. Except as 

otherwise provided in this section, 

issuers may provide prepaid account 

agreements in electronic form under 

paragraphs (c) and (d) of this section 

without regard to the consumer notice 

and consent requirements of section 

101(c) of the Electronic Signatures in 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
77306 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

Global and National Commerce Act (ESign Act) (15 U.S.C. 7001 et seq.). 

■ 9. Appendix A to part 1005 is 

amended by revising A–5 and A–7, 

adding new A–10 and reserving A–11 

through A–29 as follows: 

Appendix A to Part 1005—Model 

Disclosure Clauses and Forms 

* * * * * 

A–5—MODEL CLAUSES FOR 

GOVERNMENT AGENCIES (§ 1005.15(e)(1) 

AND (2)) 

(a) Disclosure by government agencies of 

information about obtaining account 

information for government benefit accounts 

(§ 1005.15(e)(1)(i)). 

You may obtain information about the 

amount of benefits you have remaining by 

calling [telephone number]. That information 

is also available [on the receipt you get when 

you make a transfer with your card at (an 

ATM) (a POS terminal)] [when you make a 

balance inquiry at an ATM] [when you make 

a balance inquiry at specified locations]. This 

information, along with an 18 month history 

of account transactions, is also available 

online at [Internet address]. 

You also have the right to obtain at least 

18 months of written history of account 

transactions by calling [telephone number], 

or by writing to us at [address]. You will not 

be charged a fee for this information unless 

you request it more than once per month. 

[Optional: Or you may request a written 

history of account transactions by contacting 

your caseworker.] 

(b) Disclosure of error resolution 

procedures for government agencies that do 

not provide periodic statements 

(§ 1005.15(e)(1)(ii) and (e)(2)). 

In Case of Errors or Questions About Your 

Electronic Transfers Telephone us at 

[telephone number] Write us at [insert 

address] [or email us at [insert email 

address]] as soon as you can, if you think an 

error has occurred in your [agency’s name for 

program] account. We must allow you to 

report an error until 60 days after the earlier 

of the date you electronically access your 

account, if the error could be viewed in your 

electronic history, or the date we sent the 

FIRST written history on which the error 

appeared. You may request a written history 

of your transactions at any time by calling us 

at [telephone number] or writing us at 

[address] [optional: Or by contacting your 

caseworker]. You will need to tell us: 

• Your name and [case] [file] number. 

• Why you believe there is an error, and 

the dollar amount involved. 

• Approximately when the error took 

place. 

If you tell us orally, we may require that 

you send us your complaint or question in 

writing within 10 business days. 

We will determine whether an error 

occurred within 10 business days after we 

hear from you and will correct any error 

promptly. If we need more time, however, we 

may take up to 45 days to investigate your 

complaint or question. If we decide to do 

this, we will credit your account within 10 

business days for the amount you think is in 

error, so that you will have the use of the 

money during the time it takes us to 

complete our investigation. If we ask you to 

put your complaint or question in writing 

and we do not receive it within 10 business 

days, we may not credit your account. 

For errors involving new accounts, pointof-sale, or foreign-initiated transactions, we 

may take up to 90 days to investigate your 

complaint or question. For new accounts, we 

may take up to 20 business days to credit 

your account for the amount you think is in 

error. 

We will tell you the results within three 

business days after completing our 

investigation. If we decide that there was no 

error, we will send you a written 

explanation. 

You may ask for copies of the documents 

that we used in our investigation. 

If you need more information about our 

error resolution procedures, call us at 

[telephone number][the telephone number 

shown above]. 

* * * * * 

A–7—Model Clauses for Financial 

Institutions Offering Prepaid Accounts 

(§ 1005.18(d) and (e)(3)) 

(a) Disclosure by financial institutions of 

information about obtaining account 

information for prepaid accounts 

(§ 1005.18(d)(1)(i)). 

You may obtain information about the 

amount of money you have remaining in 

your prepaid account by calling [telephone 

number]. This information, along with an 18 

month history of account transactions, is also 

available online at [Internet address]. 

You also have the right to obtain at least 

18 months of written history of account 

transactions by calling [telephone number], 

or by writing us at [address]. You will not be 

charged a fee for this information unless you 

request it more than once per month. 

(b) Disclosure of error-resolution 

procedures for financial institutions that do 

not provide periodic statements 

(§ 1005.18(d)(1)(ii) and (d)(2)). 

In Case of Errors or Questions About Your 

Prepaid Account Telephone us at [telephone 

number] or Write us at [address] [or email us 

at [email address]] as soon as you can, if you 

think an error has occurred in your prepaid 

account. We must allow you to report an 

error until 60 days after the earlier of the date 

you electronically access your account, if the 

error could be viewed in your electronic 

history, or the date we sent the FIRST written 

history on which the error appeared. You 

may request a written history of your 

transactions at any time by calling us at 

[telephone number] or writing us at 

[address]. You will need to tell us: 

Your name and [prepaid account] number. 

Why you believe there is an error, and the 

dollar amount involved. 

Approximately when the error took place. 

If you tell us orally, we may require that 

you send us your complaint or question in 

writing within 10 business days. 

We will determine whether an error 

occurred within 10 business days after we 

hear from you and will correct any error 

promptly. If we need more time, however, we 

may take up to 45 days to investigate your 

complaint or question. If we decide to do 

this, we will credit your account within 10 

business days for the amount you think is in 

error, so that you will have the money during 

the time it takes us to complete our 

investigation. If we ask you to put your 

complaint or question in writing and we do 

not receive it within 10 business days, we 

may not credit your account. 

For errors involving new accounts, pointof-sale, or foreign-initiated transactions, we 

may take up to 90 days to investigate your 

complaint or question. For new accounts, we 

may take up to 20 business days to credit 

your account for the amount you think is in 

error. 

We will tell you the results within three 

business days after completing our 

investigation. If we decide that there was no 

error, we will send you a written 

explanation. 

You may ask for copies of the documents 

that we used in our investigation. 

If you need more information about our 

error-resolution procedures, call us at 

[telephone number] [the telephone number 

shown above] [or visit [Internet address]]. 

(c) Warning regarding unregistered prepaid 

accounts (§ 1005.18(e)(3)). 

It is important to register your prepaid 

account as soon as possible. Until you 

register your account, we are not required to 

research or resolve errors regarding your 

account. To register your account, go to 

[Internet address] or call us at [telephone 

number]. We will ask you for identifying 

information about yourself (including your 

full name, address, date of birth, and [Social 

Security Number] [government-issued 

identification number]), so that we can verify 

your identity. Once we have done so, we will 

address your complaint or question as set 

forth above. 

* * * * * 

A–10—Model Forms and Sample Forms for 

Financial Institutions Offering Prepaid 

Accounts (§ 1005.15(c)(2) and § 1005.18(b)) 


tkelley on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77307 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.005</GPH>

A-10(a)- Model Form for Short Form Disclosures for Government Benefit Accounts 

(§ 1005.15(c)(2) and§ 1005.18(b)(3)(iii)(A)) 

Monthly ATM withdrawal reload 

$0 $0with $0 in.n<>hA.tnrlr N/A 

$0 withPIN $2.00 out-of-network 

ATM balance inquiry (in-network or out-of-network) $0 or $1.00* 

Customer service $1 percall 

Inactivity (no transactions for 3 months) 

[Incidence-based fee] 

[Incidence-based $3.95 

[Incidence-based fee] $1.00 

*Fees can be lower depending on how and where this card is used. 

We charge 6 other fees not listed here. 

Company your 

For more information about prepaid cards, visit cfpb.govlprepaids. 
77308 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.006</GPH>

A-JO(b)- Model Form for Short Form Disclosures for Payroll Card Accounts 

(§ 1005.18(b)(2)(i)(A) and§ 1005.18(b)(3)(iii)(A)) 

Monthly 

$0 

ATM 

purchase 

$0with 

$0 with PIN 

ATM withdrawal 

$0 in-network 

$2.00 out-of-network 

Cash reload 

N/A 

$0 or $1.00* 

Customer service .50 per 

Inactivity (no transactions for 3 months) $4.50 per month 

[Incidence-based fee] $2.95 

[Incidence-based fee) $3.95 

[Incidence-based fee] $1.00 

can be lower depending on how where this card is used. 

We charge 6 other fees not listed here. 

XYZ your 

For more information about prepaid visit cfpb.govlprepaids. 
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77309 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.007</GPH>

A-10(c)- Model Form for Short Form Disclosures for Prepaid Accounts With Overdraft 

Services and Other Credit Features(§ 1005.18(b)(2)(i)(B)(9) and§ 1005.18(b)(3)(iii)(A)) 

Monthly fee 

$4.95' 

Per purchase 

$0wrlh 

$0 

This card may charge credit-related fees. 

ATM balance inquiry 1irN1alWOrkoroot .. >l·n~rtwoirk) 

Customer service 

Inactivity 

[Incidence-based fee] 

(Incidence-based fee] 

[Incidence-based fee] 

'Fees 

Cash reload 

$2.00' 

$0 or$1.00 

$1.50 

$4.50 

$2.95 

$3.95 

$1.00 

this card used, 

does provide IFDIICUrJCUSIR ""'ur«nc:e. 

For more in!Ormalion about 

A-tO( d)- Model Form for Short Form Disclosures for Prepaid Accounts Without 

Overdraft Services and Other Credit Features(§ 1005.18(b)(2)(i)(B)(9) and 

§ 1005.18(b)(3)(iii)(A)) 

Monthly lee 

$4.95" 

Per purchase 

$0wlth 

$0 

ATM withdrawal Cash reload 

$0 $2.00' 

$2.00 oU!·Ol·networi<. 

No overdraft or credit-related fees. 

ATM balance Inquiry 

Customer service 

(Incidence-based feej $2.95 

[Incidence-based lee} 

,,,,,,, '''''" ""''' 

[Incidence-based feel $1,00 

'Fees 

We charge 6 other fees not listed here. 

Find details and tor all lees and services inside the package 

80(1.234·5678 bit.ly/XYZprepaids. 

XYZ Prepaid Company to protect your 

fFOICJINCUSlF] in$uranDo. 
77310 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.009</GPH>

A-10(e) Sample Form for Long Form Disclosures for Prepaid Accounts 

(§ 1 005.18(b )(3)(iii)(A)) 

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I i s2s,oo 1 

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This card doos 001 provide fFDICJ[NCUSIFJ insurance, 

Contact XYZ Prepaid Company 

'"""~""''~"''~'"'"'"''~''""-'''"'~"'""" '"''"~···~~·~~·~""''""~ "'"'"""' '"'"%"''''"-''] 

l ···~··; 

i 

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i 

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I 

For more info about prepaid cards, 

consumeninanre.govlcomplaint 

consumeninance.gov!prepaids. If ,ou have a complaint about prepaid cards, call H355·411 ·2372 or visit 
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77311 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.010</GPH>

A-1 O(t) -Model Form for Short Form Disclosures for Prepaid Accounts With Multiple 

Service Plans (§ 1 005.18(b )(3)(iii)(B)( 1)) 

.ATM witl1drawa! $1.95" ·~~~~····~··-~··~~~~~·-~~~~~~········~~··~······ 

$0 

$1.00' 

Customer service $1.00 per call 

inactivity (no transactions for 3 months) $1.95 per month ~·-·~·~·~···~~··~-~.~~·····~~··"'·······~·~· 
77312 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 


tkelley on DSK3SPTVN1PROD with PROPOSALS2EP23DE14.011</GPH>

A-lO(g) Sample Form for Long Form Disclosures for Prepaid Accounts With Multiple 

Service Plans(§ 1005.18(b)(3)(iii)(B)(2)) 

Plan lee 

This card doos oot provide [FDICJ[NCIJSIFJ 

Contact XYZ Prepaid Company by calling HJ00-555-5555, ai 555 Stroot Name, Anylown, 

For Info about prepaid cards, visit cor~Swmeicfim~nce,g,ov,j"ejr.>ak1s, 

consumedinanco.go,dcomplaint 
Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 77313 

A–11 through A–29 [Reserved] 

* * * * * 

■ 10. In Supplement I to part 1005: 

■ a. Under Section 1005.2 Definitions: 

■ i. In subsection 2(b) Account, 

paragraph 2 is revised and paragraph 3 

is removed. 

■ ii. Add subsection Paragraph 

2(b)(3)(i). 

■ iii. Add subsection Paragraph 

2(b)(3)(ii). 

■ iv. Add subsection Paragraph 

2(b)(3)(iv). 

■ b. Under Section 1005.10 

Preauthorized Transfers: 

■ i. In subsection 10(e) Compulsory Use: 

■ A. Revise subsection 10(e)(1) Credit. 

■ B. In subsection 10(e)(2) Employment 

or Government Benefit, paragraph 2 is 

added. 

■ c. Under Section 1005.12—Relation to 

Other Laws: 

■ i. Revise subsection 12(a) Relation to 

Truth in Lending. 

■ ii. In subsection 12(b) Preemption of 

Inconsistent State Laws, paragraph 2 is 

revised and paragraphs 3 and 4 are 

added. 

■ d. New Section 1005.15 Electronic 

Fund Transfer of Government Benefits is 

added. 

■ e. Under Section 1005.18 

Requirements for Financial Institutions 

Offering Payroll Card Accounts, the 

heading is revised. 

■ f. Under revised Section 1005.18 

Requirements for Financial Institutions 

Offering Prepaid Accounts: 

■ i. In subsection 18(a) Coverage, 

paragraphs 1 and 2 are revised. 

■ ii. Revise subsection 18(b), including 

the subheading. 

■ iii. Revise subsection 18(c), including 

the subheading. 

■ iv. Add subsection 18(e) Modified 

Limitations on Liability and Error 

Resolution Requirements. 

■ v. Add subsection 18(g) Credit Card 

Plans Linked to Prepaid Accounts. 

■ g. New Section 1005.19 Internet 

Posting of Prepaid Account Agreements 

is added. 

■ h. Under Section 1005.30 Remittance 

Transfer Definitions: 

■ i. In subsection 30(g) Sender, 

paragraph 3 is revised. 

The revisions, additions, and 

removals read as follows: 

Supplement I to Part 1005—Official 

Interpretations 

Section 1005.2—Definitions 

* * * * * 

2(b) Account 

* * * * * 

2. Examples of accounts not covered by 

Regulation E (12 CFR part 1005) include: 

i. Profit-sharing and pension accounts 

established under a trust agreement, which 

are exempt under § 1005.2(b)(2). 

ii. Escrow accounts, such as those 

established to ensure payment of items such 

as real estate taxes, insurance premiums, or 

completion of repairs or improvements. 

iii. Accounts for accumulating funds to 

purchase U.S. savings bonds. 

* * * * * 

Paragraph 2(b)(3)(i) 

1. Debit card includes prepaid card. For 

purposes of subpart A, except for § 1005.17, 

the term debit card also includes a prepaid 

card. 

2. Established primarily for personal, 

family, or household purposes. Section 

1005.2(b)(3) applies only to cards, codes, or 

other devices that are acquired by or 

provided to a consumer primarily for 

personal, family, or household purposes. For 

additional guidance, see comments 20(a)–4 

and –5. 

3. Issued on a prepaid basis. To be issued 

on a prepaid basis, a prepaid account must 

be loaded with funds when it is first 

provided to the consumer for use. For 

example, if a consumer purchases a prepaid 

account and provides funds that are loaded 

onto a card at the time of purchase, the 

prepaid account is issued on a prepaid basis. 

A prepaid account offered for sale in a retail 

store is not issued on a prepaid basis until 

purchased by the consumer. 

4. Capable of being loaded with funds. A 

prepaid account that is not issued on a 

prepaid basis but is capable of being loaded 

with funds thereafter includes a prepaid card 

issued to a consumer with a zero balance to 

which funds may be loaded by the consumer 

or a third party subsequent to issuance. This 

does not include a product that can never 

store funds, such as a digital wallet that only 

holds payment credentials for other accounts. 

5. Issued on a prepaid basis or capable of 

being loaded with funds. To satisfy 

§ 1005.2(b)(3)(i)(A), a prepaid account must 

either be issued on a prepaid basis or be 

capable of being loaded with funds. This 

means that the prepaid account must be 

capable of holding funds, rather than merely 

acting as a pass-through vehicle. For 

example, if a product is only capable of 

storing a consumer’s payment credentials for 

other accounts but is incapable of having 

funds stored on it, such a product is not a 

prepaid account. However, if a product 

allows a consumer to transfer funds, which 

can be stored before the consumer designates 

a destination for the funds, the product 

satisfies § 1005.2(b)(3)(i)(A). 

6. Not required to be reloadable. Prepaid 

accounts need not be reloadable by the 

consumer or a third party. 

7. Redeemable upon presentation at 

multiple, unaffiliated merchants. For 

guidance, see comments 20(a)(3)–1 and –2. 

8. Person-to-person transfers. A prepaid 

account capable of person-to-person transfers 

is an account that allows a consumer to send 

funds by electronic fund transfer to another 

consumer or business. An account may 

qualify as a prepaid account if it permits 

person-to-person transfers even if it is neither 

redeemable upon presentation at multiple, 

unaffiliated merchants for goods or services, 

nor usable at automated teller machines. A 

transaction involving a store gift card would 

not be a person-to-person transfer if it could 

only be used to make payments to the 

merchant or affiliated group of merchants on 

whose behalf the card was issued. 

9. Marketed and labeled as a gift card or 

gift certificate. Section 1005.2(b)(3)(i)(C) 

excludes, among other things, reloadable 

general-use prepaid cards that are both 

marketed and labeled as gift cards or gift 

certificates, whereas § 1005.20(b)(2) excludes 

such products that are marketed or labeled as 

gift cards or gift certificates. Comment 

20(b)(2)–2 describes, in part, a networkbranded general purpose reloadable card that 

is principally advertised as a less-costly 

alternative to a bank account but is promoted 

in a television, radio, newspaper, or internet 

advertisement, or on signage as ‘‘the perfect 

gift’’ during the holiday season. For purposes 

of § 1005.20, such a product would be 

considered marketed as a gift card or gift 

certificate because of this occasional holiday 

marketing activity. For purposes of 

§ 1005.2(b)(3)(i)(C), however, such a product 

would not be considered to be both marketed 

and labeled as a gift card or gift certificate 

and thus would be covered by the definition 

of prepaid account. 

Paragraph 2(b)(3)(ii) 

1. Certain employment-related cards not 

covered as payroll card accounts. The term 

‘‘payroll card account’’ does not include a 

card used solely to disburse incentive-based 

payments (other than commissions which 

can represent the primary means through 

which a consumer is paid), such as bonuses, 

which are unlikely to be a consumer’s 

primary source of salary or other 

compensation. The term also does not 

include a card used solely to make 

disbursements unrelated to compensation, 

such as petty cash reimbursements or travel 

per diem payments. Similarly, a payroll card 

account does not include a card that is used 

in isolated instances to which an employer 

typically does not make recurring payments, 

such as when providing final payments or in 

emergency situations when other payment 

methods are unavailable. While such cards 

would not be payroll card accounts, such 

cards could constitute prepaid accounts 

generally, provided the other conditions of 

the definition of that term in § 1005.2(b)(3) 

are satisfied. In addition, all transactions 

involving the transfer of funds to or from a 

payroll card account or prepaid account are 

covered by the regulation, even if a particular 

transaction involves payment of a bonus, 

other incentive-based payment, or 

reimbursement, or the transaction does not 

represent a transfer of wages, salary, or other 

employee compensation. 

Paragraph 2(b)(3)(iv) 

1. Excluded health care and employee 

benefit related prepaid products. For 

purposes of § 1005.2(b)(3)(iv), ‘‘health 

savings account’’ means a health savings 

account as defined in 26 U.S.C. 223(d); 

‘‘flexible spending account’’ means a 

cafeteria plan which provides health benefits 

or a health flexible spending arrangement 

pursuant to 26 U.S.C. 125; ‘‘medical savings 

account’’ means an Archer MSA as defined 

in 26 U.S.C. 220(d); and ‘‘health 

reimbursement arrangement’’ means a health 


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reimbursement arrangement which is treated 

as employer-provided coverage under an 

accident or health plan for purposes of 26 

U.S.C. 106. 

* * * * * 

Section 1005.10 Preauthorized Transfers 

* * * * * 

10(e) Compulsory Use 

10(e)(1) Credit 

1. General rule for loan payments. 

Creditors may not require repayment of loans 

by electronic means on a preauthorized, 

recurring basis. 

2. Overdraft credit plans not tied to 

prepaid accounts. Section 1005.10(e)(1) 

provides an exception from the general rule 

for overdraft credit plans other than for a 

credit plan that is a credit card account 

accessed by an access device for a prepaid 

account where the access device is a credit 

card under Regulation Z, or is accessed by an 

account number that is a credit card under 

Regulation Z where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. See Regulation Z 12 CFR 

1026.2(a)(15)(i) and related commentary for 

the definition of credit card. A financial 

institution may therefore require the 

automatic repayment of an overdraft credit 

plan not tied to a prepaid account even if the 

overdraft extension is charged to an open-end 

account that may be accessed by the 

consumer in ways other than by overdrafts. 

3. Applicability to credit accessed by 

access devices for prepaid accounts. Under 

§ 1005.10(e)(1), creditors must not require by 

electronic means on a preauthorized, 

recurring basis repayment of credit extended 

under a credit plan that is a credit card 

account accessed by an access device for a 

prepaid account where the access device is 

a credit card under Regulation Z or by an 

account number that is a credit card under 

Regulation Z where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. See Regulation Z 12 CFR 

1026.2(a)(15)(i) and related commentary for 

the definition of credit card. The prohibition 

in § 1005.10(e)(1) applies to any credit 

extended under a credit card plan as 

described above, including credit arising 

from transactions not using the credit card 

itself but taking place under plans that 

involve credit cards. For example, if the 

consumer writes a check that accesses a 

credit card plan as discussed above, the 

resulting credit is subject to the prohibition 

in § 1005.10(e)(1) since it is incurred through 

a credit card plan, even though the consumer 

did not use an associated credit card. An 

access device is not a credit card under 

Regulation Z 12 CFR 1026.2(a)(15)(i), 

comment 2(a)(15)–2.i.F if the access device 

only accesses credit that is not subject to any 

finance charge as defined in Regulation Z 

§ 1026.4 or any fee described in Regulation 

Z § 1026.4(c) and is not payable by written 

agreement in more than four installments. 

