Prepaid Accounts. Iowa Bankers Association. November 2017

Transcription

1 Prepaid Accounts Iowa Bankers Association November CCPG, LLC 1

2 TABLE OF CONTENTS Law and Regulation... 3 Overview... 6 Resources... 7 Definitions... 9 Exclusions Coverage Website Posting CFPB Submission Periodic Statement and its Alternative Liability of Consumer for Unauthorized Transfers Compulsatory Use Disclosures General Short Form Disclosures Offsite or Third-Party Retail Location Oral or Phone Acquisition Initial Disclosures Long Form Disclosures Form and Format Replacement of Existing Brochures Error Resolution Change in Terms Notices CIP Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F... Error! Bookmark not defined CCPG, LLC 2

3 Law and Regulation Law and Regulation (And We re Not Done Yet) Key Dates: May 24, 2012 ANPR; November 13, 2014 CFPB Issued Proposed Rule; October 5, 2016 Issued Final Rule to become effective on October 1, 2017; March 9, 2017 Delay the Effective Date until April 1, 2018; June 15, 2017 Proposed changes to final rule Comment Period Ended August 14, April 1, 2018 Get the Prepaid Party Started March 9, 2017 Notice of Delay Based on industry feedback regarding difficult in complying with certain provisions of the rule by the October 1, 2017 effective date - a 6-month delay was necessary to ensure these participants can comply with the rule Thank You CFPB; CFPB also sought comments about any implementation challenges that may affect consumers, and how additional time will impact industry, consumers, and other stakeholders; If any substantive changes to the prepaid accounts rule are necessary and appropriate, the CFPB will issue a separate proposal and provide the public an opportunity to comment on those changes before finalizing; and Proposal was published in the Federal Register on June 29, CCPG, LLC 3

4 Law and Regulation June 2017 Proposal Proposed changes generally favorable for those issuing prepaid accounts; Additional comments sought on again extending the effective date; Two major changes with number of smaller issues. June Proposal Effect on Error Resolution and Limitations of Liability Requirements Current (Pre-proposal) rule requires error resolution and limited liability on unregistered accounts such as: o Where verification process hasn t been finalized; o Where the verification processes has been finalized but the customer s identify could not be verified; and o In a program for which there is no verification process. Proposed Rule would not require issuers to resolve errors or limit customer s liability on unregistered accounts; Instead, these obligations would be imposed AFTER the issuer completes its customer ID and verification process; Requirements would apply retroactively to disputed transactions that occurred before verification completed; and If no verification process is available, issuer required to disclose the absence of, or limitations on, such protections. Bottom Line: Consumers would need to register their accounts to receive full fraud and error protection benefits such as the right to dispute charges and have stolen money restored; Proposal would require companies to provide these protections to registered accounts even if the theft or dispute occurred before registration was successfully completed CCPG, LLC 4

5 Law and Regulation Digital Wallets Current (Pre-proposal) rule requires a 30-day waiting period and additional disclosures are required to link a credit card issued by a business partner to a digital wallet; Problematic that the above requirements do not apply to nonbusiness partners which creates uneven playing field; New proposal would exclude business arrangements between prepaid issuers and issuers of traditional cards from hybrid card conditions if: o Prepaid card can t access credit from the credit card account during a prepaid account transaction without written consent to link the two accounts; o Acquisition/retention of either account not conditioned on whether the consumer authorizes such a connection; and o The Parties do not vary certain terms and conditions based on whether the two accounts are linked Bottom Line: Provides more flexibility concerning credit cards linked to digital wallets - Digital wallets provide consumers with an electronic way to use their debit and credit cards. Some digital wallets are also prepaid accounts because consumers can use them to store and access funds directly. Proposal would ensure that consumers continue to receive full CARD Act protections on their traditional credit card accounts while making it easier for them to link those accounts to their digital wallet prepaid accounts CCPG, LLC 5

6 Overview Requirements Disclosures for prepaid accounts must be provided to consumer which contain clear, upfront information about fees and other key details; Prepaid accountholders will have protections similar to those for credit cards if consumers are allowed to use credit (overdraft) on their accounts to pay for transactions; Credit protections similar to those provided for credit card accounts will apply when consumers have access to credit products via their prepaid accounts, including ability to pay requirements; Monthly billing statements, at least 21 days from billing to payment due dates unless alternative method utilized; Limits fee and interest charges; Credit features can t be made available via a prepaid account until 30 days after a consumer registers the account; and Prepaid issuers cannot automatically seize a credit repayment when a prepaid account is next reloaded with funds; and Can't automatically take funds from a prepaid account balance when a credit payment is due without consumer consent. Note: The requirement to submit prepaid account agreements to the CFPB is not effective until October 1, The scope of the final rule s coverage extends beyond the types of accounts that were the primary focus in the Prepaid ANPR CCPG, LLC 6

