WASHINGTON–The Consumer Financial Protection Bureau is now requiring issuers of prepaid cards to guarantee basic protection from fraud, unauthorized charges and errors.
The new rules come as prepaid services have become among the fastest-growing segment of the financial payments industry. The total amount loaded on general-use prepaid cards in the U.S. grew to $324 billion in 2017 from $208 billion in 2012, according to Mercator Advisory Group, a research and consulting firm. It projects the market to grow at an annual rate of around 10%, reaching $428 billion in 2021, the Wall Street Journal reported.
The new CFPB rules match those that govern debit cards. Prepaid-card customers are also to receive a simple fee chart that makes it clear how much they will pay for services like ATM withdrawals and reloading cards with cash. In addition to basic reloadable plastic prepaid cards, the new rules also covers person-to-person payment services such as PayPal and Venmo and mobile wallets such as Google Pay.
“Now there is little difference between prepaid cards and bank checking accounts as far as the laws are concerned,” Sue Brown, director of prepaid advisory service at Mercator, told the Wall Street Journal.
‘Impact Likely Limited’
“The impact of the new regulation will likely be limited for some consumers because large issuers already voluntarily provide the protection the rule requires. Products and services such as Apple Pay that are linked to credit cards or bank accounts, and therefore don’t store value, aren’t subject to the rule,” the Journal added. “Gift cards also aren’t covered by the CFPB rule.”
But employer-issued payroll cards and government benefit cards carrying Social Security and veterans benefits, as well as prepaid wristbands worn by visitors at some theme parks and resorts, do fall under the rule, the report added.
According to the Journal, the rule has prompted some companies to adjust their product offerings. PayPal notified its personal-account customers they must set up a new linked prepaid account called PayPal Cash or PayPal Cash Plus if they want to keep a balance within their accounts, rather than linking them to a bank or credit-card account.
In case of the loss of a card or fraud, the rule says consumers are responsible for up to $50 if they notify the issuer within two business days of noticing an unauthorized charge. This protection, along with requirements that issuers investigate and resolve errors in a timely manner, won’t apply if the customer hasn’t completed an identification and verification process, the Journal added.