Thus, the prohibition in § 1005.10(e)(1) does 

not apply to credit extended under an 

overdraft credit plan that is not a credit card 

account. An overdraft credit plan is not a 

credit card account if it is accessed only by 

a prepaid card that only accesses credit that 

is not subject to any finance charge as 

defined in Regulation Z § 1026.4 or any fee 

described in Regulation Z § 1026.4(c) and is 

not payable by written agreement in more 

than four installments. 

i. Automatic periodic repayment plans for 

credit accessed by access devices for prepaid 

accounts. Under Regulation Z 12 CFR 

1026.12(d)(1), a card issuer may not take any 

action, either before or after termination of 

credit card privileges, to offset a cardholder’s 

indebtedness arising from a consumer credit 

transaction under the relevant credit card 

plan against funds of the cardholder held on 

deposit with the card issuer. Under 

Regulation Z 12 CFR 1026.12(d)(3), with 

respect to credit card accounts that are 

accessed by prepaid cards or by account 

numbers where extensions of credit are 

permitted to be deposited directly only in 

particular prepaid accounts specified by the 

creditor, a card issuer generally is not 

prohibited under § 1026.12(d) from 

periodically deducting all or part of the 

cardholder’s credit card debt from a deposit 

account (such as a prepaid account) held 

with the card issuer (subject to the 

limitations of Regulation Z 12 CFR 

1026.13(d)(1)) under a plan that is authorized 

in writing by the cardholder, so long as the 

creditor does not deduct all or part of the 

cardholder’s credit card debt from the 

deposit account (such as a prepaid account) 

more frequently than once per calendar 

month, pursuant to such a plan. A card issuer 

for such credit card accounts is prohibited 

under § 1026.12(d) from automatically 

deducting all or part of the cardholder’s 

credit card debt from a deposit account (such 

as a prepaid account) held with the card 

issuer more frequently than once per 

calendar month, such as on a daily or weekly 

basis, or whenever deposits are made to the 

deposit account. Section 1005.10(e)(1) further 

restricts the card issuer from requiring 

payment from a deposit account (including a 

prepaid account) of credit card balances by 

electronic means on a preauthorized, 

recurring basis where the credit card account 

is accessed by an access device for a prepaid 

account, or is accessed by an account number 

that is a credit card under Regulation Z 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor. 

4. Incentives. A creditor may offer a 

program with a reduced annual percentage 

rate or other cost-related incentive for an 

automatic repayment feature, provided the 

program with the automatic payment feature 

is not the only loan program offered by the 

creditor for the type of credit involved. 

Examples include: 

i. Mortgages with graduated payments in 

which a pledged savings account is 

automatically debited during an initial 

period to supplement the monthly payments 

made by the borrower. 

ii. Mortgage plans calling for preauthorized 

biweekly payments that are debited 

electronically to the consumer’s account and 

produce a lower total finance charge. 

10(e)(2) Employment or Government Benefit 

* * * * * 

2. Government benefit. A government 

agency may not require consumers to receive 

government benefits by direct deposit to any 

particular institution. A government agency 

may require direct deposit of benefits by 

electronic means if recipients are allowed to 

choose the institution that will receive the 

direct deposit. Alternatively, a government 

agency may give recipients the choice of 

having their benefits deposited at a particular 

institution (designated by the government 

agency) or receiving their benefits by another 

means. 

* * * * * 

Section 1005.12 Relation to Other Laws 

12(a) Relation to Truth in Lending 

1. Issuance rules for access devices other 

than access devices for prepaid accounts. For 

access devices that also constitute credit 

cards (other than access devices for prepaid 

accounts), the issuance rules of Regulation E 

apply if the only credit feature is a 

preexisting credit line attached to the asset 

account to cover overdrafts (or to maintain a 

specified minimum balance) or an overdraft 

service, as defined in § 1005.17(a). Regulation 

Z (12 CFR part 1026) rules apply if there is 

another type of credit feature; for example, 

one permitting direct extensions of credit 

that do not involve the asset account. 

2. Overdraft services (other than for access 

devices for prepaid accounts). The addition 

of an overdraft service, as that term is defined 

in § 1005.17(a), to an accepted access device 

(other than an access device for a prepaid 

account) does not constitute the addition of 

a credit feature subject to Regulation Z. 

Instead, the provisions of Regulation E apply, 

including the liability limitations (§ 1005.6) 

and the requirement to obtain consumer 

consent to the service before any fees or 

charges for paying an overdraft may be 

assessed on the account (§ 1005.17). 

3. No initial issuance of prepaid access 

devices with credit card accounts subject to 

Regulation Z. An access device for a prepaid 

account may not access a credit card account 

under Regulation Z when the access device 

is issued. Section 1005.18(g)(1)(ii) prohibits a 

financial institution from allowing an access 

device for a prepaid account to access a 

credit plan subject to Regulation Z (12 CFR 

part 1026) that would make the access device 

into a credit card at any time prior to 30 

calendar days after the prepaid account is 

registered. Further, § 1005.18(g)(1)(i) also 

prohibits a financial institution from opening 

a credit card account subject to Regulation Z 

(12 CFR part 1026) for a holder of a prepaid 

account, or providing a solicitation or 

application to open a credit card account to 

the holder of a prepaid account, prior to 30 

calendar days after the prepaid account has 

been registered, that would be accessed by 

the access device for a prepaid account that 

is a credit card. Regulation Z, 12 CFR 

1026.12(h), also requires a credit card issuer 

to wait at least 30 calendar days from prepaid 

account registration before opening a credit 

card account for a holder of the prepaid 

account, or providing a solicitation or 

application to the holder of the prepaid 

account to open a credit card account, that 

would be accessed by the access device for 

a prepaid account that is a credit card. 


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4. Addition of a credit card account to an 

access device for a prepaid account. 

Regulation Z governs the addition of any 

credit feature or plan to an access device for 

a prepaid account where the access device 

also would be a credit card under Regulation 

Z (12 CFR part 1026). Regulation Z (12 CFR 

1026.2(a)(20), comment 2(a)(20)–2.ii) 

provides guidance on whether a program 

constitutes a credit plan. Regulation Z (12 

CFR 1026.2(a)(15)(i), comment 2(a)(15))–2) 

defines the term credit card and provides 

examples of cards or devices that are and are 

not credit cards. 

5. Determining applicable regulation 

related to liability and error resolution. i. For 

an account other than a prepaid account 

where credit is extended incident to an 

electronic fund transfer under an agreement 

to extend overdraft credit between the 

consumer and the financial institution, 

Regulation E’s liability limitations and error 

resolution provisions apply, in addition to 

§ 1026.13(d) and (g) of Regulation Z (which 

apply because of the extension of credit 

associated with the overdraft feature on the 

asset account). With respect to an account 

other than a prepaid account, incidental 

credit that is not extended under an 

agreement between the consumer and the 

financial institution where the financial 

institution agrees to extend credit is governed 

solely by the error resolution procedures in 

Regulation E and Regulation Z § 1026.13(d) 

and (g) do not apply. With respect to a 

prepaid account where credit is extended 

under a credit plan that is subject to 

Regulation Z subpart B, Regulation E’s 

liability limitations and error resolution 

provisions apply, in addition to Regulation Z 

§ 1026.13(d) and (g) (which apply because of 

the extension of credit associated with the 

overdraft feature on the asset account). A 

credit plan is subject to Regulation Z Subpart 

B if it is accessed by an access device that 

is a credit card under Regulation Z or if it is 

open-end credit under Regulation Z. An 

access device for a prepaid account is not a 

credit card if the access device only accesses 

credit that is not subject to any finance 

charge described in Regulation Z § 1026.4 or 

any fee described in Regulation Z § 1026.4(c) 

and is not payable by written agreement in 

more than four installments. See Regulation 

Z comment 2(a)(15))–2.i.F. Incidental credit 

under a credit plan that only can be accessed 

by an access device for a prepaid account 

that is not a credit card is not subject to 

Regulation Z Subpart B and is governed 

solely by the error resolution procedures in 

Regulation E because the credit plan is not 

accessed by a credit card and the plan is not 

open-end credit. In this case, Regulation Z 

§ 1026.13(d) and (g) do not apply. 

ii. For transactions involving access 

devices that also function as credit cards 

under Regulation Z, whether Regulation E or 

Regulation Z (12 CFR part 1026) applies 

depends on the nature of the transaction. For 

example, if the transaction solely involves an 

extension of credit, and does not include a 

debit to a consumer asset account, such as a 

checking account or prepaid account, the 

liability limitations and error resolution 

requirements of Regulation Z apply. If the 

transaction debits an asset account only (with 

no credit extended), the provisions of 

Regulation E apply. If the transaction debits 

an asset account but also draws on an 

overdraft credit plan subject to Regulation Z 

attached to the account, Regulation E’s 

liability limitations and error resolution 

provisions apply, in addition to § 1026.13(d) 

and (g) of Regulation Z (which apply because 

of the extension of credit associated with the 

overdraft feature on the asset account). If a 

consumer’s access device is also a credit card 

and the device is used to make unauthorized 

withdrawals from an asset account, but also 

is used to obtain unauthorized cash advances 

directly from a credit plan that is subject to 

Regulation Z that is separate from the asset 

account, both Regulation E and Regulation Z 

apply. 

iii. The following examples illustrate these 

principles: 

A. A consumer has a card that can be used 

either as a credit card or an access device that 

draws on the consumer’s checking account. 

When used as a credit card, the card does not 

first access any funds in the checking 

account but draws only on a separate credit 

card account subject to Regulation Z. If the 

card is stolen and used as a credit card to 

make purchases or to get cash advances at an 

ATM from the line of credit, the liability 

limits and error resolution provisions of 

Regulation Z apply; Regulation E does not 

apply. 

B. In the same situation, if the card is 

stolen and is used as an access device to 

make purchases or to get cash withdrawals at 

an ATM from the checking account, the 

liability limits and error resolution 

provisions of Regulation E apply; Regulation 

Z does not apply. 

C. In the same situation, assume the card 

is stolen and used both as an access device 

for the checking account and as a credit card; 

for example, the thief makes some purchases 

using the card to access funds in the 

checking account and other purchases using 

the card as a credit card. Here, the liability 

limits and error resolution provisions of 

Regulation E apply to the unauthorized 

transactions in which the card was used as 

an access device for the checking account, 

and the corresponding provisions of 

Regulation Z apply to the unauthorized 

transactions in which the card was used as 

a credit card. 

D. Assume a somewhat different type of 

card, one that draws on the consumer’s 

checking account and can also draw on an 

overdraft credit plan subject to Regulation Z 

attached to the checking account. The 

overdraft credit plan associated with the card 

is accessed only when the consumer uses the 

card to make a purchase (or other 

transaction) for which there are insufficient 

or unavailable funds in the checking account. 

In this situation, if the card is stolen and 

used to make purchases funded entirely by 

available funds in the checking account, the 

liability limits and the error resolution 

provisions of Regulation E apply. If the use 

of the card results in an extension of credit 

that is incident to an electronic fund 

transfer—i.e., if the transaction is funded 

partially by funds in the consumer’s asset 

account and partially by credit extended 

under the overdraft credit plan—the error 

resolution provisions of § 1026.13(d) and (g) 

of Regulation Z apply in addition to the 

Regulation E provisions, but the other 

liability limit and error resolution provisions 

of Regulation Z do not. Relatedly, if the use 

of the card is funded entirely by credit 

extended under the overdraft credit plan, the 

transaction is governed solely by the liability 

limitations and error resolution requirements 

of Regulation Z. See § 1026.13(i). 

E. The same principles in comment 12(a))– 

5.iii.A, B, C, and D apply to an access device 

for a prepaid account that also is a credit card 

under Regulation Z. 

12(b) Preemption of Inconsistent State Laws 

* * * * * 

2. Preemption determinations generally. 

The Bureau recognizes state law preemption 

determinations made by the Board of 

Governors of the Federal Reserve System 

prior to July 21, 2011, until and unless the 

Bureau makes and publishes any contrary 

determination. 

3. Preemption determination—Michigan. 

The Board of Governors determined that 

certain provisions in the state law of 

Michigan are preempted by the Federal law, 

effective March 30, 1981: 

i. Definition of unauthorized use. Section 

488.5(4) of the state law of Michigan, 

governing electronic fund transfers, is 

preempted to the extent that it relates to the 

section of state law governing consumer 

liability for unauthorized use of an access 

device. 

ii. Consumer liability for unauthorized use 

of an account. Section 488.14 of the state law 

of Michigan, governing electronic fund 

transfers, is inconsistent with § 1005.6 and is 

less protective of the consumer than the 

Federal law. The state law places liability on 

the consumer for the unauthorized use of an 

account in cases involving the consumer’s 

negligence. Under the Federal law, a 

consumer’s liability for unauthorized use is 

not related to the consumer’s negligence and 

depends instead on the consumer’s 

promptness in reporting the loss or theft of 

the access device. 

iii. Error resolution. Section 488.15 of the 

state law of Michigan, governing electronic 

fund transfers, is preempted because it is 

inconsistent with § 1005.11 and is less 

protective of the consumer than the Federal 

law. The state law allows financial 

institutions up to 70 days to resolve errors, 

whereas the Federal law generally requires 

errors to be resolved within 45 days. 

iv. Receipts and periodic statements. 

Sections 488.17 and 488.18 of the state law 

of Michigan, governing electronic fund 

transfers, are preempted because they are 

inconsistent with § 1005.9, other than for 

transfers of $15 or less pursuant to 

§ 1005.9(e). The state provisions require a 

different disclosure of information than does 

the Federal law. The receipt provision is also 

preempted because it allows the consumer to 

be charged for receiving a receipt if a 

machine cannot furnish one at the time of a 

transfer. 

4. Preemption determination—Tennessee. 

The Bureau determined that the following 

provision in the state law of Tennessee is 

preempted by the Federal law, effective April 

25, 2013: 


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i. Gift certificates, store gift cards, and 

stored-value cards. Section 66–29–116 of 

Tennessee’s Uniform Disposition of 

Unclaimed (Personal) Property Act is 

preempted to the extent that it permits gift 

certificates, store gift cards, and stored-value 

cards, as defined in § 1005.20(a), to be 

declined at the point-of-sale sooner than the 

gift certificates, store gift cards, or storedvalue cards and their underlying funds are 

permitted to expire under § 1005.20(e). 

* * * * * 

Section 1005.15 Electronic Fund Transfer of 

Government Benefits 

15(c) Pre-Acquisition Disclosure 

Requirements 

1. Model forms for pre-acquisition 

disclosures. Model Form A–10(a) in 

Appendix A of this part contains a model 

form for the pre-acquisition short disclosure 

requirements for government benefit 

accounts pursuant to § 1005.15(c). 

Government agencies may use Sample Form 

A–10(e) of Appendix A to this part to comply 

with the pre-acquisition long form disclosure 

requirements of § 1005.15(c)(1). 

2. Disclosing the short and long form 

before acquisition. Section 1005.15(c)(1) 

requires that, before a consumer acquires an 

account governed by § 1005.15, a government 

agency must comply with the pre-acquisition 

disclosure requirements applicable to 

prepaid accounts as set forth in § 1005.18(b). 

Section 1005.18(b)(1)(i) generally requires 

delivery of both the short form disclosure 

required by § 1005.18(b)(2)(i) and the long 

form disclosure required by 

§ 1005.18(b)(2)(ii) before a consumer acquires 

a prepaid account. The following example 

illustrates when a consumer receives 

disclosures before acquisition of an account 

for purposes of § 1005.15(c)(1): 

i. A government agency informs a 

consumer that she can receive distribution of 

benefits via government benefit account in 

the form of a prepaid card. The consumer 

receives the short form and long form 

disclosures to review at the time the 

consumer receives benefits eligibility 

information from the agency. After receiving 

the disclosures, the consumer agrees to 

receive benefits via the government benefit 

account. These disclosures were provided to 

the consumer pre-acquisition, and the agency 

has complied with § 1005.15(c)(1). By 

contrast, if the consumer does not receive the 

short form and long form disclosures to 

review until the time at which the consumer 

receives the prepaid card, these disclosures 

were provided to the consumer postacquisition, and were not provided in 

compliance with § 1005.15(c)(1). 

3. Enrollment and disclosures given during 

the same appointment. The disclosures and 

notice required by § 1005.15(c)(1) and (2) 

may be given in the same process or 

appointment during which the consumer 

acquires or agrees to acquire a government 

benefit account. When a consumer receives 

benefits eligibility information and signs up 

or enrolls to receive benefits during the same 

process or appointment, a government 

agency that gives the disclosures and notice 

required by § 1005.15(c)(1) and (2) before 

issuing a government benefit account 

complies with the timing requirements of 

§ 1005.15(c). 

15(d) Access to Account Information 

1. Access to account information. For 

guidance, see comments 18(c)–1 through–5. 

15(e) Modified Disclosure Requirements 

1. Modified limitations on liability and 

error resolution requirements. For guidance, 

see comments 18(e)–1 through–3. 

* * * * * 

Section 1005.18 Requirements for Financial 

Institutions Offering Prepaid Accounts 

18(a) Coverage 

1. Issuance of access device. Consistent 

with § 1005.5(a) and except as provided, as 

applicable, in § 1005.5(b), a financial 

institution may issue an access device only 

in response to an oral or written request for 

the device, or as a renewal or substitute for 

an accepted access device. A consumer is 

deemed to request an access device for a 

payroll card account when the consumer 

chooses to receive salary or other 

compensation through a payroll card 

account. A consumer is deemed to request an 

access device for a prepaid account when, for 

example, the consumer acquires a prepaid 

account offered for sale at a retail store or 

acquires a prepaid account by making a 

request or submitting an application by 

telephone or online. 

2. Application to employers and service 

providers. Typically, employers and thirdparty service providers do not meet the 

definition of a ‘‘financial institution’’ subject 

to the regulation because they neither hold 

prepaid accounts (including payroll card 

accounts) nor issue prepaid cards and agree 

with consumers to provide EFT services in 

connection with prepaid accounts. However, 

to the extent an employer or a service 

provider undertakes either of these functions, 

it would be deemed a financial institution 

under the regulation. 

18(b) Pre-Acquisition Disclosure 

Requirements 

18(b)(1) Timing of Disclosures 

18(b)(1)(i) General 

1. Disclosing the short form and long form 

before acquisition. Section 1005.18(b)(1)(i) 

generally requires delivery of both a short 

form disclosure as described in 

§ 1005.18(b)(2)(i) and a long form disclosure 

as described in § 1005.18(b)(2)(ii) before a 

consumer acquires a prepaid account. The 

following examples illustrate when a 

consumer receives disclosures before 

acquisition for purposes of § 1005.18(b)(1)(i): 

i. A consumer inquires about obtaining a 

prepaid account at a branch location of a 

bank. A consumer then receives printed short 

form and long form disclosures related to the 

prepaid account product. After receiving the 

disclosures, a consumer then agrees to open 

a prepaid account with the bank. This 

consumer received the short form and long 

form pre-acquisition in accordance with 

§ 1005.18(b)(1)(i). 

ii. A consumer learns that he or she can 

receive wages via a payroll card account, at 

which time a consumer is provided with the 

short form and long form disclosure to 

review. A consumer then agrees to receive 

wages via a payroll card account. These 

disclosures were provided in compliance 

with § 1005.18(b)(1)(i). By contrast, if a 

consumer receives the payroll card or other 

access device at the end of the first pay 

period two weeks later, at which time a 

consumer also receives the short form and 

long form disclosure to review for the first 

time, these disclosures were provided to a 

consumer post-acquisition, and thus not 

provided in compliance with 

§ 1005.18(b)(1)(i). 

2. Disclosures provided electronically. 

When the short form and long form 

disclosures required under § 1005.18(b)(2)(i) 

and (ii) are presented after a consumer has 

initiated a purchase for a prepaid account on 

a financial institution’s Web site, but before 

a consumer provides any personal 

identifying information and agrees to accept 

the prepaid account, such disclosures are 

made pre-acquisition in accordance with 

§ 1005.18(b)(1)(i). The short form and long 

form disclosures required by 

§ 1005.18(b)(2)(i) and (ii) that are provided 

electronically when a consumer acquires a 

prepaid account on a financial institution’s 

Web site are considered to be given after a 

consumer acquires a prepaid account if a 

consumer can easily bypass the disclosures 

before acquiring the prepaid account. A 

financial institution can present the short 

form and long form disclosures on the same 

Web page to fulfill the requirements of 

§ 1005.18(b)(1)(i). A financial institution 

could also present the short form disclosure 

on a Web page and include a hyperlink to the 

long form disclosure on that same Web page, 

but, if doing so, a consumer must not have 

to review any unrelated links before viewing 

the long form disclosure. 

18(b)(1)(ii) Disclosures for Prepaid Accounts 

Acquired in Retail Stores 

1. Retail stores. Section 1005.18(b)(1)(ii) 

sets forth alternative disclosure requirements 

for prepaid accounts acquired in retail stores. 

For purposes of § 1005.18(b)(1)(ii), a retail 

store is a location where a consumer can 

obtain a prepaid account in person and that 

is operated by an entity other than the 

financial institution or by an agent of the 

financial institution. A bank or credit union 

branch is not a retail store. Drug stores and 

grocery stores at which a consumer can 

acquire a prepaid account may be retail 

stores. A retail store that offers one financial 

institution’s prepaid account products 

exclusively would be considered an agent of 

the financial institution and, thus, both the 

short form and the long form disclosure must 

be provided pre-acquisition pursuant to 

§ 1005.18(b)(1)(i). 

2. Disclosures provided inside prepaid 

account access device packaging material. 

Except when providing the long form 

disclosure post-acquisition in accordance 

with the retail store exception set forth in 

§ 1005.18(b)(1)(ii), the short form and long 

form disclosures required by 

§ 1005.18(b)(2)(i) and (ii) must be provided to 

a consumer pre-acquisition in compliance 

with § 1005.18(b)(1)(i). Disclosures are 

considered to have been provided postacquisition if they are inside the packaging 

material accompanying a prepaid account 


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access device that a consumer cannot see or 

access before acquiring the prepaid account, 

or if it is not readily apparent to a consumer 

that he or she has the ability to access the 

disclosures inside of the packaging material. 

For example, if the packaging material is 

presented in a way that consumers would 

assume they must purchase the prepaid 

account before they can open the packaging 

material, the financial institution would be 

deemed to have provided disclosures postacquisition. 

3. Consumers working in retail stores. A 

payroll card account offered to and accepted 

by consumers working in retail stores would 

not be considered a prepaid account acquired 

in a retail store for purposes of 

§ 1005.18(b)(1)(ii), and thus, a consumer 

must receive the short and long form 

disclosures pre-acquisition pursuant to the 

timing requirement set forth in 

§ 1005.18(b)(1)(i). 

4. Providing the long form disclosures by 

telephone in a retail store. Pursuant to 

§ 1005.18(b)(1)(ii), a financial institution may 

provide the disclosures described in 

§ 1005.18(b)(2)(ii) after a consumer acquires a 

prepaid account in a retail store, if the three 

conditions set forth in § 1005.18(b)(1)(ii)(A) 

through (C) are met. Pursuant to 

§ 1005.18(b)(1)(ii)(C), a financial institution 

must make the long form accessible to a 

consumer by telephone and by a Web site 

when not providing a printed version of the 

long form disclosure to a consumer prior to 

acquisition of a prepaid account. A financial 

institution could, for example, provide the 

long form disclosure by telephone using an 

interactive voice response or similar system 

or by using a customer service agent. 

18(b)(1)(iii) Disclosures for a Prepaid 

Account Acquired Orally by Telephone 

1. Prepaid accounts acquired by telephone. 

Section 1005.18(b)(1)(iii) sets forth 

requirements for prepaid accounts acquired 

orally by telephone. For purposes of 

§ 1005.18(b)(1)(iii), a prepaid account is 

considered to have been acquired orally by 

telephone when a consumer speaks to a 

customer service agent or communicates with 

an automated system, such as an interactive 

voice response system, to provide personal 

identifying payment information to acquire a 

prepaid account. Prepaid accounts acquired 

using a mobile device without speaking to a 

customer service agent or communicating 

with an automated system are not considered 

to have been acquired orally by telephone. 