7 Resources CFPB Small Entity Guide This 157-page document was originally issued on January 31, The Guide provides numerous examples and tables and is an excellent resource. Revised guide (154 pages) includes a summary of the June 2017 updates was issued in June 2017: uments/201706_cfpb_prepaid-small-entity-compliance-guide.pdf Additional Questions If you have a specific regulatory interpretation question about the Prepaid Rule after reviewing these resources, you can any questions to CFPB_RegInquiries@cfpb.gov. The subject line of the should include Prepaid Rule, and the body of the should include your name, contact information, details about your question, and regulatory cites to indicate the topic of your question. If you do not have access to , you may leave your question in a voic at CFPB Responses Bureau staff provide only informal responses to regulatory inquiries, and the responses do not constitute official interpretations or legal advice; Bureau staff is not able to respond to specific inquiries within a particular requested timeframe; and Actual response times will vary based on the number of questions Bureau staff is handling and the amount of research needed to respond to a specific question CCPG, LLC 7

8 Resources Link to Resources These summaries, charts, and reference materials offer an easy way to understand the rule and see which provisions are likely to apply to certain products or businesses. These references aren t substitutes for reviewing the Prepaid Rule, but they can give you an idea of where to start. Rule Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth In Lending Act (Regulation Z) Guide Small Entity Compliance Guide Quick References from CFPB website Executive summary of prepaid rule Prepaid account coverage chart Model and sample pre-acquisition disclosure forms for prepaid accounts Preparing the short form disclosure for prepaid accounts 2017 CCPG, LLC 8

9 Definitions Issuer Generally, the Prepaid Rule applies to financial institutions, as that term is defined in Regulation E; However, the Prepaid Rule adds new requirements to Regulation E that apply to issuers ; and Prepaid Rule also has requirements that apply to prepaid account issuers, card issuers, and creditors as those terms are defined in amended Regulation Z. Example ABC Bank and Mainstreet Bank work together to issue prepaid accounts; Consumer obtains a prepaid account issued pursuant to this arrangement through a link on Mainstreet Bank s website; Prepaid account agreement states This is an agreement between you, the consumer, and ABC Bank. This agreement governs the terms of your Prepaid Account ; and Mainstreet Bank s logo is featured on the front of the prepaid card that the consumer receives; and For purposes of the new requirements in Reg E s Section , the issuer is ABC Bank, because the agreement creates a legally enforceable obligation between the consumer and ABC Bank CCPG, LLC 9

10 Definitions Account (b) 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 bank and established primarily for personal, family, or household purposes; Does not include an account held by a bank under a bona fide trust agreement; (As of 10/1/17) the term includes prepaid accounts. Prepaid account means: o Account that is marketed or labeled as prepaid and that is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at automated teller machines; or o An account: Issued on a prepaid basis in a specified amount or not issued on a prepaid basis but capable of being loaded with funds thereafter; and Whose primary function is to conduct transactions with multiple, unaffiliated merchants for goods or services, or at ATMs, or to conduct person-to-person transfers; and Is not a checking account, share draft account, or NOW account. Note: Must satisfy at least one of the two prongs above. Note: Must still be an account established primarily for personal, family or household use so business purpose and bona fide trusts are excluded. Note: Subject to exclusions addressed later CCPG, LLC 10

11 Definitions Characteristic of a Prepaid Account Even if marketed or labeled as prepaid, the account must be redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at ATMs; Definition of prepaid account is primarily related to the account itself and not the device used to access it no card necessary; Term debit card also includes a prepaid card; Most, if not all, General Purpose Reloadable (GPR) cards qualify as prepaid accounts; Certain products that are intended for specific, limited purposes and use term prepaid do not fit the definition if they are not redeemable upon presentation at multiple, unaffiliated merchants; and Accounts that are not loaded at acquisition are nonetheless eligible to be prepaid accounts if they are capable of being loaded with funds at a later time. Note: An account is marketed or labeled as prepaid if the term prepaid appears on the: Access device associated with the account; Access device s packaging materials; or Display, advertisement, or other publication to promote purchase or use of the account. Note: An account may be marketed or labeled as prepaid if the bank, its service provider, including a program manager, or the payment network on which an access device for the account is used, promotes or advertises, or contracts with another party to promote or advertise the account using the label prepaid CCPG, LLC 11