2. Disclosures for prepaid accounts 

acquired by telephone. Pursuant to 

§ 1005.18(b)(1)(iii), a financial institution 

must disclose the information required by 

§ 1005.18(b)(2)(i) orally before a consumer 

acquires a prepaid account orally by 

telephone. To comply with the preacquisition requirement set forth in 

§ 1005.18(b)(1)(i) for prepaid accounts 

acquired orally by telephone, a financial 

institution may, for example, read the 

disclosures required under § 1005.18(b)(2)(i) 

over the telephone after a consumer has 

initiated the purchase of a prepaid account 

by calling the financial institution, but before 

a consumer agrees to acquire the prepaid 

account. Although the disclosures required 

by § 1005.18(b)(2)(ii) are not required to be 

given pre-acquisition when a consumer 

acquires a prepaid account orally by 

telephone, a financial institution must 

communicate to a consumer that the long 

form is available upon request, either orally 

by telephone or on a Web site. In addition, 

a financial institution must provide 

information on all fees in the terms and 

conditions as required by § 1005.7(b)(5), as 

modified by § 1005.18(f), before the first 

electronic fund transfer is made from a 

consumer’s prepaid account. 

18(b)(2) Content of Disclosures 

18(b)(2)(i) Short Form Content Requirements 

1. Disclosures that are inapplicable. 

Disclosures required by § 1005.18(b)(2)(i) 

must always be provided prior to prepaid 

account acquisition, even when a particular 

disclosure is not applicable to a specific 

prepaid account product. For example, if a 

financial institution does not charge a fee to 

a consumer for withdrawing money at an 

automated teller machine in the financial 

institution’s network or an affiliated network, 

which is a type of fee that is required to be 

disclosed pursuant to § 1005.18(b)(2)(i)(B)(3), 

the financial institution should list ‘‘ATM 

withdrawal (in network)’’ on the short form 

disclosure and list ‘‘$0’’ as the fee. If, 

however, the financial institution does not 

allow a consumer to withdraw money from 

automated teller machines that are either in 

the financial institution’s network or from 

those in an affiliated network, the financial 

institution should still list ‘‘ATM withdrawal 

(in-network)’’ and ‘‘ATM withdrawal (out-ofnetwork)’’ on the short form disclosure but 

instead state ‘‘not offered’’ or ‘‘N/A.’’ 

2. Number of fees disclosed per fee type. 

No more than two fees may be disclosed for 

each fee type required to be listed by 

§ 1005.18(b)(2)(i)(B)(2), (3), and (5) in the 

short form disclosure. Only one fee may be 

disclosed for each fee type required to be 

listed by § 1005.18(b)(2)(i)(B)(1), (4), (6), (7) 

and (8), however, § 1005.18(b)(2)(i)(B)(8) 

requires the disclosure of up to three 

additional fee types. For example, if a 

financial institution offers more than one 

method for loading cash into a prepaid 

account, only the fee for the method that will 

charge the highest fee should be disclosed, 

and the financial institution may use an 

asterisk or other symbol next to the cash 

reload fee disclosed to indicate that the fee 

may be lower. See comment 18(b)(2)(i)(C)–1. 

18(b)(2)(i)(B) Fees and Other Information 

18(b)(2)(i)(B)(3) ATM Withdrawal Fees 

1. Foreign ATM withdrawal fees. Pursuant 

to § 1005.18(b)(2)(i)(B)(3), a financial 

institution must disclose the fees imposed 

when a consumer uses an automated teller 

machine in the United States to initiate a 

withdrawal of cash, both within and outside 

of the financial institution’s network or a 

network affiliated with the financial 

institution, from the prepaid account. If the 

fee imposed on a consumer for using an 

automated teller machine in a foreign 

country to initiate a withdrawal of cash is 

different from the fee charged for using an 

automated teller machine in the United 

States within or outside the financial 

institution’s network or a network affiliated 

with the financial institution, a financial 

institution must not disclose the foreign 

ATM fee pursuant to § 1005.18(b)(2)(i)(B)(3), 

but may be required to do so pursuant to 

§ 1005.18(b)(2)(i)(B)(8), as part of the 

incidence-based fee disclosure. 

18(b)(2)(i)(B)(4) Cash Reload Fee 

1. Cash reload fees. Pursuant to 

§ 1005.18(b)(2)(i)(B)(4), a financial institution 

must disclose a fee imposed when a 

consumer loads cash into a prepaid account. 

For example, the cash reload fee would 

include the cost of adding cash at a point-ofsale terminal, the cost of purchasing an 

additional card or other device on which 

cash is loaded and then transferred into a 

prepaid account, or any other method a 

consumer may use to load cash into a 

prepaid account. If the financial institution 

offers more than one method for a consumer 

to load cash into the prepaid account, 

§ 1005.18(b)(2)(i)(C) requires that it must only 

disclose the highest fee on the short form. 

18(b)(2)(i)(B)(5) ATM Balance Inquiry Fees 

1. Foreign ATM balance inquiry fees. 

Pursuant to § 1005.18(b)(2)(i)(B)(5), a 

financial institution must disclose the two 

fees imposed when a consumer uses an 

automated teller machine in the United 

States to check the balance of a consumer’s 

prepaid account, both within and outside of 

the financial institution’s network or a 

network affiliated with the financial 

institution. If the fee imposed on a consumer 

for using an automated teller machine in a 

foreign country to check the balance of a 

consumer’s prepaid account is different from 

the fee charged for using an automated teller 

machine within or outside the financial 

institution’s network or a network affiliated 

with the financial institution in the United 

States, a financial institution would not 

disclose the foreign ATM balance inquiry fee 

pursuant to § 1005.18(b)(2)(i)(B)(5), but could 

do so by § 1005.18 (b)(2)(i)(B)(8). 

18(b)(2)(i)(B)(7) Inactivity Fee 

1. Relationship between inactivity fees and 

periodic fees. Section 1005.18(b)(2)(i)(B)(7) 

requires disclosure of any fee for non-use or 

inactivity on a prepaid account as well as the 

duration of inactivity that triggers a financial 

institution to impose such an inactivity fee. 

When disclosing this fee pursuant to 

§ 1005.18(b)(2)(ii)(A) as part of the long form 

disclosure, a financial institution should 

specify whether this inactivity fee is imposed 

in lieu of or in addition to the periodic fee 

disclosed pursuant to § 1005.18(b)(2)(i)(B)(1). 

18(b)(2)(i)(B)(8) Incidence-Based Fee 

Disclosures 

18(b)(2)(i)(B)(8)(I) Generally 

1. Incidence-based fee disclosures. Section 

1005.18(b)(2)(i)(B)(8) requires the disclosure 

of up to three fees, other than any of those 

disclosed pursuant to § 1005.18(b)(2)(i)(B)(1) 

through (7), that were incurred most 

frequently in the prior 12-month period from 

that prepaid account product. If a prepaid 

account product only has one, two, or three 

fees not already disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(1) through (7), 

§ 1005.18(b)(2)(i)(B)(8) requires disclosure of 

those fees assuming they were incurred by a 


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consumer at least once during the prior 12- 

month period. Conversely, if a prepaid 

account has four fees not already disclosed 

pursuant to § 1005.18(b)(2)(i)(B)(1) through 

(7), § 1005.18(b)(2)(i)(B)(8)(I) requires 

disclosure of the three fees most frequently 

incurred. If the disclosures made pursuant to 

§ 1005.18(b)(2)(i)(B)(1) through (7) capture a 

prepaid account product’s entire fee 

schedule, a financial institution has no 

obligation to disclose additional information 

on the short form pursuant to 

§ 1005.18(b)(2)(i)(B)(8)(I). 

2. Determining incidence-based fees. 

Section 1005.18(b)(2)(i)(B)(8)(I) requires 

financial institutions at the same time each 

year, in accordance with the timing 

requirements of § 1005.18(h), to total the 

incidence for each type of fee incurred 

during the prior 12-month period by 

consumers using a particular prepaid account 

product. Incidence should be considered on 

a total basis across all consumers using a 

particular prepaid account product. For 

example, if a given consumer incurred one 

fee type ten times during the prior 12-month 

period, all ten instances of that individual 

consumer’s paying such a fee must be 

factored into the total incidence calculation 

for that fee type. If a financial institution 

offers more than one prepaid account 

product, it must consider consumers’ fee 

incidence for each product separately and 

not consolidate the fee incidence across all 

of its prepaid account products. The price for 

purchasing or activating a prepaid account 

could be an incidence-based fee for purposes 

of § 1005.18(b)(2)(i)(B)(8). 

3. Relationship between incidence-based 

fee assessment and § 1005.18(h). Section 

1005.18(b)(2)(i)(B)(8)(I) requires that a 

financial institution disclose up to three fees, 

other than any of the fees disclosed pursuant 

to § 1005.18(b)(3)(iii)(B)(1) through (7). 

Section 1005.18(h)(2) states that after twelve 

months, all prepaid accounts and related 

packaging material, access devices, and 

physical other materials, that are offered, 

sold, or otherwise made available to 

consumers in connection with a prepaid 

account must comply with the requirements 

of this § 1005.18(b). A financial institution 

must therefore make its first incidence-based 

fee assessment in time to ensure that all 

prepaid accounts and related packaging 

material, access devices, and physical other 

materials, that are offered, sold, or otherwise 

made available to consumers in connection 

with a prepaid account include the 

incidence-based disclosure within 12 months 

in accordance with § 1005.18(h)(2). Section 

1005.18(h)(1), however, states that within 

nine months any newly-created disclosures 

would have to comply with the disclosure 

requirements in § 1005.18(b)(2). Thus, if a 

financial institution creates new disclosures 

within nine months of the effective date, 

those disclosures would need to include the 

appropriate incidence-based fee disclosure in 

accordance with 1005.18(h)(1). 

4. Multiple service plan prepaid account 

products. When disclosing multiple service 

plans on a short form disclosure as permitted 

by § 1005.18(b)(3)(iii)(B)(1), a financial 

institution must consider the frequency with 

which fees are incurred from all of those 

plans as a whole to determine which three 

additional fees to disclose pursuant to 

§ 1005.18(b)(2)(i)(B)(8)(I). If, however, the 

financial institution is disclosing the fee 

schedule for only the service plan in which 

a consumer is enrolled by default upon 

acquiring the prepaid account, it would 

consider the fee incidence for that service 

plan. See comment 18(b)(3)(iii)(B)–1 for 

guidance on what constitutes multiple 

service plans. 

5. Updating disclosures for retail store 

packaging. For prepaid accounts sold in 

retail stores, § 1005.18(b)(2)(i)(B)(8)(I) permits 

a financial institution to implement any 

necessary updates to the incidence-based fee 

disclosures at the time the institution prints 

new prepaid account packaging materials. 

Section 1005.18(b)(2)(i)(B)(8)(I) does not 

require that financial institutions 

immediately destroy existing inventory in 

retail stores or elsewhere in the distribution 

channel, to the extent the disclosures on such 

packaging materials are otherwise accurate, 

to comply with this requirement. For 

example, if a financial institution determines 

that an incidence-based fee listed on a short 

form disclosure in a retail store is no longer 

one of the most commonly incurred fees and 

makes the appropriate change when printing 

new disclosures, any packages in retail stores 

that contain the previous incidence-based fee 

disclosure may still be sold and comply with 

§ 1005.18(b)(2)(i)(B)(8)(I). 

18(b)(2)(i)(B)(8)(II) New Prepaid Account 

Products 

1. New prepaid account products. If a 

particular prepaid account product was not 

offered by the financial institution during the 

prior 12-month period, 

§ 1005.18(b)(2)(i)(B)(8)(II) requires the 

financial institution to disclose up to three 

fees other than any of those fees disclosed 

pursuant to § 1005.18(b)(2)(i)(B)(1) through 

(7) that it reasonably anticipates will be 

incurred by consumers most frequently 

during the next 12-month period. The 

financial institution should use available 

data to reasonably anticipate what fees 

should be disclosed. For example, if a 

financial institution changes the name of its 

prepaid account product and develops a new 

marketing and distribution plan but does not 

alter the prepaid account’s fee schedule, this 

would be considered a new prepaid account 

product for purposes of 

§ 1005.18(b)(2)(i)(B)(8)(II). Insofar as the fee 

schedule remains unchanged, however, and 

the financial institution reasonably 

anticipates that the fees it previously 

disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(8)(I) would remain 

unchanged, the financial institution should 

continue to disclose those fees for an 

additional 12-month period. See comment 

18(b)(2)(i)(B)(8)(I)–1 for guidance on how to 

determine which three fees to disclose. 

18(b)(2)(i)(B)(8)(III) Revised Prepaid Account 

Products 

1. Revised prepaid account products. 

Section 1005.18(b)(2)(i)(B)(8)(III) requires 

that if the financial institution changes an 

existing prepaid account product’s fee 

schedule at any point after assessing its 

incidence-based fee disclosure for the prior 

12-month period pursuant to 

§ 1005.18(b)(2)(i)(B)(8)(I), it must determine 

whether, after making such changes, it 

reasonably anticipates that the existing 

incidence-based fee disclosure will represent 

the most commonly incurred fees for the 

remainder of the 12-month period. For 

example, if a financial institution changes its 

card replacement fee from $3.00 to $4.00 in 

May after already assessing in January 

whether the incidence-based fees need to be 

updated for the current 12-month period, this 

change in the fee schedule would subject the 

prepaid account product to 

§ 1005.18(b)(2)(i)(B)(8)(III). In this example, 

the financial institution would assess 

whether it reasonably anticipates that the 

existing incidence-based fee disclosure still 

lists what will be the most commonly 

incurred fees from May until the following 

January when the financial institution 

conducts its next, annual incidence-based 

fees assessment. 

18(b)(2)(i)(B)(9) Overdraft Services and Other 

Credit Features 

1. Short form overdraft disclosure. Section 

1005.18(b)(2)(i)(B)(9) requires disclosure of a 

statement that credit-related fees may apply 

if, at any point, a credit plan may be offered 

in connection with the prepaid account. This 

statement would have to be provided on all 

short form disclosures, regardless of whether 

some consumers may never be solicited to 

enroll in such a plan, if such a plan could 

be offered. 

18(b)(2)(i)(B)(10) Statement Regarding Other 

Fees 

1. Statement regarding other fees. Section 

1005.18(b)(2)(i)(B)(10) requires a financial 

institution to include a statement on the 

short form disclosing the number of fees, 

other than those listed on the short form 

§ 1005.18(b)(2)(i)(B)(1) through (8), listed in 

the long form disclosure pursuant to 

§ 1005.18(b)(2)(ii)(A). The following 

examples illustrate this concept: 

i. A financial institution charges a fee for 

issuing a consumer a replacement card, but 

this fee is not among the top three fees its 

consumers incurred most frequently during 

the prior 12-month period and therefore 

would not be disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(8). This is the only fee 

the financial institution imposes that is not 

required to be disclosed elsewhere on the 

short form disclosure. The financial 

institution would include a statement on the 

short form disclosure that it may charge one 

other fee not otherwise listed, in a form 

substantially similar to the clause set forth in 

appendix A–10(a) of this part. 

ii. A financial institution does not charge 

any fees other than those required to be 

disclosed pursuant to § 1005.18(b)(2)(i)(B)(1) 

through (8). The financial institution may, 

but is not required to, include a statement on 

the short form disclosure that it does not 

charge any other fees not listed on the short 

form disclosure. 

2. Counting the number of other fees. If the 

fee a financial institution imposes might 

vary, even if the variation is based on a 

consumer’s choice of how to utilize a 

particular service, the financial institution 

must count each variation of the fee that 


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might be imposed as a separate fee. For 

example, if a financial institution imposes 

one fee to issue a replacement card to a 

consumer using a standard mail service, but 

charges a different (and perhaps higher) fee 

if a consumer requests expedited delivery of 

the replacement card, and neither of these 

fees are incurred frequently enough to be 

disclosed as an incidence-based fee pursuant 

to § 1005.18(b)(2)(i)(B)(8), then the financial 

institution would still count each of these 

fees separately when determining the total 

number of fees to disclose pursuant to 

§ 1005.18(b)(2)(i)(B)(10). Even if a fee could 

be waived under certain conditions, it would 

still be counted in order to comply with 

§ 1005.18(b)(2)(i)(B)(10). 

18(b)(2)(i)(B)(11) Telephone Number and 

Web site 

1. Financial institution’s telephone 

number. A financial institution must make 

the long form disclosure described in 

§ 1005.18(b)(2)(ii) accessible to a consumer 

orally via a telephone number disclosed 

pursuant to § 1005.18(b)(2)(i)(B)(11) when a 

financial institution chooses not to provide a 

written form of those disclosures before a 

consumer acquires a prepaid account, as 

described in § 1005.18(b)(1)(ii). For example, 

a financial institution could use a customer 

service agent, or an interactive voice 

response system, to provide this disclosure. 

A consumer must not incur a fee to call this 

telephone number before acquiring a prepaid 

account. The telephone number disclosed 

pursuant to § 1005.18(b)(2)(i)(B)(11) could be 

the same as the customer service number for 

which a financial institution may impose a 

fee on a consumer to use for other purposes, 

but a consumer could not incur any customer 

service or other transaction fees when calling 

this number to access the information set 

forth in § 1005.18(b)(2)(ii) before acquiring a 

prepaid account in a retail store. 

2. Financial institution’s Web site. Section 

1005.18(b)(2)(i)(B)(11) requires disclosure of 

a unique URL that must take consumers to 

the Web page where disclosures described in 

§ 1005.18(b)(2)(ii) may be viewed when a 

financial institution chooses not to provide a 

written form of those disclosures before a 

consumer acquires a prepaid account, as 

described in § 1005.18(b)(1)(ii). An entered 

URL that requires a consumer to navigate 

various other Web pages before viewing the 

long form disclosure would not comply with 

§ 1005.18(b)(2)(i)(B)(11). 

18(b)(2)(i)(C) Disclosing Variable Fees 

1. Disclosing variable fees in the short 

form. Section 1005.18(b)(2)(i)(C) requires a 

financial institution to disclose the highest 

fee it could impose upon a consumer for each 

of the fee types listed on the short form 

pursuant to § 1005.18(b)(2)(i)(B)(1), along 

with a symbol, such as an asterisk, to 

indicate that a lower fee might apply, and 

text explaining that the fee may be lower, if 

applicable. For example, if a financial 

institution charges a monthly fee of $4.95, 

but the financial institution waives this fee 

if a consumer receives direct deposit 

payments into the prepaid account, the 

financial institution would list a monthly fee 

of $4.95 on the short form disclosure with an 

asterisk (or other symbol) next to the dollar 

amount that refers to a statement that the fee 

may be lower. If a financial institution 

charges a cash reload fee of $3.95 at reload 

networks that are not agents of the financial 

institution, but waives this fee if a consumer 

loads money at a point-of-sale terminal 

operated by a retailer that is an agent of the 

financial institution, the financial institution 

would disclose a cash reload fee of $3.95 on 

the short form disclosure pursuant to 

§ 1005.18(b)(2)(i)(C) with an asterisk (or other 

symbol) next to the dollar amount that refers 

to the same statement that the fee maybe 

lower. Section 1005.18(b)(2)(i)(C) does not 

permit a financial institution to explain the 

conditions under which fee may be lower, 

but a financial institution could use any 

other part of the prepaid account product’s 

packaging material or may use its Web site 

to disclose that information. That 

information is also required to be disclosed 

in the long form pursuant to 

§ 1005.18(b)(2)(ii)(A). 

2. Third party fees. Section 

1005.18(b)(2)(i)(C) states that a financial 

institution must not disclose any additional 

third party fees imposed in connection with 

any of the fees disclosed pursuant to 

§ 1005.18(b)(2)(i)(B)(1) through (7). Third 

parties could include service providers and 

other entities, regardless of whether the 

entity is an agent of the financial institution. 

18(b)(2)(ii) Long Form Content Requirements 

18(b)(2)(ii)(A) Fees 

1. Fee disclosure. Section 

1005.18(b)(2)(ii)(A) requires a financial 

institution to disclose every fee that may be 

imposed on a consumer and the conditions, 

if any, under which the fee may be imposed, 

waived, or reduced. For example, if a 

financial institution charges a cash reload 

fee, the financial institution must list the 

amount of the cash reload fee and also 

specify any circumstances under which a 

consumer can qualify for a lower fee. 

Relevant conditions to disclose could also 

include, for example, if there is a limit on the 

amount of cash a consumer may load into the 

prepaid account in a transaction or during a 

particular time period. Section 

1005.18(b)(2)(ii)(A) also explains that a 

financial institution must not utilize any 

symbols to explain conditions under which 

any fee may be imposed. 

2. Disclosing a service or feature without a 

charge. A financial institution may, at its 

option, choose to disclose pursuant to 

§ 1005.18(b)(2)(ii)(A), any service or feature it 

provides or offers even if it does not charge 

a fee for that service or feature. For example, 

a financial institution may choose to list 

‘‘online bill pay service’’ and indicate that 

the fee is ‘‘$0’’ or ‘‘free’’ when the financial 

institution does not charge consumers a fee 

for that service or feature. By contrast, where 

a service or feature is available without a fee 

for an introductory period, but where a fee 

may be imposed at the conclusion of the 

introductory period for that service or 

feature, the financial institution could not 

indicate that the fee is ‘‘$0.’’ The financial 

institution should instead list the main fee 

and explain in the separate explanatory 

column how the fee could be lower during 

the introductory period, what that alterative 

fee would be, and when it will be imposed. 

Similarly, if a consumer must enroll in an 

additional service to avoid incurring a fee for 

another service, neither of those services 

should disclose a fee of ‘‘$0,’’ but should 

instead list each fee amount imposed if a 

consumer does not enroll. For example, if the 

monthly fee is waived once a consumer 

receives direct deposit payments into the 

prepaid account, the monthly fee imposed 

upon a consumer if they do not receive direct 

deposit would be disclosed in the long form, 

and an explanation regarding how receiving 

direct deposit might lower the fee should be 

included in the explanatory column in the 

long form. 

3. Third party fees. Section 

1005.18(b)(2)(ii)(A) generally requires 

disclosure, to the extent known, of any third 

party fee amounts that may apply. For 

example, a financial institution that offers 

balance updates to a consumer via text 

message would disclose that mobile carrier 

data charges may apply for each text message 

a consumer receives. Section 

1005.18(b)(2)(ii)(A) also requires that a 

financial institution must always disclose in 

the long form any fees imposed by a third 

party who is acting as an agent of the 

financial institution for purposes of the 

prepaid account product. For example, any 

fees that the provider of a cash reload service 

who has a relationship with the financial 

institution may impose would be disclosed 

in the long form. 

18(b)(2)(ii)(B) Overdraft Services and Other 

Credit Features 

1. Long form disclosure of overdraft 

services and other credit features. Section 

1005.18(b)(2)(ii)(B) requires that if, at any 

point, a credit plan may be offered in 

connection with the prepaid account, the 

disclosures described in Regulation Z, 12 

CFR 1026.60(a), (b), and (c) must be 

provided. These disclosures must appear in 

the form required under 12 CFR 1026.60(a), 

(b), and (c), and, to the extent possible, on 

the same printed page or Web page as the rest 

of the information required to be listed 

pursuant to § 1005.18(b)(2)(ii). 

18(b)(3) Form of Pre-Acquisition Disclosures 

18(b)(3)(i) General 

18(b)(3)(i)(B) Electronic Disclosures 

1. Disclosing short forms and long forms 

electronically. Section 1005.18(b)(3)(i)(B) 

generally requires electronic delivery of the 

short form and long form disclosures 

required by § 1005.18(b)(2)(i) and (ii) when a 

consumer acquires a prepaid account through 

the Internet, including via a mobile 

application. A financial institution may, at its 

option, provide the short form and long form 

disclosures on the same Web page or two 

different Web pages as long as the disclosures 

are provided in accordance with the preacquisition disclosure requirements of 

§ 1005.18(b)(1)(i). 

2. No requirement of E-Sign consent. 

Section 1005.18(b)(3)(i)(B) allows financial 

institutions to provide disclosures 

electronically without regard to a consumer 

consent and other applicable provisions of 

the E-Sign Act, but specifies that disclosures 

must be provided electronically in a manner 


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which is reasonably expected to be accessible 

in light of how a consumer is acquiring the 

prepaid account. For example, if a consumer 

is acquiring the prepaid account using a 

financial institution’s Web site, it would be 

reasonable to expect that a consumer would 

be able to access pre-acquisition disclosures 

provided on a similar Web site. 

3. Machine-readable text. Section 

1005.18(b)(3)(i)(B) requires that disclosures 

provided to a consumer through a Web site 

where required by paragraph (b)(1)(ii)(C) and 

as described in § 1005.18(b)(2)(i)(B)(11) must 

be made in an electronic form using a 

machine-readable text format that is 

accessible via both Web browsers and screen 

readers. A disclosure would not comply with 

this requirement if it was not provided in a 

textual format that can be read automatically 

by Internet search engines or other computer 

systems. 

18(b)(3)(ii) Retainable Form 

1. Retainable electronic disclosures. 

Section 1005.18(b)(3)(ii) generally requires 

that, except for disclosures provided to a 

consumer through the telephone number 

described in § 1005.18(b)(2)(i)(B)(11) or 

disclosures provided orally pursuant to 

§ 1005.18(b)(1)(iii) disclosures provided to 

consumers pursuant to § 1005.18(b)(2)(i) and 

(b)(2)(ii) be retainable. A financial institution 

may satisfy the requirement to provide 

electronic disclosures in a retainable form if 

it provides disclosures on its Web site in a 

format that is capable of being printed, saved 

or emailed to a consumer. 

18(b)(3)(iii) Tabular Format 

18(b)(3)(iii)(B) Disclosures for Prepaid 

Account Products Offering Multiple Service 

Plans 

1. Multiple service plans. The multiple 

service plan disclosure provisions in 

§ 1005.18(b)(3)(iii)(B) apply when a financial 

institution offers more than one service plan 

for a particular prepaid account product, and 

each plan has a different fee schedule. For 

example, a financial institution might offer a 

prepaid account product with one service 

plan where a consumer pays no periodic fee 

but instead pays a fee for each transaction, 

and another plan that includes a monthly fee 

but no per transaction fee. A financial 

institution may also offer a prepaid account 

product with one service plan for consumers 

who utilize another one of the financial 

institution’s non-prepaid services (e.g., a 

mobile phone service) and a different plan 

for consumers who only utilize a financial 

institution’s prepaid account products. Each 

of these plans would be considered a 

‘‘service plan’’ for purposes of 

§ 1005.18(b)(3)(iii)(B). 

18(b)(6) Prepaid Accounts Acquired in a 

Foreign Language 

1. Principally using a foreign language. 

Section 1005.18(b)(6) requires that if a 

financial institution principally uses a 

foreign language on a packaging material, by 

telephone, in person, or on the Web site a 

consumer utilizes to acquire a prepaid 

account, then disclosures made pursuant to 

§ 1005.18(b)(2)(i) of this section or 

§ 1005.18(b)(2)(ii) of this section must be 

provided in that same foreign language. For 

example, if a financial institution uses mostly 

Spanish on the packaging material of a 

prepaid account sold in a retail store, even 

though a few words appear in English, then 

the short form and long form disclosure 

provided to a consumer must also be in 

Spanish. Similarly, if the homepage of the 

Web site a consumer visits to acquire a 

prepaid account is mostly in Spanish, the 

short form and long form disclosure a 

consumer receives pre-acquisition must also 

be in Spanish. A consumer who calls a 

telephone number to acquire a prepaid 

account and either speaks to a customer 

service agent in Spanish or interacts with an 

IVR system in Spanish must also receive the 

short form and long form disclosure 

information in Spanish, in accordance with 

§ 1005.18(b)(2)(ii). Also, if a consumer speaks 

with a customer service agent in a foreign 

language in a bank branch or credit union 

location, this would be considered ‘‘in 

person,’’ and a consumer must receive the 

short form disclosure and the long form 

disclosure information in that foreign 

language to comply with § 1005.18(b)(6). 

18(b)(7) Disclosures on a Prepaid Account 

Access Device 

1. Web site and telephone number. Section 

1005.18(b)(7) requires that the name of a 

financial institution and the URL of a Web 

site and a telephone number that a consumer 

can use to contact the financial institution 

about the prepaid account must be disclosed 

on the prepaid account access device. For 

example, a consumer might use this 

information to contact a financial institution 

with a question about a prepaid account’s 

terms and conditions, or to report when an 

unauthorized transaction has occurred 

involving a prepaid account. 

18(c) Access to Prepaid Account Information 

1. Posted transactions. A history of 

transactions provided under 

§ 1005.18(c)(1)(ii) and (iii) shall reflect 

transfers once they have been posted to the 

account. Thus, an institution does not need 

to include transactions that have been 

authorized but that have not yet posted to the 

account. 

2. Electronic history. The electronic history 

required under § 1005.18(c)(1)(ii) must be 

provided in a form that the consumer may 

keep, as required under § 1005.4(a)(1). 

Financial institutions may satisfy this 

requirement if they make the electronic 

history available in a format that is capable 

of being retained. For example, an institution 

satisfies the requirement if it provides a 

history at a Web site in a format that is 

capable of being printed or stored 

electronically using a web browser. 

3. Access to account information. Section 

1005.18(c)(1) permits a financial institution, 

instead of furnishing periodic statements 

under § 1005.9(b), to make available to the 

consumer the consumer’s account balance by 

telephone, an electronic history of the 

consumer’s account transactions that covers 

at least 18 months preceding the date the 

consumer electronically accesses the 

account, and a written history of the 

consumer’s account transactions upon the 

consumer’s oral or written request that covers 

at least 18 months preceding the date the 

institution receives the consumer’s request. 

Requests that exceed the requirements of 

§ 1005.18(c)(1) for providing account 

information, for which a financial institution 

may charge a fee, include the following: 

i. A financial institution may assess a fee 

or charge to a consumer for responding to 

subsequent requests for written account 

information made in a single calendar month. 

For example, if a consumer makes a request 

for 18 months of written account transaction 

history on June 1 and makes a request for 18 

months of written history on August 5, the 

financial institution may not assess a fee or 

charge to the consumer for responding to 

either request. However, if the consumer 

requests 18 months of written history on June 

1 and then makes the same request on June 

15, the financial institution may assess a fee 

or charge to the consumer for responding to 

the request made on June 15, as this is the 

second request in the same month. 

ii. If a financial institution maintains more 

than 18 months of account transaction 

history, it may assess a fee or charge to the 

consumer for providing a written history of 

the consumer’s account information for 

transactions occurring more than 18 months 

prior to the date the institution receives the 

consumer’s request, provided the consumer 

specifically requests the account transaction 

history for that time period. 

iii. If a financial institution offers a 

consumer the ability to request automatic 

mailings of written history on a monthly or 

other periodic basis, it may, at its option, 

assess a fee or charge for such automatic 

mailings but not for account history 

requested pursuant to § 1005.18(c)(1)(iii). See 

comment 18(c)–4. 

4. 18 months of account information. 

Section 1005.18(c)(1)(ii) requires a financial 

institution to make available at least 18 

months of account transaction information 

electronically, and § 1005.18(c)(1)(iii) 

requires the financial institution to provide 

that information in writing upon the 

consumer’s request. A financial institution 

may provide fewer than 18 months of written 

account transaction history if the consumer 

requests a shorter period of time. If a prepaid 

account has been open for fewer than 18 

months, the financial institution need only 

provide account information pursuant to 

§ 1005.18(c)(1)(ii) and (iii) since the time of 

account opening. If a prepaid account is 

closed or becomes inactive, as defined by the 

financial institution, the financial institution 

must continue to provide at least 18 months 

of account transaction information from the 

date the request is received. See comment 

9(b)–3. When a prepaid account has been 

closed or inactive for 18 months, the 

financial institution is no longer required to 

make available any account or transaction 

information. 

5. Summary totals of amount of fees, 

deposits, and debits. Section 1005.18(c)(4) 

requires a financial institution to disclose a 

summary total of the amount of all fees 

assessed against a prepaid account, the total 

amount of all deposits to the account, and the 

total amount of all debits from the account, 

for the prior calendar month and for the 

calendar year to date. The calendar month 

and annual fees, deposits, and debits 


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information must be disclosed on any 

periodic statement provided pursuant to 

§ 1005.9(b), in any electronic history of 

account transactions whether provided 

pursuant to § 1005.18(c)(1)(ii) or otherwise, 

and on any written history of account 

transactions provided pursuant to 

§ 1005.18(c)(1)(iii). If a financial institution 

provides periodic statements pursuant to 

§ 1005.9(b), total fees, deposits, and debits 

may be disclosed for each statement period 

rather than each calendar month, if different. 

The fees that must be included in the 

summary total include those that are required 

to be disclosed pursuant to 

§ 1005.18(b)(2)(ii)(A). For example, an 

institution must include the fee it charges a 

consumer for using an out-of-network ATM 

in the summary total of fees, but it need not 

include any fee charged by an ATM operator 

with whom the institution has no 

relationship for the consumer’s use of that 

operator’s ATM. The summary total of fees 

should be net of any fee reversals. The total 

amount of all debits from the account should 

be exclusive of fees assessed against the 

account. The total deposits and total debits 

must include all deposits to and debits from 

the prepaid account, not just those deposits 

and debits that are the result of electronic 

fund transfers. 

18(e) Modified Limitations on Liability and 

Error Resolution Requirements 

1. Error resolution safe harbor provision. 

Institutions that choose to investigate notices 

of error provided up to 120 days from the 

date a transaction has posted to a consumer’s 

account may still disclose the error 

resolution time period required by the 

regulation (as set forth in the model clause 

in paragraph (b) of appendix A–7 of this 

part). Specifically, an institution may 

disclose to prepaid account holders that the 

institution will investigate any notice of error 

provided within 60 days of the consumer 

electronically accessing an account or 

receiving a written history upon request that 

reflects the error, even if, for some or all 

transactions, the institution investigates any 

notice of error provided up to 120 days from 

the date that the transaction alleged to be in 

error has posted to the consumer’s account. 

Similarly, an institution’s summary of the 

consumer’s liability (as required under 

§ 1005.7(b)(1)) may disclose that liability is 

based on the consumer providing notice of 

error within 60 days of the consumer 

electronically accessing an account or 

receiving a written history reflecting the 

error, even if, for some or all transactions, the 

institution allows a consumer to assert a 

notice of error up to 120 days from the date 

of posting of the alleged error. 

2. Electronic access. A consumer is deemed 

to have accessed a prepaid account 

electronically when the consumer enters a 

user identification code or password or 

otherwise complies with a security procedure 

used by an institution to verify the 

consumer’s identity and to provide access to 

a Web site or mobile application through 

which account information can be viewed. 

An institution is not required to determine 

whether a consumer has in fact accessed 

information about specific transactions to 

trigger the beginning of the 60-day periods 

for liability limits and error resolution under 

§§ 1005.6 and 1005.11. A consumer is not 

deemed to have accessed a prepaid account 

electronically when the consumer receives an 

automated text message or other automated 

account alert, or checks the account balance 

by telephone. 

3. Untimely notice of error. An institution 

that provides a transaction history under 

§ 1005.18(c)(1) is not required to comply with 

the requirements of § 1005.11 for any notice 

of error from the consumer pertaining to a 

transfer that occurred more than 60 days 

prior to the earlier of the date the consumer 

electronically accesses the account or the 

date the financial institution sends a written 

history upon the consumer’s request. 

(Alternatively, as provided in 

§ 1005.18(e)(2)(ii), an institution need not 

comply with the requirements of § 1005.11 

with respect to any notice of error received 

from the consumer more than 120 days after 

the date of posting of the transfer allegedly 

in error.) Where the consumer’s assertion of 

error involves an unauthorized EFT, 

however, the institution must comply with 

§ 1005.6 (including the extension of time 

limits in § 1005.6(b)(4)) before it may impose 

any liability on the consumer. 

4. Limitations on liability and error 

resolution for unverified accounts. Section 

1005.18(e)(3) provides that for prepaid 

accounts that are not payroll card accounts 

or government benefit accounts, if a financial 

institution discloses to the consumer the 

risks of not registering a prepaid account 

using a notice that is substantially similar to 

the model notice contained in paragraph (c) 

of appendix A–7 of this part, a financial 

institution is not required to comply with the 

liability limits and error resolution 

requirements under §§ 1005.6 and 1005.11 

for any prepaid account with respect to 

which it has not completed its collection of 

consumer identifying information and 

identity verification. Consumer identifying 

information may include the consumer’s full 

name, address, date of birth, and Social 

Security number or other government-issued 

identification number. Section 1005.18(e)(3) 

also provides that once a consumer’s identity 

has been verified, a financial institution must 

limit the consumer’s liability for 

unauthorized transactions and resolve any 

errors that occurred prior to verification that 

satisfy the timing requirements of §§ 1005.6 

or 1005.11, or the modified timing 

requirements in § 1005.18(e), as applicable. 

For an unauthorized transfer or an error 

asserted on a previously unverified prepaid 

account, whether a consumer has timely 

reported the unauthorized transfer or alleged 

error is based on the date the consumer 

contacts the financial institution to report the 

unauthorized transfer or alleged error, not the 

date the financial institution completes its 

customer identification and verification 

process. For an error asserted on a previously 

unverified prepaid account, the time limits 

for a financial institution’s investigation of 

errors pursuant to § 1005.11(c) begin on the 

day following the date the financial 

institution completed its customer 

identification and verification process. A 

financial institution may not delay 

completing its customer identification and 

verification process or refuse to verify a 

consumer’s identity based on the consumer’s 

assertion of an error. 

18(g) Credit Card Plans Linked to Prepaid 

Accounts 

1. Credit card plan subject to Regulation Z. 

Regulation Z (12 CFR 1026.2(a)(20), comment 

2(a)(20)–2.ii) provides guidance on whether a 

program constitutes a credit plan. Regulation 

Z (12 CFR 1026.15(a)(i), comment 2(a)(15)– 

2.i.F provides guidance on when an access 

device for a prepaid account is a credit card, 

and comment 2(a)(15)–2.i.G provides 

guidance on when an account number is a 

credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. 

2. Variation in account term or conditions. 

i. Under § 1005.18(g)(2), a financial 

institution may offer different terms on 

different prepaid account products, where 

the terms may differ between a prepaid 

account product where a credit card plan 

subject to Regulation Z cannot be linked to 

the prepaid account, and a prepaid account 

product where a credit card plan subject to 

Regulation Z can be linked to the prepaid 

account. However, if with respect to a 

prepaid account a credit card plan subject to 

Regulation Z may be offered at any point to 

the consumer and the plan is accessed by an 

access device for the prepaid account where 

the access device is a credit card under 

Regulation Z or is accessed by account 

number that is a credit card where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid accounts 

specified by the creditor, a financial 

institution that establishes or holds such a 

prepaid account may not apply different 

terms and conditions that do not relate to an 

extension of credit, carrying a credit balance, 

or credit availability to a consumer’s account, 

depending on whether the consumer elects to 

link such a credit card plan to the prepaid 

account. In addition, § 1005.18(g)(2) prevents 

a financial institution from waiving fees or 

reducing the amount of fees that do not relate 

to an extension of credit, carrying a credit 

balance, or credit availability if the consumer 

elects to link the prepaid account to a credit 

card plan. 

ii. Account terms and conditions subject to 

§ 1005.18(g)(2) include, but are not limited 

to: 

A. Interest paid on funds deposited into 

the prepaid account, if any; 

B. Fees assessed on the prepaid account 

that do not relate to an extension of credit, 

carrying a credit balance, or credit 

availability, including any one-time or 

periodic fees imposed for opening or holding 

a prepaid account. See Regulation Z 

§ 1026.4(b)(2), comment 4(b)(2)–1.iii and .iv 

for guidance on fees that relate to an 

extension of credit, carrying a credit balance, 

or credit availability; 

C. The type of prepaid access card 

provided to the consumer. For instance, an 

institution may not provide to consumers a 

PIN-only card before a credit plan subject to 

Regulation Z is linked to the prepaid 

account, while providing a prepaid card with 

both PIN and signature-debit functionality to 


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consumers who have elected to link such a 

credit plan to the prepaid account; 

D. Minimum balance requirements; or 

E. Account features such as online bill 

payment services. 

iii. Account terms and conditions that 

relate to an extension of credit, carrying a 

credit balance, or credit availability and thus 

are not subject to § 1005.18(g)(2) include: 

A. Fees or charges assessed on the prepaid 

account applicable to transactions that access 

the credit card plan subject to Regulation Z 

(12 CFR part 1026), including transactions 

that access both the prepaid account and the 

credit card plan; 

B. Annual or other periodic fees assessed 

on the prepaid account imposed for the 

issuance or availability of the credit card 

plan subject to Regulation Z (12 CFR part 

1026); 

C. Any non-periodic fees that relate to the 

opening of the credit card plan subject to 

Regulation Z (12 CFR part 1026); or 

D. Other fees described in Regulation Z 

§ 1026.4(b)(2), comment 4(b)(2)–1.iii. 

iv. Examples. For all the examples below, 

assume that a consumer has selected a 

prepaid account where a credit card plan 

subject to Regulation Z may be offered to the 

consumer and the credit plan will be 

accessed by an access device for the prepaid 

account where the access device is a credit 

card under Regulation Z or will be accessed 

by an account number that is a credit card 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor. 

A. Assume also that the consumer uses the 

access device to make a purchase that only 

accesses the prepaid account and does not 

access a credit card plan. A financial 

institution is prohibited by § 1005.18(g)(2) 

from charging a $2.00 fee for that transaction 

if the consumer has not elected to link the 

prepaid account to the credit card plan, and 

charging a $1.00 fee for that transaction 

where the consumer has made such an 

election. 

B. Assume instead the consumer has 

elected to link the prepaid account to the 

credit card plan, and the consumer makes a 

purchase transaction at point of sale where 

the transaction using the access device is 

either entirely funded from the credit card 

plan, or partially funded from the credit card 

plan. A financial institution is not prevented 

by § 1005.18(g)(2) from charging a different 

amount of fee for that type of transaction 

than would be charged for a transaction that 

is funded solely from the prepaid account. 

For example, a financial institution is not 

prevented by § 1005.18(g)(2) from charging a 

$2.00 fee for that transaction, 

notwithstanding that only a $1.00 fee would 

have applied if the transaction was solely 

funded from the prepaid account. 

C. Assume a financial institution charges a 

$10 annual fee for holding the prepaid 

account. Section 1005.18(g)(2) prevents a 

financial institution from charging a different 

monthly fee for holding the prepaid account 

if the consumer elects to link the prepaid 

account to the credit card plan. For example, 

the financial institution may not waive or 

discount the annual fee for holding the 

prepaid account, if the consumer elects to 

link the prepaid account to the credit card 

plan. Section 1005.18(g)(2), however, does 

not prevent the institution from charging an 

additional fee to open the credit card plan or 

for the availability of the credit card plan. 

Section 1005.19 Internet Posting of Prepaid 

Account Agreements 

19(a) Definitions 

19(a)(1) Agreement 

1. Provisions contained in separate 

documents included. Section 1005.19(a)(1) 

defines a prepaid account agreement, for 

purposes of § 1005.19, as the written 

document or documents evidencing the 

terms of the legal obligation, or the 

prospective legal obligation, between a 

prepaid account issuer and a consumer for a 

prepaid account. An agreement may consist 

of several documents that, taken together, 

define the legal obligation between the issuer 

and consumer. 

19(a)(2) Amends 

1. Substantive changes. A change to an 

agreement is substantive, and therefore is 

deemed an amendment of the agreement, if 

it alters the rights or obligations of the 

parties. Section 1005.19(a)(2) provides that 

any change in the fee information, as defined 

in § 1005.19(a)(3), is deemed to be 

substantive. Examples of other changes that 

generally would be considered substantive 

include: 

i. Addition or deletion of a provision 

giving the issuer or consumer a right under 

the agreement, such as a clause that allows 

an issuer to unilaterally change the terms of 

an agreement. 

ii. Addition or deletion of a provision 

giving the issuer or consumer an obligation 

under the agreement, such as a clause 

requiring the consumer to pay an additional 

fee. 

iii. Changes that may affect the cost of the 

prepaid account to the consumer, such as 

changes in a provision describing how the 

prepaid account’s monthly fee will be 

calculated. 

iv. Changes that may affect how the terms 

of the agreement are construed or applied, 

such as changes to a choice-of-law provision. 

v. Changes that may affect the parties to 

whom the agreement may apply, such as 

provisions regarding authorized users or 

assignment of the agreement. 

2. Non-substantive changes. Changes that 

generally would not be considered 

substantive include, for example: 

i. Correction of typographical errors that do 

not affect the meaning of any terms of the 

agreement. 

ii. Changes to the issuer’s corporate name, 

logo, or tagline. 

iii. Changes to the format of the agreement, 

such as conversion to a booklet from a fullsheet format, changes in font, or changes in 

margins. 

iv. Changes to the name of the prepaid 

account to which the program applies. 

v. Reordering sections of the agreement 

without affecting the meaning of any terms 

of the agreement. 

vi. Adding, removing, or modifying a table 

of contents or index. 

vii. Changes to titles, headings, section 

numbers, or captions. 

19(a)(4) Issuer 

1. Issuer. Section 1005.19(a)(4) provides 

that, for purposes of § 1005.19, issuer or 

prepaid account issuer means the entity to 

which a consumer is legally obligated, or 

would be legally obligated, under the terms 

of a prepaid account agreement. For example, 

Bank X and Bank Y work together to issue 

prepaid accounts. A consumer that obtains a 

prepaid account issued pursuant to this 

arrangement between Bank X and Bank Y is 

subject to an agreement that states ‘‘This is 

an agreement between you, the consumer, 

and Bank X that governs the terms of your 

Bank Y Prepaid Account.’’ The prepaid 

account issuer in this example is Bank X, 

because the agreement creates a legally 

enforceable obligation between the consumer 

and Bank X. Bank X is the issuer even if the 

consumer applied for the prepaid account 

through a link on Bank Y’s Web site and the 

cards prominently feature the Bank Y logo on 

the front of the card. 

2. Use of third-party service providers. An 

issuer has a legal obligation to comply with 

the requirements of § 1005.19. However, an 

issuer generally may use a third-party service 

provider to satisfy its obligations under 

§ 1005.19, provided that the issuer acts in 

accordance with regulatory guidance 

regarding use of third-party service providers 

and other applicable regulatory guidance. In 

some cases, an issuer may wish to arrange for 

the entity with which it partners to issue 

prepaid accounts to fulfill the requirements 

of § 1005.19 on the issuer’s behalf. For 

example, Program Manager and Bank work 

together to issue prepaid accounts. Under the 

§ 1005.19(a)(4) definition, Bank is the 

prepaid account issuer for purposes of 

§ 1005.19. However, Program Manager 

services the prepaid accounts, including 

mailing to consumers account opening 

materials and providing electronic history of 

consumers’ account transactions pursuant to 

§ 1005.18(c)(1)(ii). While Bank is responsible 

for ensuring compliance with § 1005.19, 

Bank may arrange for Program Manager (or 

another appropriate third-party service 

provider) to submit prepaid account 

agreements to the Bureau under § 1005.19 on 

Bank’s behalf. Bank must comply with 

regulatory guidance regarding use of thirdparty service providers and other applicable 

regulatory guidance. 

3. Partner institution Web sites. As 

explained in comment 19(c)–2, if an issuer 

provides consumers with access to specific 

information about their individual accounts, 

such as providing electronic history of 

consumers’ account transactions pursuant to 

§ 1005.18(c)(1)(ii), through a third-party Web 

site, the issuer is deemed to maintain that 

Web site for purposes of § 1005.19. Such a 

Web site is deemed to be maintained by the 

issuer for purposes of § 1005.19 even where, 

for example, an unaffiliated entity designs 

the Web site and owns and maintains the 

information technology infrastructure that 

supports the Web site, consumers with 

prepaid accounts from multiple issuers can 

access individual account information 

through the same Web site, and the Web site 

is not labeled, branded, or otherwise held out 


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to the public as belonging to the issuer. A 

partner institution’s Web site is an example 

of a third-party Web site that may be deemed 

to be maintained by the issuer for purposes 

of § 1005.19. For example, Program Manager 

and Bank work together to issue prepaid 

accounts. Under the § 1005.19(a)(4) 

definition, Bank is the issuer that issues these 

prepaid accounts for purposes of § 1005.19. 

Bank does not maintain a Web site 

specifically related to prepaid accounts. 

However, consumers can access information 

about their individual accounts, such as an 

electronic history of consumers’ account 

transactions, through a Web site maintained 

by Program Manager. Program Manager 

designs the Web site and owns and maintains 

the information technology infrastructure 

that supports the Web site. The Web site is 

branded and held out to the public as 

belonging to Program Manager. Because 

consumers can access information about their 

individual accounts through this Web site, 

the Web site is deemed to be maintained by 

Bank for purposes of § 1005.19. Bank 

therefore may comply with § 1005.19(c) or 

(d)(1) by ensuring that agreements offered to 

the public are posted on Program Manager’s 

Web site in accordance with § 1005.19(c) or 

(d)(1), respectively. Bank need not create and 

maintain a Web site branded and held out to 

the public as belonging to Bank in order to 

comply with § 1005.19(c) and (d) as long as 

Bank ensures that Program Manager’s Web 

site complies with these sections. 

19(a)(5) Offers 

1. Prepaid accounts offered to limited 

groups. An issuer is deemed to offer a 

prepaid account agreement to the public even 

if the issuer solicits applications for or 

otherwise makes available prepaid accounts 

only to a limited group of persons. For 

example, an issuer may market affinity cards 

only to students and alumni of a particular 

educational institution, or may solicit only 

residents of a specific geographic location for 

a particular prepaid account; in these cases, 

the agreement would be considered to be 

offered to the public. Similarly, agreements 

for prepaid accounts issued by a credit union 

are considered to be offered to the public 

even though such prepaid accounts are 

available only to credit union members. 

Agreements for payroll card accounts, 

government benefit accounts, or for prepaid 

accounts used to distribute student financial 

aid disbursements, or property and casualty 

insurance payouts, and other similar 

programs are also considered to be offered to 

the public. 

19(a)(6) Open Account 

1. Open account. The definition of open 

account includes a prepaid account if (i) 

there is an outstanding balance in the 

account; (ii) the consumer can load more 

funds to the account even if the account does 

not currently hold a balance; or (iii) the 

consumer can access credit through a credit 

plan that would be a credit card account 

under Regulation Z, 12 CFR 1026, that is 

offered in connection with a prepaid account. 

Under this definition, an account that meets 

either of these criteria is considered to be 

open even if the account is considered 

inactive by the issuer. 

19(a)(7) Prepaid Account 

1. Prepaid account. Section 1005.19(a)(7) 

provides that, for purposes of § 1005.19, the 

term prepaid account means a prepaid 

account as defined in § 1005.2(b)(3). 

Therefore, for purposes of § 1005.19, a 

prepaid account includes, among other 

things, a payroll card account as defined in 

§ 1005.2(b)(3)(iii) and an account established 

by a government agency for distributing 

government benefits to a consumer 

electronically as defined in § 1005.2(b)(3)(iv) 

and § 1005.15(a)(2). 

19(b) Submission of Agreements to the 

Bureau 

19(b)(1) Quarterly Submissions 

1. Quarterly submission requirement. 

Section 1005.19(b)(1) requires issuers to send 

quarterly submissions to the Bureau no later 

than the first business day on or after January 

31, April 30, July 31, and October 31 of each 

year. For additional guidance as to the 

quarterly submission timing requirement, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(1)–1. 

2. No quarterly submission required. i. 

Under § 1005.19(b)(1), an issuer is not 

required to make any submission to the 

Bureau at a particular quarterly submission 

deadline if, during the previous calendar 

quarter, the issuer did not take any of the 

following actions: 

A. Offering a new prepaid account 

agreement that was not submitted to the 

Bureau previously. 

B. Amending an agreement previously 

submitted to the Bureau. 

C. Ceasing to offer an agreement previously 

submitted to the Bureau. 

ii. For additional guidance as to when a 

quarterly submission is not required, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(1)–2.ii. 

3. Quarterly submission of complete set of 

updated agreements. Section 1005.19(b)(1) 

permits an issuer to submit to the Bureau on 

a quarterly basis a complete, updated set of 

the prepaid account agreements the issuer 

offers to the public. For additional guidance 

regarding quarterly submission of a complete 

set of updated agreements, see Regulation Z 

(12 CFR 1026.58) comment 58(c)(1)–3. 

19(b)(2) Amended Agreements 

1. No requirement to resubmit agreements 

not amended. Under § 1005.19(b)(2), if a 

prepaid account agreement has been 

submitted to the Bureau, the agreement has 

not been amended, and the issuer continues 

to offer the agreement to the public, no 

additional submission regarding that 

agreement is required. For additional 

guidance regarding the lack of a requirement 

to resubmit agreements that have not been 

amended, see Regulation Z (12 CFR 1026.58) 

comment 58(c)(3)–1. 

2. Submission of amended agreements. If 

an issuer amends a prepaid account 

agreement previously submitted to the 

Bureau, § 1005.19(b)(2) requires the issuer to 

submit the entire amended agreement to the 

Bureau. The issuer must submit the amended 

agreement to the Bureau by the first quarterly 

submission deadline after the last day of the 

calendar quarter in which the change became 

effective. However, the issuer is required to 

submit the amended agreement to the Bureau 

only if the issuer offered the amended 

agreement to the public as of the last 

business day of the calendar quarter in which 

the change became effective. See comment 

19(b)(2)–3. For additional guidance on the 

submission of amended agreements, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(3)–2. 

3. Agreements amended but no longer 

offered to the public. An issuer should 

submit an amended agreement to the Bureau 

under § 1005.19(b)(2) only if the issuer 

offered the amended agreement to the public 

as of the last business day of the calendar 

quarter in which the amendment became 

effective. Agreements that are not offered to 

the public as of the last day of the calendar 

quarter should not be submitted to the 

Bureau. For additional guidance on 

agreements that have been amended but are 

no longer offered to the public, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(3)–3. 

4. Change-in-terms notices not permissible. 

Section 1005.19(b)(2) requires that if an 

agreement previously submitted to the 

Bureau is amended, the issuer must submit 

the entire revised agreement to the Bureau. 

An issuer may not fulfill this requirement by 

submitting a change-in-terms or similar 

notice covering only the terms that have 

changed. In addition, amendments must be 

integrated into the text of the agreement (or 

the optional addendum described in 

§ 1005.19(b)(6)), not provided as separate 

riders. For additional guidance as to 

submission of revised agreements, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(3)–4. 

19(b)(3) Withdrawal of Agreements 

1. Notice of withdrawal of agreement. 

Section 1005.19(b)(3) requires an issuer to 

notify the Bureau if any agreement 

previously submitted to the Bureau by that 

issuer is no longer offered to the public by 

the first quarterly submission deadline after 

the last day of the calendar quarter in which 

the issuer ceased to offer the agreement. For 

additional guidance as to notice of 

withdrawal of agreements, see Regulation Z 

(12 CFR 1026.58) comment 58(c)(4)–1. 

19(b)(4) De Minimis Exception 

1. Relationship to other exceptions. The de 

minimis exception in § 1005.19(b)(4) is 

distinct from the product testing exception 

under § 1005.19(b)(5). The de minimis 

exception provides that an issuer with fewer 

than 3,000 open prepaid accounts is not 

required to submit any agreements to the 

Bureau, regardless of whether those 

agreements qualify for the product testing 

exception. In contrast, the product testing 

exception provides that an issuer is not 

required to submit to the Bureau agreements 

offered solely in connection with certain 

types of prepaid account programs with 

fewer than 3,000 open accounts, regardless of 

the issuer’s total number of open accounts. 

2. De minimis exception. Under 

§ 1005.19(b)(4), an issuer is not required to 

submit any prepaid account agreements to 

the Bureau under § 1005.19(b)(1) if the issuer 

has fewer than 3,000 open prepaid accounts 


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as of the last business day of the calendar 

quarter. For additional guidance on the de 

minimis exception, see Regulation Z (12 CFR 

1026.58) comment 58(c)(5)–2. 

3. Date for determining whether issuer 

qualifies. Whether an issuer qualifies for the 

de minimis exception is determined as of the 

last business day of each calendar quarter. 

For additional guidance on the date for 

determining whether an issuer qualifies for 

the de minimis exception, see Regulation Z 

(12 CFR 1026.58) comment 58(c)(5)–3. 

4. Date for determining whether issuer 

ceases to qualify. Whether an issuer has 

ceased to qualify for the de minimis 

exception under § 1005.19(b)(4) is 

determined as of the last business day of the 

calendar quarter. For additional guidance on 

the date for determining whether an issuer 

ceases to qualify for the de minimis 

exception, see Regulation Z (12 CFR 1026.58) 

comment 58(c)(5)–4. 

5. Option to withdraw agreements. Section 

1005.19(b)(4) provides that if an issuer that 

did not previously qualify for the de minimis 

exception qualifies for the de minimis 

exception, the issuer must continue to make 

quarterly submissions to the Bureau as 

required by § 1005.19(b)(1) until the issuer 

notifies the Bureau that the issuer is 

withdrawing all agreements it previously 

submitted to the Bureau. For additional 

guidance on an issuer’s option to withdraw 

its agreements submitted to the Bureau, see 

Regulation Z (12 CFR 1026.58) comment 

58(c)(5)–5. 

19(b)(6) Form and Content of Agreements 

Submitted to the Bureau 

1. ‘‘As of’’ date. Agreements submitted to 

the Bureau must contain the provisions of the 

agreement and fee information in effect as of 

the last business day of the preceding 

calendar quarter. For example, on June 1, an 

issuer decides to decrease the out-of-network 

ATM withdrawal fee associated with one of 

the agreements it offers to the public. The 

change in that fee will become effective on 

August 1. If the issuer submits the agreement 

to the Bureau on July 31 (for example, 

because the agreement has been otherwise 

amended), the agreement submitted should 

not include the new lower out-of-network 

ATM withdrawal fee because that lower fee 

was not in effect on June 30, the last business 

day of the preceding calendar quarter. 

2. Fee agreement variations do not 

constitute separate agreements. Fee 

information that may vary from one 

consumer to another depending on the 

consumer’s state of residence or other factors 

must be disclosed by setting forth all the 

possible variations or by providing a range of 

possible variations. Two agreements that 

differ only with respect to variations in the 

fee information do not constitute separate 

agreements for purposes of this section. For 

example, an issuer offers two types of 

prepaid accounts that differ only with respect 

to the monthly fee. The monthly fee for one 

type of account is $4.95, while the monthly 

fee for the other type of account is $0 if the 

consumer regularly receives direct deposit to 

the prepaid account. The provisions of the 

agreement and fee information for the two 

types of accounts are otherwise identical. 

The issuer should not submit to the Bureau 

one agreement with fee information listing a 

$4.95 monthly fee and another agreement 

with fee information listing a $0 monthly fee. 

Instead, the issuer should submit to the 

Bureau one agreement with fee information 

listing possible monthly fees of $4.95 or $0, 

including the explanation that the latter fee 

is dependent upon the consumer regularly 

receiving direct deposit. 

3. Integrated agreement requirement. 

Issuers may not provide provisions of the 

agreement or fee information in the form of 

change-in-terms notices or riders. The only 

addendum that may be submitted as part of 

an agreement is the optional fee information 

addendum described in § 1005.19(b)(6)(ii). 

Changes in provisions or fee information 

must be integrated into the body of the 

agreement or the optional fee information 

addendum described in § 1005.19(b)(6)(ii). 

For example, it would be impermissible for 

an issuer to submit to the Bureau an 

agreement in the form of a terms and 

conditions document dated January 1, 2015, 

four subsequent change in terms notices, and 

2 addenda showing variations in fee 

information. Instead, the issuer must submit 

a document that integrates the changes made 

by each of the change in terms notices into 

the body of the original terms and conditions 

document and a single optional addendum 

displaying variations in fee information. 

19(c) Posting of Agreements Offered to the 

Public 

1. Requirement applies only to agreements 

submitted to the Bureau. Issuers are only 

required to post and maintain on their 

publicly available Web site the prepaid 

account agreements that the issuer must 

submit to the Bureau under § 1005.19(b). 

This posting requirement is distinct from that 

of § 1005.7, which requires an issuer to 

provide certain disclosures at the time a 

consumer contracts for an electronic fund 

transfer service or before the first electronic 

fund transfer is made involving the 

consumer’s account, as well as the change in 

terms notice required under § 1005.8(a). This 

requirement is also distinct from that of 

§ 1005.18(b)(2)(ii), which requires issuers to 

make the long form disclosure available to 

consumers prior to prepaid account 

acquisition and which, depending on the 

methods an issuer offers prepaid accounts to 

consumers, may require posting of the long 

form disclosure on the issuer’s Web site. If, 

for example, an issuer is not required to 

submit any agreements to the Bureau because 

the issuer qualifies for the de minimis 

exception under § 1005.19(b)(4), the issuer is 

not required to post and maintain any 

agreements on its Web site under 

§ 1005.19(c). The issuer is still required to 

provide each individual consumer with 

access to his or her specific prepaid account 

agreement under § 1005.19(d) by posting and 

maintaining the agreement on the issuer’s 

Web site or by providing a copy of the 

agreement upon the consumer’s request. The 

issuer may also be required to post the long 

form fee disclosure required by 

§ 1005.18(b)(2)(ii) online as well, depending 

on the methods by which the issuer offers 

prepaid accounts to consumers. 

2. Issuers that do not otherwise maintain 

Web sites. If an issuer is required to submit 

one or more agreements to the Bureau under 

§ 1005.19(b) that issuer must post those 

agreements on a publicly available Web site 

it maintains. If an issuer provides consumers 

with access to specific information about 

their individual accounts, such as balance 

information or copies of statements, through 

a third-party Web site, the issuer is 

considered to maintain that Web site for 

purposes of § 1005.19. Such a third-party 

Web site is deemed to be maintained by the 

issuer for purposes of § 1005.19(c) even 

where, for example, an unaffiliated entity 

designs the Web site and owns and maintains 

the information technology infrastructure 

that supports the Web site, consumers with 

prepaid accounts from multiple issuers can 

access individual account information 

through the same Web site, and the Web site 

is not labeled, branded, or otherwise held out 

to the public as belonging to the issuer. 

Therefore, issuers that provide consumers 

with access to account-specific information 

through a third-party Web site can comply 

with § 1005.19(c) by ensuring that the 

agreements the issuer submits to the Bureau 

are posted on the third-party Web site in 

accordance with § 1005.19(c). 

19(d) Agreements for All Open Accounts 

1. Requirement applies to all open 

accounts. The requirement to provide access 

to prepaid account agreements under 

§ 1005.19(d) applies to all open prepaid 

accounts, unless the agreements are required 

to be submitted to the Bureau pursuant to 

§ 1005.19(b) and posted on the issuer’s Web 

site pursuant to § 1005.19(c). For example, an 

issuer that is not required to submit 

agreements to the Bureau because it qualifies 

for the de minimis exception under 

§ 1005.19(b)(4) would still be required to 

provide consumers with access to their 

specific agreements under § 1005.19(d). 

Similarly, an agreement that is no longer 

offered to the public would not be required 

to be submitted to the Bureau under 

§ 1005.19(b), but would still need to be 

provided to the consumer to whom it applies 

under § 1005.19(d). 

* * * * * 

Section 1005.30 Remittance Transfer 

Definitions 

* * * * * 

30(g) Sender 

* * * * * 

3. Non-consumer accounts. A transfer that 

is requested to be sent from an account that 

was not established primarily for personal, 

family, or household purposes, such as an 

account that was established as a business or 

commercial account or an account held by a 

business entity such as a corporation, not-forprofit corporation, professional corporation, 

limited liability company, partnership, or 

sole proprietorship, is not requested 

primarily for personal, family, or household 

purposes. A consumer requesting a transfer 

from such an account therefore is not a 

sender under § 1005.30(g). Additionally, a 

transfer that is requested to be sent from an 

account held by a financial institution under 

a bona fide trust agreement pursuant to 

§ 1005.2(b)(2) is not requested primarily for 

personal, family, or household purposes, and 


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a consumer requesting a transfer from such 

an account is therefore not a sender under 

§ 1005.30(g). 

* * * * * 

PART 1026—TRUTH IN LENDING 

(REGULATION Z) 

■ 11. The authority citation for part 

1026 continues to read as follows: 

Authority: 12 U.S.C. 2601, 2603–2605, 

2607, 2609, 2617, 5511, 5512, 5532, 5581; 15 

U.S.C. 1601 et seq. 

Subpart A—General 

■ 12. Section 1026.2 is amended by 

revising paragraph (a)(15) to read as 

follows: 

§ 1026.2 Definitions and rules of 

construction. 

(a) * * * 

(15)(i) Credit card means any card, 

plate, or other single credit device that 

may be used from time to time to obtain 

credit. 

(ii) Credit card account under an 

open-end (not home-secured) consumer 

credit plan means any open-end credit 

account that is accessed by a credit card, 

except: 

(A) A home-equity plan subject to the 

requirements of § 1026.40 that is 

accessed by a credit card; 

(B) An overdraft line of credit that is 

accessed by a debit card; 

(C) An overdraft line of credit that is 

accessed by an account number, except 

if: 

(1) The account number is a prepaid 

card that is a credit card; or 

(2) The account number is a credit 

card where extensions of credit are 

permitted to be deposited directly only 

into particular prepaid accounts 

specified by the creditor. 

(iii) Charge card means a credit card 

on an account for which no periodic 

rate is used to compute a finance charge. 

(iv) Debit card means any card, plate, 

or other single device that may be used 

from time to time to access an asset 

account other than a prepaid account. 

The term debit card does not include a 

prepaid card. 

(v) Prepaid card means any card, 

code, or other device that can be used 

to access a prepaid account. 

(vi) Prepaid account means a prepaid 

account as defined in 12 CFR 

1005.2(b)(3). 

(vii) Account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor means an account number that 

is not a prepaid card that may be used 

from time to time to access a credit plan 

that allows deposits directly into 

particular prepaid accounts specified by 

the creditor but does not allow the 

consumer to deposit directly extensions 

of credit from the plan into asset 

accounts other than particular prepaid 

accounts specified by the creditor. 

* * * * * 

■ 13. Section 1026.4 is amended by 

revising paragraphs (b)(2), (c)(3), and 

(c)(4) to read as follows: 

§ 1026.4 Finance charge. 

* * * * * 

(b) * * * 

(2) Service, transaction, activity, and 

carrying charges, including: 

(i) Except as provided for prepaid 

accounts in paragraph (b)(2)(ii) of this 

section, any charge imposed on a 

checking or other transaction account to 

the extent that the charge exceeds the 

charge for a similar account without a 

credit feature; and 

(ii) Any charge imposed in connection 

with an extension of credit, for carrying 

a credit balance, or for credit availability 

where that fee is imposed on a prepaid 

account in connection with credit 

accessed by a prepaid card or accessed 

by an account number where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, 

regardless of whether the creditor 

imposes the same, greater or lesser 

charge on the withdrawal of funds from 

the prepaid account, to have access to 

the prepaid account, or when credit is 

not extended. 

* * * * * 

(c) * * * 

(3) Charges imposed by a financial 

institution for paying items that 

overdraw an account, unless the 

payment of such items and the 

imposition of the charge were 

previously agreed upon in writing. This 

exception does not apply to credit 

accessed by a prepaid card or to credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

(4) Fees charged for participation in a 

credit plan, whether assessed on an 

annual or other periodic basis. This 

exception does not apply to credit 

accessed by a prepaid card or to credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor. 

* * * * * 

Subpart B—Open-End Credit 

■ 14. Section 1026.7 is amended by 

revising paragraph (b)(11)(ii)(A) to read 

as follows: 

§ 1026.7 Periodic statement. 

* * * * * 

(b) * * * 

(11) * * * 

(ii) * * * 

(A) Periodic statements provided 

solely for charge card accounts except: 

(1) A charge card account accessed by 

a charge card that is a prepaid card; or 

(2) A charge card account accessed by 

an account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor; and 

* * * * * 

■ 15. Section 1026.12 is amended by 

revising paragraph (d) and adding 

paragraph (h) to read as follows: 

§ 1026.12 Special credit card provisions. 

* * * * * 

(d) Offsets by card issuer prohibited— 

(1) General rule. A card issuer may not 

take any action, either before or after 

termination of credit card privileges, to 

offset a cardholder’s indebtedness 

arising from a consumer credit 

transaction under the relevant credit 

card plan against funds of the 

cardholder held on deposit with the 

card issuer. 

(2) Rights of the card issuer. This 

paragraph does not alter or affect the 

right of a card issuer acting under state 

or Federal law to do any of the 

following with regard to funds of a 

cardholder held on deposit with the 

card issuer if the same procedure is 

constitutionally available to creditors 

generally: Obtain or enforce a 

consensual security interest in the 

funds; attach or otherwise levy upon the 

funds; or obtain or enforce a court order 

relating to the funds. 

(3) Periodic deductions. (i) This 

paragraph does not prohibit a plan, if 

authorized in writing by the cardholder, 

under which the card issuer may 

periodically deduct all or part of the 

cardholder’s credit card debt from a 

deposit account held with the card 

issuer (subject to the limitations in 

§ 1026.13(d)(1)). 

(ii) With respect to credit cards that 

are also prepaid cards or credit cards 

that are also account numbers where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor, for purposes of this paragraph 

(d)(3), ‘‘periodically’’ means no more 

frequently than once per calendar 

month, such as on a monthly due date 


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disclosed on the applicable periodic 

statement in accordance with the 

requirements of § 1026.7(b)(11)(i) or on 

an earlier date in each calendar month 

in accordance with a written 

authorization signed by the consumer. 

* * * * * 

(h) Timing requirement for 

solicitation or application with respect 

to a prepaid cardholder. (1) A card 

issuer shall not open a credit card 

account for a consumer holding a 

prepaid account, or make a solicitation 

or provide an application to a consumer 

holding a prepaid card to open a credit 

or charge card account, accessed by the 

prepaid card or by an account number 

that is a credit card where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, until 

at least 30 calendar days after the 

consumer has registered the prepaid 

account. If a card issuer has established 

an existing credit or charge card account 

with a holder of a prepaid card that is 

accessed by a prepaid card or an 

account number where extensions of 

credit are permitted to be deposited 

directly only into particular prepaid 

accounts specified by the creditor, the 

card issuer shall not allow an additional 

prepaid card obtained by the consumer 

from the card issuer to access the credit 

or charge card account, or permit credit 

from the credit or charge card account 

to be deposited into an additional 

prepaid account, until at least 30 

calendar days after the consumer has 

registered the additional prepaid 

account. 

(2) For purposes of paragraph (h) of 

this section, the term solicitation means 

an offer by the card issuer to open a 

credit or charge card account that does 

not require the consumer to complete an 

application. A ‘‘firm offer of credit’’ as 

defined in section 603(l) of the Fair 

Credit Reporting Act (15 U.S.C. 

1681a(l)) for a credit or charge card is 

a solicitation for purposes of paragraph 

(h) of this section. 

■ 16. Section 1026.13 is amended by 

revising paragraph (i) to read as follows: 

§ 1026.13 Billing error resolution. 

* * * * * 

(i) Relation to Electronic Fund 

Transfer Act and Regulation E. A 

creditor shall comply with the 

requirements of Regulation E, 12 CFR 

1005.11 governing error resolution 

rather than those of paragraphs (a), (b), 

(c), (e), (f), and (h) of this section if: 

(1) With respect to an asset account 

other than a prepaid account, an 

extension of credit that is incident to an 

electronic fund transfer occurs under an 

agreement between the consumer and a 

financial institution to extend credit 

when the consumer’s account is 

overdrawn or to maintain a specified 

minimum balance in the consumer’s 

account; or 

(2) With respect to a credit plan in 

connection with a prepaid account, an 

extension of credit incident to an 

electronic fund transfer when the 

consumer’s prepaid account is 

overdrawn if the credit plan is subject 

to subpart B of this regulation. 

* * * * * 

Subpart G—Special Rules Applicable 

to Credit Card Accounts and Open-End 

Credit Offered to College Students 

■ 17. Section 1026.52 is amended by 

revising paragraph (a) to read as follows: 

§ 1026.52 Limitations on fees. 

(a) Limitations during first year after 

account opening. * * * 

* * * * * 

■ 18. Section 1026.60 is amended by 

revising paragraph (a)(5)(iv) to read as 

follows: 

§ 1026.60 Credit and charge card 

applications and solicitations. 

(a) * * * 

(5) * * * 

(iv) Lines of credit accessed solely by 

account numbers except where the 

account number is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the 

creditor; 

* * * * * 

■ 19. In Supplement I to Part 1026: 

■ a. Under Section 1026.2—Definitions 

and Rules of Construction: 

■ i. In subsection 2(a)(7) Card Issuer, 

paragraph 1 is revised and paragraph 2 

is added. 

■ ii. In subsection 2(a)(14) Credit, 

paragraph 3 is added. 

■ iii. In subsection Paragraph 2(a)(15): 

■ A. Paragraphs 1, 2.i.B, 2.ii.C, 3 and 4 

are revised. 

■ B. Paragraphs 2.i.F, 2.i.G, 5 and 6 are 

added. 

■ iv. In subsection Paragraph 

2(a)(17)(iii), paragraph 2 is added. 

■ v. In subsection 2(a)(20) Open-End 

Credit, paragraphs 2 and 4 are revised. 

■ b. Under Section 1026.4—Finance 

Charge: 

■ i. In subsection 4(a) Definition, 

paragraphs 4.iii and 4.iv are added. 

■ ii. In subsection Paragraph 4(b)(2), 

paragraph 1 is revised. 

■ iii. In subsection Paragraph 4(c)(3), 

paragraph 1 is revised. 

■ iv. In subsection Paragraph 4(c)(4), 

paragraph 1 is revised. 

■ c. Under Section 1026.5—General 

Disclosure Requirements: 

■ i. In subsection 5(b) Time of 

Disclosures: 

■ ii. In subsection 5(b)(2) Periodic 

Statements: 

■ A. In subsection 5(b)(2)(ii) Timing 

Requirements, paragraph 4.i is revised. 

■ d. Under Section 1026.8—Identifying 

Transactions on Periodic Statements: 

■ i. In subsection 8(a) Sale Credit, 

paragraph 2 is revised. 

■ ii. In subsection 8(b) Nonsale Credit, 

paragraphs 1 and 2 are revised. 

■ e. Under Section 1026.10—Payments: 

■ i. In subsection 10(a) General Rule, 

paragraph 2.ii is revised. 

■ ii. In subsection 10(b) Specific 

Requirements for Payments, paragraph 1 

is revised. 

■ f. Under Section 1026.12—Special 

Credit Card Provisions: 

■ i. In subsection 12(a) Issuance of 

Credit Cards: 

■ A. In subsection Paragraph 12(a)(1), 

paragraphs 2 and 7 are revised. 

■ B. In subsection Paragraph 12(a)(2), 

paragraph 6 is revised. 

■ ii. In subsection 12(c) Right of 

Cardholder to Assert Claims or Defenses 

Against Card Issuer, paragraph 5 is 

added. 

■ iii. In subsection 12(c)(1) General 

Rule, paragraph 1 is revised. 

■ iv. In subsection 12(d) Offsets by Card 

Issuer Prohibited, paragraph 1 is added. 

■ v. In subsection Paragraph 12(d)(1), 

paragraph 2 is revised. 

■ vi. In subsection Paragraph 12(d)(2), 

paragraph 1 is revised. 

■ vii. In subsection Paragraph 12(d)(3), 

paragraph 3 is added. 

■ viii. Subsection 12(h) Timing 

Requirement for Solicitation or 

Application With Respect to a Prepaid 

Cardholder is added. 

■ g. Under Section 1026.13—Billing 

Error Resolution: 

■ i. In subsection 13(a) Definition of a 

Billing Error: 

■ A. In subsection Paragraph 13(a)(3), 

paragraph 2 is revised 

■ ii. In subsection 13(i) Relation to 

Electronic Fund Transfer Act and 

Regulation E, paragraphs 1, 2, and 3 are 

revised and paragraphs 4 and 5 are 

added. 

■ h. Under Section 1026.52— 

Limitations on Fees: 

■ i. In subsection 52(a) Limitations 

During First Year After Account 

Opening: 

■ A. In subsection 52(a)(1) General 

Rule, paragraph 1 is revised and 

paragraphs 1.iii and 1.iv are added. 

■ ii. In subsection 52(a)(2) Fees Not 

Subject to Limitations, paragraphs 2 and 

3 are revised and paragraphs 4 and 5 are 

added. 

■ iii. In subsection 52(b) Limitations on 

Penalty Fees: 


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■ A. In subsection 52(b)(2) Prohibited 

fees: 

■ B. In subsection 52(b)(2)(i) Fees that 

Exceed Dollar Amount Associated with 

Violation, paragraph 7 is added. 

■ i. Under Section 1026.57—Reporting 

and Marketing Rules for College Student 

Open-End Credit: 

■ i. In subsection 57(a) Definitions: 

■ A. In subsection 57(a)(1) College 

Student Credit Card, paragraph 1 is 

revised. 

■ B. In subsection 57(a)(5) College 

Credit Card Agreement, paragraph 1 is 

revised. 

■ ii. In subsection 57(b) Public 

Disclosure of Agreements, paragraph 3 

is added. 

■ iii. In subsection 57(c) Prohibited 

Inducement, paragraph 7 is added. 

■ j. Under Section 1026.60—Credit and 

Charge Card Applications and 

Solicitation: 

■ i. Paragraph 1 is revised. 

■ ii. In subsection 60(b) Required 

Disclosures: 

■ A. In subsection 60(b)(4) Transaction 

Charges, paragraph 3 is added. 

■ B. In subsection 60(b)(8) Cash 

Advance Fee, paragraphs 4 and 5 are 

added. 

The revisions and additions read as 

follows: 

SUPPLEMENT I TO PART 1026— 

OFFICIAL INTERPRETATIONS 

Subpart A—General 

* * * * * 

Section 1026.2 Definitions and Rules of 

Construction 

* * * * * 

2(a)(7) Card Issuer 

1. Agent. i. An agent of a card issuer is 

considered a card issuer. Except as provided 

in comment 2(a)(7)–1.ii, because agency 

relationships are traditionally defined by 

contract and by state or other applicable law, 

the regulation does not define agent. Merely 

providing services relating to the production 

of credit cards or data processing for others, 

however, does not make one the agent of the 

card issuer. In contrast, a financial institution 

may become the agent of the card issuer if 

an agreement between the institution and the 

card issuer provides that the cardholder may 

use a line of credit with the financial 

institution to pay obligations incurred by use 

of the credit card. 

ii. Under § 1026.2(a)(7), with respect to a 

prepaid card that is a credit card where the 

card accesses a credit plan that is offered by 

a third party, a party offering the credit plan 

that is accessed by the prepaid card would 

be an agent of the person issuing the prepaid 

card and thus, would be a card issuer with 

respect to the prepaid card that is a credit 

card. 

2. Prepaid cards. With respect to credit 

accessed by a prepaid card, a person is not 

a card issuer if the card only accesses credit 

that is not subject to any finance charge or 

any fee described in § 1026.4(c) and is not 

payable by written agreement in more than 

four installments. For example, a person is 

not a card issuer if (1) the prepaid card only 

accesses credit where the person does not 

impose any finance charge or any fee 

described in § 1026.4(c) for the credit or for 

participation in a credit plan; and (2) the 

person expects repayment when funds are 

deposited into the prepaid account. In this 

case, the prepaid card is not a credit card and 

therefore the person issuing the card is not 

a card issuer. See comment 2(a)(15)–2.i.F. 

* * * * * 

2(a)(14) Credit 

* * * * * 

3. Transactions on prepaid accounts when 

there are insufficient funds. Credit includes 

an authorized transaction on a prepaid 

account where the consumer has insufficient 

or unavailable funds in the prepaid account 

at the time of authorization. It also includes 

a paid transaction on a prepaid account 

where the consumer has insufficient or 

unavailable funds in the prepaid account at 

the time the transaction is paid. This 

includes a transaction where the consumer 

has sufficient or available funds in the 

prepaid account to cover the amount of the 

transaction at the time the transaction is 

authorized but insufficient or unavailable 

funds in the prepaid account to cover the 

amount of the transaction at the time the 

transaction is paid. 

Paragraph 2(a)(15) 

1. Usable from time to time. A credit card 

must be usable from time to time. Since this 

involves the possibility of repeated use of a 

single device, checks and similar instruments 

that can be used only once to obtain a single 

credit extension are not credit cards. With 

respect to a preauthorized check that is 

issued on a prepaid account for which the 

funds are withdrawn at the time of 

preauthorization using the prepaid account 

number, the credit is obtained using the 

prepaid account number and not the check. 

See comment 2(a)(15)–2.i.F for discussion of 

when a prepaid account number is a credit 

card. 

2. * * * 

i. * * * 

B. A debit card (other than a debit card that 

is solely an account number) that also 

accesses a credit account (that is, a debitcredit card). See comment 2(a)(15)–2.ii.C for 

guidance on whether a debit card that is 

solely an account number is a credit card. 

* * * * * 

F. A prepaid card (including a prepaid card 

that is solely an account number) that is a 

single device that may be used from time to 

time to access a credit plan, except if that 

prepaid card only accesses credit that is not 

subject to any finance charge or any fee 

described in § 1026.4(c) and is not payable by 

written agreement in more than four 

installments. 

G. An account number described in 

§ 1026.2(a)(15)(vii). For example, if a creditor 

provides a consumer with an open-end line 

of credit that can be accessed by an account 

number and funds from that line of credit are 

permitted to be deposited directly only into 

particular prepaid accounts identified by the 

creditor (such as a prepaid account with the 

same creditor), the account number is a 

credit card for purposes of § 1026.2(a)(15)(i). 

See also § 1026.2(a)(15)(vii) and related 

commentary for additional guidance on these 

account numbers. 

ii. * * * 

C. Except as provided in comment 

2(a)(15)–2.i.F and G, an account number that 

accesses a credit account, unless the account 

number can access an open-end line of credit 

to purchase goods or services. For example, 

if a creditor provides a consumer with an 

open-end line of credit that can be accessed 

by an account number in order to transfer 

funds into another account (such as an asset 

account with the same creditor), the account 

number is not a credit card for purposes of 

§ 1026.2(a)(15)(i). However, if the account 

number can also access the line of credit to 

purchase goods or services (such as an 

account number that can be used to purchase 

goods or services on the Internet), the 

account number is a credit card for purposes 

of § 1026.2(a)(15)(i), regardless of whether the 

creditor treats such transactions as 

purchases, cash advances, or some other type 

of transaction. Furthermore, if the line of 

credit can also be accessed by a card (such 

as a debit card), that card is a credit card for 

purposes of § 1026.2(a)(15)(i). 

3. Charge card. i. Charge cards are credit 

cards where no periodic rate is used to 

compute the finance charge. Under the 

regulation, a reference to credit cards 

generally includes charge cards. In particular, 

references to credit card accounts under an 

open-end (not home-secured) consumer 

credit plan in Subparts B and G generally 

include charge cards. The term charge card 

is, however, distinguished from credit card or 

credit card account under an open-end (not 

home-secured) consumer credit plan in 

§§ 1026.60, 1026.6(b)(2)(xiv), 1026.7(b)(11) 

(except as described in comment 2(a)(15)–3.ii 

below), 1026.7(b)(12), 1026.9(e), 1026.9(f), 

1026.28(d), 1026.52(b)(1)(ii)(C), and 

Appendices G–10 through G–13. 

ii. A prepaid card is a charge card if it also 

is a credit card where no periodic rate is used 

to compute the finance charge. See comment 

2(a)(15)–2.i.F for when a prepaid card is a 

credit card. Likewise, an account number 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor is 

a charge card if it is a credit card where no 

periodic rate is used to compute the finance 

charge. See § 1026.2(a)(15)(vii) and comment 

2(a)(15)–2.i.G for when such an account 

number is a credit card. Unlike other charge 

cards, such a prepaid card or account number 

that accesses a credit card account under an 

open-end (not home-secured) consumer 

credit plan is subject to the requirements in 

§ 1026.7(b)(11). Thus, under 

§ 1026.5(b)(2)(ii), for credit card accounts 

under an open-end (not home-secured) 

consumer credit plan, a card issuer of a 

prepaid card or account number that meets 

the definition of a charge card because it does 

not impose a finance charge structured as a 

periodic rate must adopt reasonable 

procedures designed to ensure that (1) 

periodic statements are mailed or delivered 


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at least 21 days prior to the payment due date 

disclosed on the statement pursuant to 

§ 1026.7(b)(11)(i)(A), and (2) the card issuer 

does not treat as late for any purposes a 

required minimum periodic payment 

received by the card issuer within 21 days 

after mailing or delivery of the periodic 

statement disclosing the due date for that 

payment. 

4. Credit card account under an open-end 

(not home-secured) consumer credit plan. i. 

An open-end consumer credit account is a 

credit card account under an open-end (not 

home-secured) consumer credit plan for 

purposes of § 1026.2(a)(15)(ii) if: 

A. The account is accessed by a credit card, 

as defined in § 1026.2(a)(15)(i); and 

B. The account is not excluded under 

§ 1026.2(a)(15)(ii)(A), (a)(15)(ii)(B) or 

(a)(15)(ii)(C). 

ii. As noted in § 1026.2(a)(15)(ii)(C), the 

exclusion from credit card account under an 

open-end (not home-secured) consumer 

credit plan provided by that paragraph does 

not apply to: 

A. An overdraft line of credit that is 

accessed by a prepaid card (including a 

prepaid card that is solely an account 

number) that is a credit card; and 

B. An overdraft line of credit accessed by 

an account number that is a credit card 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor. 

5. Account number where extensions of 

credit are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. As defined in 

§ 1026.2(a)(15)(vii), this phrase means an 

account number that is not a prepaid account 

that can be used from time to time to access 

a credit plan that allows deposits directly 

into particular prepaid accounts specified by 

the creditor but does not allow the consumer 

to deposit directly extensions of credit from 

the plan into asset accounts other than 

particular prepaid accounts specified by the 

creditor. A credit plan that permits a 

consumer to deposit directly extensions of 

credit into a checking account would not 

constitute a credit plan where extensions of 

credit are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. A credit plan where 

a consumer could access the credit plan by 

use of checks or in-person withdrawals 

would constitute a credit plan where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor, so 

long as the credit plan allows deposits 

directly into particular prepaid accounts 

specified by the creditor but does not allow 

the consumer to deposit directly extensions 

of credit into asset accounts other than 

particular prepaid accounts specified by the 

creditor. These account numbers would be 

credit cards as discussed in comment 

2(a)(15)–2.i.G. 

6. Definition of prepaid card. The term 

‘‘prepaid card’’ in § 1026.2(a)(15)(v) includes 

any card, code or other device that can be 

used to access a prepaid account, including 

a prepaid account number or other code. The 

phrase ‘‘credit accessed by a prepaid card’’ 

means any credit that is accessed by any 

card, code or other device that also can be 

used to access a prepaid account. 

* * * * * 

2(a)(17) Creditor 

* * * * * 

Paragraph 2(a)(17)(iii) 

* * * * * 

2. Prepaid cards. With respect to credit 

accessed by a prepaid card, 

§ 1026.2(a)(17)(iii) does not apply if the card 

only accesses credit that is not subject to any 

finance charge or any fee described in 

§ 1026.4(c) and is not payable by written 

agreement in more than four installments. In 

this case, the prepaid card is not a credit card 

and the person issuing the card is not a card 

issuer. See comments 2(a)(15)–2.i.F. For 

example, a person is not a creditor if (1) the 

prepaid card only accesses credit where the 

person does not impose any finance charge 

or any fee described in § 1026.4(c) for the 

credit or for participation in a credit plan; 

and (2) the person expects repayment when 

funds are deposited into the prepaid account. 

* * * * * 

2(a)(20) Open-End Credit 

* * * * * 

2. Existence of a plan. i. The definition 

requires that there be a plan, which connotes 

a contractual arrangement between the 

creditor and the consumer. 

ii. With respect to credit accessed by a 

prepaid card, a plan means a program where 

the consumer is obligated contractually to 

repay any credit extended by the creditor. 

For example, a plan includes a program 

under which a creditor routinely pays 

transactions when a consumer has 

insufficient or unavailable funds in a prepaid 

account and the consumer is obligated 

contractually to repay those transactions. 

Such a program constitutes a plan 

notwithstanding that the creditor retains 

discretion not to pay such transactions, the 

creditor does not pay transactions once the 

consumer has exceeded a certain amount of 

credit, or the creditor only pays transactions 

where there were sufficient or available 

funds in the prepaid account to cover the 

amount of the transaction at the time the 

transaction was authorized but not sufficient 

or available funds in the prepaid account to 

cover the amount of the transaction at the 

time the transaction is paid. For example, a 

program constitutes a plan where a creditor 

will routinely pay a transaction when the 

consumer does not have adequate funds in 

the prepaid account to cover the full amount 

of the transaction and the consumer is 

obligated contractually to repay that 

transaction. 

iii. With respect to credit accessed by an 

account number where extensions of credit 

are permitted to be deposited directly only 

into particular prepaid accounts specified by 

the creditor extending the credit, a plan 

means a program where the consumer is 

obligated contractually to repay any credit 

extended by the creditor. For example, a plan 

includes a program under which a creditor 

routinely will extend credit that is deposited 

directly into particular prepaid accounts 

specified by the creditor and the consumer is 

obligated contractually to repay the credit. 

Such a program constitutes a plan 

notwithstanding that the creditor retains 

discretion not to extend credit, or the creditor 

does not extend credit once the consumer has 

exceeded a certain amount of credit. For 

example, a program constitutes a plan where 

a creditor routinely will extend credit that is 

deposited directly into a particular prepaid 

account specified by the creditor when the 

consumer requests an extension because the 

consumer does not have adequate funds in 

the prepaid account to cover the full amount 

of a transaction using the prepaid card and 

the consumer is obligated contractually to 

repay the credit. 

iv. Some creditors offer programs 

containing a number of different credit 

features. The consumer has a single account 

with the institution that can be accessed 

repeatedly via a number of sub-accounts 

established for the different program features 

and rate structures. Some features of the 

program might be used repeatedly (for 

example, an overdraft line) while others 

might be used infrequently (such as the part 

of the credit line available for secured credit). 

If the program as a whole is subject to 

prescribed terms and otherwise meets the 

definition of open-end credit, such a program 

would be considered a single, multifeatured 

plan. 

* * * * * 

4. Finance charge on an outstanding 

balance. i. The requirement that a finance 

charge may be computed and imposed from 

time to time on the outstanding balance 

means that there is no specific amount 

financed for the plan for which the finance 

charge, total of payments, and payment 

schedule can be calculated. A plan may meet 

the definition of open-end credit even though 

a finance charge is not normally imposed, 

provided the creditor has the right, under the 

plan, to impose a finance charge from time 

to time on the outstanding balance. For 

example, in some plans, a finance charge is 

not imposed if the consumer pays all or a 

specified portion of the outstanding balance 

within a given time period. Such a plan 

could meet the finance charge criterion, if the 

creditor has the right to impose a finance 

charge, even though the consumer actually 

pays no finance charges during the existence 

of the plan because the consumer takes 

advantage of the option to pay the balance 

(either in full or in installments) within the 

time necessary to avoid finance charges. 

ii. With respect to credit accessed by a 

prepaid card (including a prepaid card that 

is solely an account number) or credit 

accessed by an account number where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor, 

any service, transaction, activity, or carrying 

charges imposed on a credit account, and any 

such charges imposed on a prepaid account 

if that charge is related to an extension of 

credit, carrying a credit balance, or credit 

availability, generally would be a finance 

charge. See § 1026.4(a), (b)(2), (c)(3) and (c)(4) 

and comments 4(a)–4 and 4(b)(2)–1. Such 

charges would include periodic participation 

fees for the credit plan and transaction 

charges imposed in connection with a credit 

extension. With respect to that credit, such 


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service, transaction, activity or carrying 

charges constitute finance charges imposed 

from time to time on an outstanding unpaid 

balance if there is no specific amount 

financed for the plan for which the finance 

charge, total of payments, and payment 

schedule can be calculated. 

* * * * * 

Section 1026.4 Finance Charge 

4(a) Definition 

* * * * * 

4. * * * 

iii. Any transaction charge imposed on a 

cardholder by a card issuer for credit 

accessed by a prepaid card is a finance 

charge regardless of whether the card issuer 

imposes the same, greater or lesser charge on 

the withdrawal of funds from a prepaid 

account. 

iv. Any transaction charge imposed on a 

cardholder by a card issuer for credit 

accessed by an account number that is a 

credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor is a finance charge regardless of 

whether the card issuer imposes the same, 

greater or lesser charge on the withdrawal of 

funds from a prepaid account. 

* * * * * 

4(b) Examples of Finance Charges 

* * * * * 

Paragraph 4(b)(2) 

1. Checking or transaction account 

charges. i. Except for prepaid accounts as 

provided in § 1026.4(b)(2)(ii) and in comment 

4(b)(2)–1.ii, .iii and .iv below, a checking or 

transaction account charge imposed in 

connection with a credit feature is a finance 

charge under § 1026.4(b)(2)(i) to the extent 

the charge exceeds the charge for a similar 

account without a credit feature. If a charge 

for an account with a credit feature does not 

exceed the charge for an account without a 

credit feature, the charge is not a finance 

charge under § 1026.4(b)(2)(i). To illustrate: 

A. A $5 service charge is imposed on an 

account with an overdraft line of credit 

(where the institution has agreed in writing 

to pay an overdraft), while a $3 service 

charge is imposed on an account without a 

credit feature; the $2 difference is a finance 

charge. (If the difference is not related to 

account activity, however, it may be 

excludable as a participation fee. See the 

commentary to § 1026.4(c)(4).) 

B. A $5 service charge is imposed for each 

item that results in an overdraft on an 

account with an overdraft line of credit, 

while a $25 service charge is imposed for 

paying or returning each item on a similar 

account without a credit feature; the $5 

charge is not a finance charge. 

ii. Under § 1026.4(b)(2)(ii), the term finance 

charge includes any service, transaction, 

activity, or carrying charge imposed in 

connection with an extension of credit, for 

carrying a credit balance, or for credit 

availability where that fee is imposed on a 

prepaid account in connection with credit 

accessed by a prepaid card or credit accessed 

by an account number where extensions of 

credit are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor, regardless of 

whether the creditor imposes the same, 

greater or lesser charge on the withdrawal of 

funds from the prepaid account, to have 

access to the prepaid account, or when credit 

is not extended. To illustrate, 

A. A $15 transaction charge is imposed on 

the prepaid account each time a consumer 

uses a prepaid card or an account number 

described in § 1026.4(b)(2)(ii) to access an 

open-end credit plan. The $15 charge is a 

finance charge regardless of whether the 

creditor imposes the same, greater or lesser 

charge to withdraw funds from the prepaid 

account. 

B. A $1.50 transaction charge is imposed 

on the prepaid account for each transaction 

that is made with the prepaid card, including 

when the prepaid card is used to access 

credit where the consumer has insufficient or 

unavailable funds in the prepaid account at 

the time of authorization or at the time the 

transaction is paid. The $1.50 transaction 

charge is a finance charge when the prepaid 

card accesses credit, notwithstanding that a 

$1.50 transaction charge also is imposed on 

transactions that solely access funds in the 

prepaid account. 

C. A $5 monthly service charge is imposed 

on the prepaid account for the availability of 

an open-end plan that is accessed by a 

prepaid card or an account number described 

in § 1026.4(b)(2)(ii). The $5 monthly service 

charge is a finance charge regardless of 

whether the creditor imposes the same, 

greater or lesser monthly service charge to 

hold the prepaid account. 

iii. For purposes of § 1026.4(b)(2)(ii), 

charges imposed on a prepaid account in 

connection with an extension of credit, for 

carrying a credit balance, or for credit 

availability include: 

A. Transaction fees for credit extensions; 

B. Fees for transferring funds from a credit 

account to a prepaid account; 

C. A daily, weekly, or monthly (or other 

periodic) fee assessed each period a prepaid 

account is in ‘‘overdraft’’ status, or would be 

in overdraft status but for funds supplied by 

a linked line of credit; 

D. A daily, weekly, or monthly (or other 

periodic) fee assessed each period a line of 

credit accessed by a prepaid card or account 

number described in § 1026.4(b)(2)(ii) has an 

outstanding balance; or 

E. Participation fees or other fees that the 

consumer is required to pay for the issuance 

or availability of credit. 

iv. Section § 1026.4(b)(2)(ii) does not apply 

to transaction fees imposed on the prepaid 

account that relate to transactions that only 

access funds in the prepaid account, fees for 

opening or holding the prepaid account, and 

other fees, such as cash reload fees and 

balance inquiry fees, that are not imposed on 

the prepaid account because the consumer 

engaged in a transaction that is funded in 

whole or in part by credit, for holding a 

credit plan, or for carrying a credit balance. 

These fees are not considered charges 

imposed on a prepaid account in connection 

with an extension of credit, for carrying a 

credit balance, or for credit availability even 

if there are not sufficient funds in the prepaid 

account to pay the fees at the time they are 

imposed on the prepaid account. 

Nonetheless, any negative balance on the 

prepaid account, whether from fees or other 

transactions, would be a credit extension and 

if a fee is imposed for such credit extension, 

the fee would be a finance charge under 

§ 1026.4(b)(2)(ii). For example, if a cashreload fee is imposed on the prepaid account, 

there are not sufficient funds in the prepaid 

account to pay the fee at the time it is 

imposed on the prepaid account, and an 

additional charge is imposed on the prepaid 

account for this credit extension, the 

additional charge would be a transaction 

charge imposed on a prepaid account in 

connection with an extension of credit and 

would be a finance charge under 

§ 1026.4(b)(2)(ii). 

* * * * * 

Paragraph 4(c)(3) 

1. Assessing interest on an overdraft 

balance. Except with respect to credit 

accessed by a prepaid card or an account 

number where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor, a charge on an overdraft balance 

computed by applying a rate of interest to the 

amount of the overdraft is not a finance 

charge, even though the consumer agrees to 

the charge in the account agreement, unless 

the financial institution agrees in writing that 

it will pay such items. 

Paragraph 4(c)(4) 

1. Participation fees—periodic basis. The 

participation fees described in § 1026.4(c)(4) 

do not necessarily have to be formal 

membership fees, nor are they limited to 

credit card plans. Except as provided in 

§ 1026.4(c)(4) for prepaid accounts, the 

provision applies to any credit plan in which 

payment of a fee is a condition of access to 

the plan itself, but it does not apply to fees 

imposed separately on individual closed-end 

transactions. The fee may be charged on a 

monthly, annual, or other periodic basis; a 

one-time, non-recurring fee imposed at the 

time an account is opened is not a fee that 

is charged on a periodic basis, and may not 

be treated as a participation fee. 

* * * * * 

Section 1026.5 General Disclosure 

Requirements 

* * * * * 

5(b)(2)(ii) Timing Requirements 

* * * * * 

4. Application of § 1026.5(b)(2)(ii) to 

charge card and charged-off accounts. i. 

Charge card accounts. For purposes of 

§ 1026.5(b)(2)(ii)(A)(1), the payment due date 

for a credit card account under an open-end 

(not home-secured) consumer credit plan is 

the date the card issuer is required to 

disclose on the periodic statement pursuant 

to § 1026.7(b)(11)(i)(A). Because 

§ 1026.7(b)(11)(ii) provides that 

§ 1026.7(b)(11)(i) does not apply to periodic 

statements provided solely for charge card 

accounts other than charge card accounts 

accessed by prepaid cards or by account 

numbers where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 


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creditor, § 1026.5(b)(2)(ii)(A)(1) also does not 

apply to the mailing or delivery of periodic 

statements provided solely for such accounts. 

However, in these circumstances, 

§ 1026.5(b)(2)(ii)(A)(2) requires the card 

issuer to have reasonable procedures 

designed to ensure that a payment is not 

treated as late for any purpose during the 21- 

day period following mailing or delivery of 

the statement. A card issuer that complies 

with § 1026.5(b)(2)(ii)(A) as discussed above 

with respect to a charge card account has also 

complied with § 1026.5(b)(2)(ii)(B)(2). 

Section 1026.5(b)(2)(ii)(B)(1) does not apply 

to charge card accounts because, for purposes 

of § 1026.5(b)(2)(ii)(B), a grace period is a 

period within which any credit extended 

may be repaid without incurring a finance 

charge due to a periodic interest rate and, 

consistent with § 1026.2(a)(15)(iii), charge 

card accounts do not impose a finance charge 

based on a periodic rate. 

* * * * * 

Section 1026.8 Identifying Transactions on 

Periodic Statements 

8(a) Sale Credit 

* * * * * 

2. Amount. i. Transactions not billed in 

full. If sale transactions are not billed in full 

on any single statement, but are billed 

periodically in precomputed installments, 

the first periodic statement reflecting the 

transaction must show either the full amount 

of the transaction together with the date the 

transaction actually took place; or the 

amount of the first installment that was 

debited to the account together with the date 

of the transaction or the date on which the 

first installment was debited to the account. 

In any event, subsequent periodic statements 

should reflect each installment due, together 

with either any other identifying information 

required by § 1026.8(a) (such as the seller’s 

name and address in a three-party situation) 

or other appropriate identifying information 

relating the transaction to the first billing. 

The debiting date for the particular 

installment, or the date the transaction took 

place, may be used as the date of the 

transaction on these subsequent statements. 

ii. Prepaid cards. The term ‘‘sale credit’’ 

includes a purchase in which the consumer 

uses a prepaid card that is a credit card to 

obtain goods or services from a merchant and 

the transaction is wholly or partially funded 

by credit, whether or not the merchant is the 

card issuer or creditor. If a prepaid card that 

is a credit card is used to obtain goods or 

services from a merchant and the transaction 

is partially funded by the consumer’s prepaid 

account, and partially funded by credit, the 

amount to be disclosed under § 1026.8(a) is 

the amount of the credit extension, not the 

total amount of the purchase transaction. For 

a transaction at point of sale where credit is 

accessed by a prepaid card that is a credit 

card, and that transaction partially involves 

the purchase of goods or services and 

partially involves other credit such as cash 

back given to the cardholder, the creditor 

must disclose the entire amount of the credit 

as sale credit, including the part of the 

transaction that does not relate to the 

purchase of goods or services. 

* * * * * 

8(b) Nonsale Credit 

1. Nonsale credit. The term ‘‘nonsale 

credit’’ refers to any form of loan credit 

including, for example: 

i. A cash advance. 

ii. An advance on a credit plan that is 

accessed by overdrafts on an asset account 

other than a prepaid account. 

iii. The use of a ‘‘supplemental credit 

device’’ in the form of a check or draft or the 

use of the overdraft credit plan accessed by 

a debit card, even if such use is in connection 

with a purchase of goods or services. 

iv. Miscellaneous debits to remedy 

mispostings, returned checks, and similar 

entries. 

v. An advance at an ATM on a credit plan 

that is accessed by a prepaid card that is a 

credit card. If a prepaid card that is a credit 

card is used to obtain an advance at an ATM 

and the transaction is partially funded by the 

consumer’s prepaid account, and partially 

funded by a credit extension, the amount to 

be disclosed under § 1026.8(a) is the amount 

of the credit extension, not the total amount 

of the ATM transaction. 

vi. An advance on a credit plan accessed 

by an account number where extensions of 

credit are permitted to be deposited directly 

only into particular prepaid accounts 

specified by the creditor. 

2. Amount—overdraft credit plans. If credit 

is extended under an overdraft credit plan 

tied to an asset account other than a prepaid 

account or by means of a debit card tied to 

an overdraft credit plan: 

i. The amount to be disclosed is that of the 

credit extension, not the face amount of the 

check or the total amount of the debit/credit 

transaction. 

ii. The creditor may disclose the amount of 

the credit extensions on a cumulative daily 

basis, rather than the amount attributable to 

each check or each use of the debit card that 

accesses the credit plan. 

* * * * * 

Section 1026.10 Payments 

10(a) General Rule 

* * * * * 

2. * * * 

ii. In a payroll deduction plan in which 

funds are deposited to an asset account held 

by the creditor, and from which payments are 

made periodically to an open-end credit 

account, payment is received on the date 

when it is debited to the asset account (rather 

than on the date of the deposit), provided the 

payroll deduction method is voluntary and 

the consumer retains use of the funds until 

the contractual payment date. Section 

1026.12(d)(3)(ii) defines ‘‘periodically’’ to 

mean no more frequently than once per 

calendar month for payroll deduction plans 

for prepaid cards that are credit cards or for 

account numbers that are credit cards where 

the extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor. In 

a payroll deduction plan in which funds are 

deposited to a prepaid account held by the 

creditor, and from which payments are made 

on a monthly basis to a credit card account 

held by the creditor that is accessed by a 

prepaid card that is a credit card, or by 

account numbers that are credit cards where 

the extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor, 

payment is received on the date when it is 

debited to the prepaid account (rather than 

on the date of the deposit), provided the 

payroll deduction method is voluntary and 

the consumer retains use of the funds until 

the contractual payment date. 

* * * * * 

10(b) Specific Requirements for Payments 

1. Payment by electronic fund transfer. A 

creditor may be prohibited from specifying 

payment by preauthorized electronic fund 

transfer. See Section 913 of the Electronic 

Fund Transfer Act and Regulation E, 12 CFR 

1005.10(e). 

* * * * * 

Section 1026.12 Special Credit Card 

Provisions 

* * * * * 

12(a) Issuance of Credit Cards 

Paragraph 12(a)(1) 

* * * * * 

2. Addition of credit features. If the 

consumer has a non-credit card, including a 

prepaid card, the addition of a credit feature 

or plan to the card that would make the card 

into a credit card under § 1026.2(a)(15)(i) 

constitutes issuance of a credit card. For 

example, the following constitute issuance of 

a credit card: 

i. Granting overdraft privileges on a 

checking account when the consumer already 

has a check guarantee card; or 

ii. Allowing a prepaid card to access a 

credit plan that would make the card into a 

credit card under § 1026.2(a)(15)(i). 

* * * * * 

7. Issuance of non-credit cards. i. Issuance 

of non-credit cards other than prepaid cards. 

A. Under § 1026.12(a)(1), a credit card cannot 

be issued except in response to a request or 

an application. (See comment 2(a)(15)–2 for 

examples of cards or devices that are and are 

not credit cards.) A non-credit card other 

than a prepaid card may be sent on an 

unsolicited basis by an issuer that does not 

propose to connect the card to any credit 

plan; a credit feature may be added to a 

previously issued non-credit card other than 

a prepaid card only upon the consumer’s 

specific request. 

B. Examples. A purchase-price discount 

card may be sent on an unsolicited basis by 

an issuer that does not propose to connect 

the card to any credit plan. An issuer 

demonstrates that it proposes to connect the 

card to a credit plan by, for example, 

including promotional materials about credit 

features or account agreements and 

disclosures required by § 1026.6. The issuer 

will violate the rule against unsolicited 

issuance if, for example, at the time the card 

is sent a credit plan can be accessed by the 

card or the recipient of the unsolicited card 

has been preapproved for credit that the 

recipient can access by contacting the issuer 

and activating the card. 

ii. Issuance of a prepaid card. Section 

1026.12(a)(1) does not apply to the issuance 

of a prepaid card where an issuer does not 


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connect the card to any credit plan that 

would make the prepaid card into a credit 

card at the time the card is issued and only 

opens a credit card account, or provides an 

application or solicitation to open a credit or 

charge card account, that would be accessed 

by that card in compliance with § 1026.12(h). 

A credit card feature may be added to a 

previously issued prepaid card only upon the 

consumer’s specific request and only in 

compliance with § 1026.12(h). An issuer does 

not connect a prepaid card to a credit plan 

that would make the card into a credit card 

simply by providing the disclosures required 

by Regulation E 12 CFR 1005.18(b)(2)(i)(B)(9) 

and 18(b)(2)(ii)(B) with the prepaid card. 

* * * * * 

Paragraph 12(a)(2) 

* * * * * 

6. One-for-one rule—exceptions. The 

regulation does not prohibit the card issuer 

from: 

i. Replacing a single card that is both a 

debit card and a credit card with a credit card 

and a separate debit card with only debit 

functions (or debit functions plus an 

associated overdraft capability), since the 

latter card could be issued on an unsolicited 

basis under Regulation E. 

ii. Replacing a single card that is both a 

prepaid card and a credit card with a credit 

card and a separate prepaid card where the 

latter card is not a credit card. 

iii. Replacing an accepted card with more 

than one renewal or substitute card, provided 

that: 

A. No replacement card accesses any 

account not accessed by the accepted card; 

B. For terms and conditions required to be 

disclosed under § 1026.6, all replacement 

cards are issued subject to the same terms 

and conditions, except that a creditor may 

vary terms for which no change in terms 

notice is required under § 1026.9(c); and 

C. Under the account’s terms the 

consumer’s total liability for unauthorized 

use with respect to the account does not 

increase. 

* * * * * 

12(c) Right of Cardholder To Assert Claims 

or Defenses Against Card Issuer 

* * * * * 

5. Prepaid cards. Section 1026.12(c) 

applies to property or services purchased by 

a consumer using credit accessed by a credit 

card that also is a prepaid card. For a 

transaction at point of sale where a prepaid 

card that is a credit card is used to obtain 

goods or services from a merchant and the 

transaction is partially funded by the 

consumer’s prepaid account, and partially 

funded by credit, the amount of the purchase 

transaction that is funded by credit generally 

would be subject to the requirements of 

§ 1026.12(c). The amount of the transaction 

funded from the prepaid account would not 

be subject to the requirements of § 1026.12(c). 

12(c)(1) General Rule 

1. Situations excluded and included. The 

consumer may assert claims or defenses only 

when the goods or services are ‘‘purchased 

with the credit card.’’ This would include 

when the goods or services are purchased by 

a consumer using credit accessed by a credit 

card that also is a prepaid card. This could 

include mail, the Internet or telephone 

orders, if the purchase is charged to the 

credit card account. But it would exclude: 

i. Use of a credit card to obtain a cash 

advance, even if the consumer then uses the 

money to purchase goods or services. This 

includes an advance on a credit plan 

accessed by an account number that is a 

credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. Such a transaction would not 

involve ‘‘property or services purchased with 

the credit card.’’ 

ii. The purchase of goods or services by use 

of a check accessing an overdraft account and 

a credit card used solely for identification of 

the consumer. (On the other hand, if the 

credit card is used to make partial payment 

for the purchase and not merely for 

identification, the right to assert claims or 

defenses would apply to credit extended via 

the credit card, although not to credit 

extended by the overdraft line on an asset 

account other than a prepaid account.) 

* * * * * 

12(d) Offsets by Card Issuer Prohibited 

1. Meaning of funds on deposit. For 

purposes of § 1026.12(d), funds of the 

cardholder held on deposit include funds in 

a consumer’s prepaid account. In addition, 

for purposes of § 1026.12(d), deposit account 

includes a prepaid account. 

Paragraph 12(d)(1) 

* * * * * 

2. Funds intended as deposits. If the 

consumer tenders funds as a deposit (to a 

checking account, for example) or if the card 

issuer receives funds designated for the 

consumer’s prepaid account with the issuer, 

such as by means of an ACH deposit or an 

electronic transmittal of funds the consumer 

submits as cash at a non-bank location, the 

card issuer may not apply the funds to repay 

indebtedness on the consumer’s credit card 

account. 

* * * * * 

Paragraph 12(d)(2) 

1. Security interest—limitations. In order to 

qualify for the exception stated in 

§ 1026.12(d)(2), a security interest must be 

affirmatively agreed to by the consumer and 

must be disclosed in the issuer’s accountopening disclosures under § 1026.6. The 

security interest must not be the functional 

equivalent of a right of offset; as a result, 

routinely including in agreements contract 

language indicating that consumers are 

giving a security interest in any deposit 

accounts maintained with the issuer does not 

result in a security interest that falls within 

the exception in § 1026.12(d)(2). For a 

security interest to qualify for the exception 

under § 1026.12(d)(2) the following 

conditions must be met: 

i. The consumer must be aware that 

granting a security interest is a condition for 

the credit card account (or for more favorable 

account terms) and must specifically intend 

to grant a security interest in a deposit 

account. 

ii. For deposit accounts other than prepaid 

accounts, indicia of the consumer’s 

awareness and intent to grant a security 

interest include at least one of the following 

(or a substantially similar procedure that 

evidences the consumer’s awareness and 

intent): 

A. Separate signature or initials on the 

agreement indicating that a security interest 

is being given. 

B. Placement of the security agreement on 

a separate page, or otherwise separating the 

security interest provisions from other 

contract and disclosure provisions. 

C. Reference to a specific amount of 

deposited funds or to a specific deposit 

account number. 

iii. For prepaid accounts, in order for a 

consumer to show awareness and intent to 

grant a security interest, all of the following 

conditions must be met: 

A. In addition to being disclosed in the 

issuer’s account-opening disclosures under 

§ 1026.6, the security agreement must be 

provided to the consumer in a document 

separate from the prepaid account agreement 

and the credit card account agreement; 

B. The separate document setting forth the 

security agreement must be signed by the 

consumer; 

C. The separate document setting forth the 

security agreement must refer to the prepaid 

account number and to a specific amount of 

funds in the prepaid account in which the 

card issuer is taking a security interest and 

these two elements of the document must be 

separately signed or initialed by the 

consumer; 

D. The separate document setting forth the 

security agreement must specifically 

enumerate the conditions under which the 

card issuer will enforce the security interest 

and each of those conditions must be 

separately signed or initialed by the 

consumer. 

iv. The security interest must be obtainable 

and enforceable by creditors generally. If 

other creditors could not obtain a security 

interest in the consumer’s deposit accounts 

to the same extent as the card issuer, the 

security interest is prohibited by 

§ 1026.12(d)(2). 

* * * * * 

Paragraph 12(d)(3) 

* * * * * 

3. Prepaid accounts. With respect to credit 

cards that are also prepaid cards or credit 

cards that are also account numbers where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor, a 

card issuer is not prohibited under 

§ 1026.12(d) from periodically deducting all 

or part of the cardholder’s credit card debt 

from a deposit account (such as a prepaid 

account) held with the card issuer (subject to 

the limitations of § 1026.13(d)(1)) under a 

plan that is authorized in writing by the 

cardholder, so long as the creditor does not 

deduct all or part of the cardholder’s credit 

card debt from the deposit account (such as 

a prepaid account) more frequently than once 

per calendar month, pursuant to such a plan. 

To illustrate, with respect to credit cards that 

are also prepaid cards or credit cards that are 

also account numbers where extensions of 

credit are permitted to be deposited directly 


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77332 Federal Register / Vol. 79, No. 246 / Tuesday, December 23, 2014 / Proposed Rules 

only into particular prepaid accounts 

specified by the creditor, assume that a 

periodic statement is sent out each month to 

a cardholder on the first day of the month 

and the payment due date for the amount due 

on that statement is the 25th day of each 

month. In this case, 

i. The card issuer is not prohibited under 

§ 1026.12(d) from automatically deducting 

the amount due on the periodic statement on 

the 25th of each month, or on an earlier date 

in each calendar month, from a deposit 

account held by the card issuer, if the 

deductions are pursuant to a plan that is 

authorized in writing by the cardholder (as 

discussed in comment 12(d)(3)–1) and 

comply with the limitations in 

§ 1026.13(d)(1). 

ii. The card issuer is prohibited under 

§ 1026.12(d) from automatically deducting all 

or part of the cardholder’s credit card debt 

from a deposit account (such as a prepaid 

account) held with the card issuer more 

frequently than once per calendar month, 

such as on a daily or weekly basis, or 

whenever deposits are made to the deposit 

account. 

* * * * * 

12(h) Timing Requirement for Solicitation 

or Application With Respect to a Prepaid 

Cardholder 

1. Meaning of registration of a prepaid card 

or prepaid account. A prepaid card or 

prepaid account is registered, such that the 

30-day interval required by § 1026.12(h) 

begins, when the issuer of the prepaid card 

or prepaid account successfully completes its 

collection of consumer identifying 

information and identity verification in 

accordance with the requirements of 

applicable Federal and state law. The 

beginning of the required 30-day interval is 

triggered by successful completion of 

collection of consumer identifying 

information and identity verification, not by 

the consumer’s mere purchase or obtaining of 

the card. 

2. Unsolicited issuance of credit cards and 

disclosures related to applications or 

solicitations for credit or charge card 

accounts. See § 1026.12(a)(1) and comment 

12(a)(1)–7 for additional rules that apply to 

the addition of a credit or charge card 

account to a previously-issued prepaid 

account. See also § 1026.60 and related 

commentary for disclosures that generally 

must be provided on or with applications or 

solicitations to open a credit or charge card 

account. 

Section 1026.13 Billing Error Resolution 

* * * * * 

13(a) Definition of a Billing Error 

* * * * * 

Paragraph 13(a)(3) 

* * * * * 

2. Application to purchases made using a 

third-party payment intermediary and 

prepaid cards. i. Third-party intermediaries. 

Section 1026.13(a)(3) generally applies to 

disputes about goods and services that are 

purchased using a third-party payment 

intermediary, such as a person-to-person 

Internet payment service, funded through use 

of a consumer’s credit plan when the goods 

or services are not accepted by the consumer 

or not delivered to the consumer as agreed. 

However, the extension of credit must be 

made at the time the consumer purchases the 

good or service and match the amount of the 

transaction to purchase the good or service 

(including ancillary taxes and fees). Under 

these circumstances, the property or service 

for which the extension of credit is made is 

not the payment service, but rather the good 

or service that the consumer has purchased 

using the payment service. Thus, for 

example, § 1026.13(a)(3) would not apply to 

purchases using a third party payment 

intermediary that is funded through use of a 

credit plan if: 

A. The extension of credit is made to fund 

the third-party payment intermediary 

‘‘account,’’ but the consumer does not 

contemporaneously use those funds to 

purchase a good or service at that time; or 

B. The extension of credit is made to fund 

only a portion of the purchase amount, and 

the consumer uses other sources to fund the 

remaining amount. 

ii. Prepaid cards. Section 1026.13(a)(3) 

generally applies to disputes about goods and 

services that are purchased using a prepaid 

card funded through use of a consumer’s 

credit plan accessed by an account number 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor 

when the goods or services are not accepted 

by the consumer or not delivered to the 

consumer as agreed. However, the extension 

of credit must be made at the time the 

consumer purchases the good or service and 

match the amount of the transaction to 

purchase the good or service (including 

ancillary taxes and fees). Under these 

circumstances, the property or service for 

which the extension of credit is made is not 

for funding the prepaid account, but rather 

for the good or service that the consumer has 

purchased using the prepaid account. Thus, 

for example, § 1026.13(a)(3) would not apply 

to purchases using a prepaid card that is 

funded through use of such a credit plan if: 

A. The extension of credit is made to fund 

the prepaid account, but the consumer does 

not contemporaneously use those funds to 

purchase a good or service at that time; or 

B. The extension of credit is made to fund 

only a portion of the purchase amount, and 

the consumer uses other sources to fund the 

remaining amount. 

* * * * * 

13(i) Relation to Electronic Fund Transfer 

Act and Regulation E 

1. Coverage. Credit extended directly from 

a non-overdraft credit line is governed solely 

by Regulation Z, even though a combined 

credit card/access device is used to obtain 

the extension. With respect to a credit 

account accessed by an account number 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor, 

§ 1026.13(i) does not apply to transfers from 

that plan to a prepaid account. The creditor 

for such transfers must comply with the 

billing error provisions in § 1026.13. 

2. Incidental credit using a debit card 

under an agreement. With respect to an 

account that is not a prepaid account, for 

credit extended incident to an electronic 

fund transfer under an agreement between 

the consumer and the financial institution, 

§ 1026.13(i) provides that certain error 

resolution procedures in both this part and 

Regulation E apply. Incidental credit that is 

not extended under an agreement between 

the consumer and the financial institution is 

governed solely by the error resolution 

procedures in Regulation E. For example, 

credit inadvertently extended incident to an 

electronic fund-transfer using a debit card, 

such as under an overdraft service not subject 

to Regulation Z, is governed solely by the 

Regulation E error resolution procedures, if 

the bank and the consumer do not have an 

agreement to extend credit when the 

consumer’s account is overdrawn. 

3. Application to debit/credit 

transactions—examples. If a consumer uses a 

debit card to withdraw money at an 

automated teller machine and activates an 

overdraft credit feature on the checking 

account: 

i. An error asserted with respect to the 

transaction is subject, for error resolution 

purposes, to the applicable Regulation E (12 

CFR part 1005) provisions (such as timing 

and notice) for the entire transaction. 

ii. The creditor need not provisionally 

credit the consumer’s account, under 12 CFR 

1005.11(c)(2)(i), for any portion of the unpaid 

extension of credit. 

iii. The creditor must credit the consumer’s 

account under § 1005.11(c) with any finance 

or other charges incurred as a result of the 

alleged error. 

iv. The provisions of § 1026.13(d) and (g) 

apply only to the credit portion of the 

transaction. 

4. Incidental credit under an overdraft 

credit plan subject to subpart B. For 

transactions involving an overdraft credit 

plan subject to subpart B in connection with 

a prepaid account (such as a credit plan 

accessed by a prepaid card that is a credit 

card), whether Regulation E (12 CFR part 

1005) or Regulation Z applies depends on the 

nature of the transaction. For example, 

i. If the transaction solely involves an 

extension of credit under an overdraft plan, 

and does not include a debit to the prepaid 

account, the error resolution requirements of 

Regulation Z apply. 

ii. If the transaction debits a prepaid 

account only (with no credit extended under 

the overdraft plan), the provisions of 

Regulation E apply. 

iii. If the transaction debits a prepaid 

account but also draws on an overdraft plan 

subject to subpart B in connection with a 

prepaid account, a creditor must comply 

with the requirements of Regulation E, 12 

CFR 1005.11 and 18(c) governing error 

resolution rather than those of § 1026.13(a), 

(b), (c), (e), (f) and (h). In this case, 

A. An error asserted with respect to the 

transaction is subject, for error resolution 

purposes, to the applicable Regulation E (12 

CFR part 1005) provisions (such as timing 

and notice) for the entire transaction. 

B. The creditor need not provisionally 

credit the consumer’s account, under 12 CFR 

1005.11(c)(2)(i), for any portion of the unpaid 

extension of credit. 


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C. The creditor must credit the consumer’s 

account under § 1005.11(c) with any finance 

or other charges incurred as a result of the 

alleged error. 

D. The provisions of § 1026.13(d) and (g) 

apply only to the credit portion of the 

transaction. 

5. Incidental credit under a credit plan that 

is not subject to subpart B. An overdraft 

credit plan is not subject to subpart B if the 

credit plan is only accessed by a prepaid card 

that is not a credit card. A prepaid card is 

not a credit card if the prepaid card only 

accesses credit that is not subject to any 

finance charge or fee described in § 1026.4(c) 

and is not payable by written agreement in 

more than four installments. See comment 

2(a)(15)–2.i.F. 

* * * * * 

Section 1026.52 Limitations on Fees 

52(a) Limitations During First Year After 

Account Opening 

52(a)(1) General Rule 

1. Application. The 25 percent limit in 

§ 1026.52(a)(1) applies to fees that the card 

issuer charges to the account as well as to 

fees that the card issuer requires the 

consumer to pay with respect to the account 

through other means (such as through a 

payment from the consumer’s asset account, 

including a prepaid account, to the card 

issuer or from another credit account 

provided by the card issuer). For example: 

* * * * * 

iii. Assume that a consumer opens a 

prepaid account accessed by a prepaid card 

on January 1 of year one and opens a credit 

account accessed by the prepaid card that is 

a credit card on March 1 of year one. Assume 

that, under the terms of the credit account 

accessed by the prepaid card, a consumer is 

required to pay $50 in fees for the issuance 

or availability of credit at account opening. 

At credit account opening on March 1 of year 

one, the credit limit for the account is $200. 

Section 1026.52(a)(1) permits the card issuer 

to charge the $50 in fees to the credit 

account. However, § 1026.52(a)(1) prohibits 

the card issuer from requiring the consumer 

to make payments to the card issuer for 

additional non-exempt fees with respect to 

the credit account during the first year after 

account opening. Section 1026.52(a)(1) also 

prohibits the card issuer from requiring the 

consumer to open a separate credit account 

with the card issuer to fund the payment of 

additional non-exempt fees during the first 

year after the credit card account is opened. 

iv. Assume that a consumer opens a 

prepaid account accessed by a prepaid card 

on January 1 of year one and opens a credit 

account accessed by the prepaid card that is 

a credit card on March 1 of year one. Assume 

that, under the terms of a credit card account 

accessed by the prepaid card, a consumer is 

required to pay $120 in fees for the issuance 

or availability of credit at account opening. 

The consumer is also required to pay a cash 

advance fee that is equal to five percent of 

the cash advance and a late payment fee of 

$15 if the required minimum periodic 

payment is not received by the payment due 

date (which is the twenty-fifth of the month). 

At credit account opening on March 1 of year 

one, the credit limit for the account is $500. 

Section 1026.52(a)(1) permits the card issuer 

to charge to the account the $120 in fees for 

the issuance or availability of credit at 

account opening. On April 1 of year one, the 

consumer uses the account for a $100 cash 

advance. Section 1026.52(a)(1) permits the 

card issuer to charge a $5 cash-advance fee 

to the account. On April 26 of year one, the 

card issuer has not received the consumer’s 

required minimum periodic payment. 

Section 1026.52(a)(2) permits the card issuer 

to charge a $15 late payment fee to the 

account. On July 15 of year one, the 

consumer uses the account for a $50 cash 

advance. Section 1026.52(a)(1) does not 

permit the card issuer to charge a $2.50 cash 

advance fee to the account. Furthermore, 

§ 1026.52(a)(1) prohibits the card issuer from 

collecting the $2.50 cash advance fee from 

the consumer by other means. 

* * * * * 

52(a)(2) Fees Not Subject to Limitations 

* * * * * 

2. Fees related to prepaid cards. Except as 

provided in § 1026.52(a)(2), § 1026.52(a) 

applies to any charge or fee, other than a 

charge attributable to a periodic interest rate, 

that the card issuer will or may require the 

consumer to pay in connection with a credit 

account accessed by a prepaid card that is a 

credit card, including fees that are assessed 

on the prepaid account in connection with 

credit accessed by the prepaid card. This 

includes, but is not limited to: 

i. Per-transaction fees for ‘‘shortages’’ or 

‘‘overdrafts;’’ 

ii. Fees for transferring funds from a credit 

account to a prepaid account that are both 

accessed by the prepaid card; 

iii. A daily, weekly, or monthly (or other 

periodic) fee (other than a periodic interest 

rate) assessed each period a prepaid account 

is in ‘‘overdraft’’ status, or would be in 

overdraft status but for funds supplied by a 

linked line of credit accessed by the prepaid 

card; or 

iv. A daily, weekly, or monthly (or other 

periodic) fee (other than a periodic interest 

rate) assessed each period a line of credit 

accessed by the prepaid card has an 

outstanding balance. 

3. Fees on credit card accounts where 

extensions of credit are deposited directly 

only in particular prepaid accounts. Except 

as provided in § 1026.52(a)(2), § 1026.52(a) 

applies to any charge or fee, other than a 

charge attributable to a periodic interest rate, 

that the card issuer will or may require the 

consumer to pay in connection with a credit 

account accessed by an account number that 

is a credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor, including fees that are assessed on 

the prepaid account in connection with the 

credit assessed by the account number. This 

includes, but is not limited to: 

i. Per-transaction fees for ‘‘shortages’’ or 

‘‘overdrafts;’’ 

ii. Fees for transferring funds from the 

credit account to a prepaid account; 

iii. A daily, weekly, or monthly (or other 

periodic) fee (other than a periodic interest 

rate) assessed each period the line of credit 

accessed by the account number has an 

outstanding balance. 

4. Fees the consumer is not required to pay. 

Section 1026.52(a)(2)(ii) provides that 

§ 1026.52(a) does not apply to fees that the 

consumer is not required to pay with respect 

to the account. For example, § 1026.52(a) 

generally does not apply to fees for making 

an expedited payment (to the extent 

permitted by § 1026.10(e)), fees for optional 

services (such as travel insurance), fees for 

reissuing a lost or stolen card, or statement 

reproduction fees. 

5. Security deposits. A security deposit that 

is charged to a credit card account is a fee 

for purposes of § 1026.52(a). In contrast, 

however, a security deposit is not subject to 

the 25 percent limit in § 1026.52(a)(1) if it is 

not charged to the account. For example, 

§ 1026.52(a)(1) does not prohibit a card issuer 

from requiring a consumer to provide funds 

at account opening pledged as security for 

the account that exceed 25 percent of the 

credit limit at account opening so long as 

those funds are not obtained from the 

account. 

* * * * * 

52(b) Limitations on Penalty Fees 

* * * * * 

52(b)(2)(i) Fees That Exceed Dollar Amount 

Associated With Violation 

* * * * * 

7. Declined transaction fees. Section 

1026.51(b)(2)(i)(B)(1) applies to declined 

transaction fees where an account number is 

a credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor. In addition, with respect to a credit 

card that is a prepaid card, the prohibition 

in § 1026.52(b)(2)(i)(B)(1) applies to the 

consumer’s transactions using the prepaid 

card where a declined transaction would 

have accessed the consumer’s credit account 

with the card issuer had it been authorized. 

Fees imposed for declining a transaction that 

would have only accessed the prepaid 

account and would not have accessed the 

credit card account would not be covered by 

§ 1026.52(b)(2)(B)(i)(1). 

* * * * * 

Section 1026.57 Reporting and Marketing 

Rules for College Student Open–End Credit 

57(a) Definitions 

57(a)(1) College Student Credit Card 

1. Definition. The definition of college 

student credit card excludes home-equity 

lines of credit accessed by credit cards and 

overdraft lines of credit accessed by debit 

cards. A college student credit card includes 

a college affinity card within the meaning of 

TILA section 127(r)(1)(A). In addition, a card 

may fall within the scope of the definition 

regardless of the fact that it is not 

intentionally targeted at or marketed to 

college students. For example, an agreement 

between a college and a card issuer may 

provide for marketing of credit cards to 

alumni, faculty, staff, and other non-student 

consumers who have a relationship with the 

college, but also contain provisions that 

contemplate the issuance of cards to 


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students. A credit card issued to a student at 

the college in connection with such an 

agreement qualifies as a college student 

credit card. The definition of college student 

credit card includes a prepaid card that is a 

credit card, or an account number that is a 

credit card where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor, that is issued to any college student 

under a credit card account under an openend (not home-secured) consumer credit 

plan. The definition of college student credit 

card also includes a prepaid account that is 

issued to any college student where an openend (not home-secured) consumer credit plan 

may be added in connection with the prepaid 

account and the credit account may be 

accessed by a prepaid card that is a credit 

card, or may be accessed by an account 

number that is a credit card where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid accounts 

specified by the creditor. 

* * * * * 

57(a)(5) College Credit Card Agreement 

1. Definition. Section 1026.57(a)(5) defines 

‘‘college credit card agreement’’ to include 

any business, marketing or promotional 

agreement between a card issuer and a 

college or university (or an affiliated 

organization, such as an alumni club or a 

foundation) if the agreement provides for the 

issuance of credit cards to full-time or parttime students. Business, marketing or 

promotional agreements may include a broad 

range of arrangements between a card issuer 

and an institution of higher education or 

affiliated organization, including 

arrangements that do not meet the criteria to 

be considered college affinity card 

agreements as discussed in TILA section 

127(r)(1)(A). For example, TILA section 

127(r)(1)(A) specifies that under a college 

affinity card agreement, the card issuer has 

agreed to make a donation to the institution 

or affiliated organization, the card issuer has 

agreed to offer discounted terms to the 

consumer, or the credit card will display 

pictures, symbols, or words identified with 

the institution or affiliated organization; even 

if these conditions are not met, an agreement 

may qualify as a college credit card 

agreement, if the agreement is a business, 

marketing or promotional agreement that 

contemplates the issuance of college student 

credit cards to college students currently 

enrolled (either full-time or part-time) at the 

institution. An agreement may qualify as a 

college credit card agreement even if 

marketing of cards under the agreement is 

targeted at alumni, faculty, staff, and other 

non-student consumers, as long as cards may 

also be issued to students in connection with 

the agreement. This definition also includes 

a business, marketing or promotional 

agreement between a card issuer and a 

college or university (or an affiliated 

organization, such as an alumni club or a 

foundation) if the agreement provides for the 

addition of open-end (not home-secured) 

consumer credit plans to previously issued 

prepaid accounts that were issued to fulltime or part-time students, where that credit 

account would be accessed by a prepaid card 

that is a credit card, or may be accessed by 

an account number that is a credit card 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor. 

This definition also includes a business, 

marketing or promotional agreement between 

a card issuer and a college or university (or 

an affiliated organization, such as an alumni 

club or a foundation) if (1) the agreement 

provides for the issuance of prepaid accounts 

to full-time or part-time students; and (2) an 

open-end (not home-secured) consumer 

credit plan may be added in connection with 

the prepaid account where that credit 

account may be accessed by a prepaid card 

that is a credit card, or may be accessed by 

an account number that is a credit card 

where extensions of credit are permitted to 

be deposited directly only into particular 

prepaid accounts specified by the creditor. 

57(b) Public Disclosure of Agreements 

* * * * * 

3. Credit card account in connection with 

prepaid account. Section 1026.57(b) applies 

to any contract or other agreement that an 

institution of higher education makes with a 

card issuer or creditor for the purpose of 

marketing either (1) the addition of an openend (not home-secured) consumer credit 

account to previously issued prepaid 

accounts that were issued to full-time or parttime students or (2) new prepaid accounts 

where a credit account may be added in 

connection with the prepaid account, where, 

in either case, the credit account would be 

accessed by a prepaid card that is a credit 

card, or may be accessed by an account 

number that is a credit card where extensions 

of credit are permitted to be deposited 

directly only into particular prepaid accounts 

specified by the creditor. Thus, under 

§ 1026.57(b), an institution of higher 

education must publicly disclose such 

agreements. 

57(c) Prohibited Inducements 

* * * * * 

7. Credit card accounts in connection with 

prepaid accounts. Section 1026.57(c) applies 

to either (1) the application for or opening of 

a credit card account that is being added to 

previously issued prepaid accounts that were 

issued to full-time or part-time students or (2) 

the application for or opening of a prepaid 

account where a credit account may be added 

in connection with the prepaid account, 

where, in either case, the credit account 

would be accessed by a prepaid card that is 

a credit card, or may be accessed by an 

account number that is a credit card where 

extensions of credit are permitted to be 

deposited directly only into particular 

prepaid accounts specified by the creditor. 

* * * * * 

Section 1026.60 Credit and Charge Card 

Applications and Solicitations 

1. General. Section 1026.60 generally 

requires that credit disclosures be contained 

in application forms and solicitations 

initiated by a card issuer to open a credit or 

charge card account. (See § 1026.60(a)(5) and 

(e)(2) for exceptions; see § 1026.60(a)(1) and 

accompanying commentary for the definition 

of solicitation; see also § 1026.2(a)(15) and 

accompanying commentary for the definition 

of charge card and § 1026.12(h) for 

restrictions on when credit or charge card 

accounts can be added to previously issued 

prepaid accounts.) 

* * * * * 

60(b)(4) Transaction Charges 

* * * * * 

3. Prepaid cards. If a card issuer assesses 

a fee (other than a periodic rate that may be 

used to compute the finance charge on an 

outstanding balance) for credit accessed by a 

credit card that is a prepaid card to make a 

purchase, that fee is a transaction charge 

described in § 1026.60(b)(4). This is so 

whether the fee is a flat per-transaction fee 

to make a purchase, a flat fee for each day 

(or other period) the consumer has an 

outstanding balance of purchase transactions, 

or a one-time fee for transferring funds from 

the consumer’s credit account to the 

consumer’s prepaid account to cover the 

shortfall in the prepaid account as a result of 

a purchase with the prepaid card. 

* * * * * 

60(b)(8) Cash Advance Fee 

* * * * * 

4. Prepaid cards. If a card issuer assesses 

a fee (other than a periodic rate that may be 

used to compute the finance charge on an 

outstanding balance) for a cash advance 

accessed by a credit card that is a prepaid 

card, such as a cash withdrawal at an ATM, 

that fee is a cash advance fee. If the cash 

advance fee is the same dollar amount as the 

transaction charge for purchases described in 

§ 1026.6(b)(2)(iv), the card issuer may 

disclose the fee amount under a heading that 

indicates the fee applies to both purchase 

transactions and cash advances. Examples of 

how fees for purchase transactions described 

in § 1026.60(b)(4) and fees for cash advances 

described in § 1026.60(b)(8) must be 

disclosed are as follows: 

i. A card issuer assesses a $15 fee for credit 

accessed by a credit card that is a prepaid 

card to purchase goods or services at the 

point of sale when the consumer has 

insufficient or unavailable funds in the 

prepaid account. The card issuer assesses a 

$25 fee for credit accessed by a prepaid card 

for a cash advance at an ATM when the 

consumer has insufficient or unavailable 

funds in the prepaid account. In this 

instance, the card issuer must disclose 

separately a purchase transaction charge of 

$15 and a cash advance fee of $25. 

ii. A card issuer assesses a $15 fee for 

credit accessed by a credit card that is a 

prepaid card to purchase goods or services at 

the point of sale when the consumer has 

insufficient or unavailable funds in the 

prepaid account. The card issuer assesses a 

$15 fee for credit accessed by a credit card 

that is a prepaid card for providing cash at 

an ATM when the consumer has insufficient 

or unavailable funds in the prepaid account. 

In this instance, the card issuer may disclose 

the $15 fee under a heading that indicates the 

fee applies to both purchase transactions and 

ATM cash advances. Alternatively, the card 

issuer may disclose the $15 fee on two 

separate rows, one row indicating that a $15 

fee applies to purchase transactions, and a 


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second row indicating that a $15 fee applies 

to ATM cash advances. 

iii. A card issuer assesses a $15 fee for 

credit accessed by a credit card that is a 

prepaid card for providing cash at an ATM 

when the consumer has insufficient or 

unavailable funds in the prepaid account. 

The card issuer also assesses a fee of $1.50 

for out-of-network ATM cash withdrawals 

and $1.00 for in-network ATM cash 

withdrawals. The card issuer must disclose 

the cash advance fee as $16.50 for out-ofnetwork ATM cash withdrawals, indicating 

that $1.50 is for the out-of-network ATM 

withdrawal fee, such as ‘‘$16.50 (including a 

$1.50 out-of-network ATM withdrawal fee).’’ 

The card issuer also must disclose the cash 

advance fee as $16.00 for in-network ATM 

cash withdrawals, indicating that $1.00 is for 

the in-network ATM withdrawal fee, such as 

‘‘$16 (including a $1.00 in-network ATM 

cash withdrawal fee).’’ 

5. Credit card accounts where extensions of 

credit are deposited directly only in 

particular prepaid accounts. With respect to 

a credit card account accessed by an account 

number where extensions of credit are 

permitted to be deposited directly only into 

particular prepaid accounts specified by the 

creditor, if a card issuer assesses a fee (other 

than a periodic rate that may be used to 

compute the finance charge on an 

outstanding balance) for an extension of 

credit that will be deposited into a prepaid 

account that fee is a cash advance fee. 

* * * * * 

Dated: November 10, 2014. 

Richard Cordray, 

Director, Bureau of Consumer Financial 

Protection. 

[FR Doc. 2014–27286 Filed 12–22–14; 8:45 am] 

BILLING CODE 4810–AM–P 


tkelley on DSK3SPTVN1PROD with PROPOSALS2