12 Definitions Is Marketed or Labeled as Prepaid Comment (b)(3)(i)- 3. If prepaid appears on the card or other access device associated with the account, on packaging materials for the card or other access device, or on a display, advertisement, or other publication used to promote the account, the account satisfies the first prong; or An account may also be marketed or labeled as prepaid if the bank or its service provider (including a program manager), or the payment network on which the account s access device is used promotes or advertises the account using the term prepaid or contracts with a third party to promote or advertise the account using the term prepaid. Is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at ATMs An account satisfies this test if, for example, multiple, unaffiliated merchants agree (pursuant to the payment network s rules) to honor a card, code, or other access device if it bears the mark, logo, or brand of a payment network. However, an account does not satisfy this test if the card, code, or other access device can only be used at an affiliated group of merchants, such as merchants at a specific shopping mall. Merchants are affiliated if they are related by common ownership or common corporate control; Are also affiliated if they share the same name, mark, or logo; Are affiliated if franchisees are subject to a common set of corporate policies or practices under the terms of their franchise license; and Are affiliated if merchants agree, by contract or otherwise, to redeem cards, codes, or other devices bearing the same mark, logo or brand (other than the mark, logo, or brand of a payment network) for the purchase of goods or services solely at such merchants CCPG, LLC 12

13 Definitions Issued on a prepaid basis in a specified amount 12 CFR (b)(3)(i)( D)(1). Capable of being loaded with funds after issuance. An account is issued on a prepaid basis if it is loaded with funds when it is first provided to the consumer for the consumer s use; or A product that allows a consumer to store funds before the consumer designates a final destination for the funds satisfies this test, but a product that only is capable of storing a consumer s payment credentials for other accounts does not.. An account is capable of being loaded with funds after issuance if the consumer or a third party can load funds into the account after it is issued to the consumer; However, the account does not need to be reloadable to qualify as a prepaid account; and To satisfy this test, the account must be capable of holding funds. Primary functions Must be capable of conducting: Transactions with multiple, unaffiliated merchants for goods or services; Transactions at ATMs; or P2P transfers Functionality Determination Look to the account s functionality - not to the consumer s actual use of the account or to the access device associated with the account - to determine if covered; For example, the fact that a consumer may choose to withdraw the entire account balance at an ATM or transfer it to another account held by the consumer does not change the fact that the account s primary function is to provide general transaction capability; and Account s primary function is not determined by how frequently an individual consumer chooses to use the account for a given function CCPG, LLC 13

14 Definitions Used for Other Purposes Even if the account s access device can be used for other purposes (e.g., as a form of identification), the account may still satisfy the primary function test. P2P P2P transfers include not only EFTs to another consumer but also EFTs to a business; and Account may qualify as a prepaid account if its primary function is to make P2P transfers to another consumer or to a business, even if it is not redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at ATMs CCPG, LLC 14

15 Exclusions General Exclusions An account that satisfies one or both of the coverage tests is NOT a prepaid account if it is any of the following: Account loaded only with funds from a health savings account, flexible spending arrangement, medical savings account, health reimbursement arrangement, dependent care assistance program, or transit or parking reimbursement arrangement; Account that is directly or indirectly established through a third party and loaded only with qualified disaster relief payments; Gift certificate; Store gift card; Loyalty, award, or promotional gift card; General-use prepaid card that is both marketed and labeled as a gift card or gift certificate; Account established for distributing needs-tested benefits in a program established under state or local law or administered by a state or local agency; or P2P functionality of an account established by or through the U.S. government if the account s primary function is to conduct closed loop transactions on U.S. military installations or vessels or similar government facilities CCPG, LLC 15

16 Exclusions Gift Certificates and Store Gift Cards Gift certificate and Store gift card, as defined in the Gift Card Rule, are not Prepaid Accounts; While Gift certificates and Store gift cards are not prepaid accounts under the Prepaid Rule they are subject to separate requirements under Regulation E; and Gift card requirements generally are found in Reg E s 12 CFR Loyalty, Award or Promotional Gift Card Rule In order to qualify as a loyalty, award, or promotional gift card under the Gift Card Rule, the card, code, or access device must include certain disclosures set forth in Reg E s 12 CFR (a)(4)(iii); A general-use prepaid card that is both marketed and labeled as a gift card or gift certificate is covered under the Gift Card Rule and is not a prepaid account IF it is both marketed and labeled as a gift card or gift certificate; The Gift Card Rule provides that gift cards, gift certificates, and general-use prepaid cards do not include certain codes, cards, and access devices that are not marketed or labeled as a gift card or gift certificate; and Therefore, a product may be subject to both the Gift Card Rule and the Prepaid Rule in certain limited circumstances. [See example next page] 2017 CCPG, LLC 16

17 Exclusions Example of both Prepaid Account and Gift Card Rules Applying Blaine Bank principally advertises a general-use prepaid card as a less-costly alternative to a bank account; During the holiday season, the bank uses signs that promote the card as the perfect gift, but the card itself is not labeled as a gift card or gift certificate; The card is marketed as a gift card or gift certificate, but is not both marketed and labeled as a gift card or gift certificate; Therefore, the product does not fit within the Prepaid Rule s exclusion for a general-use prepaid card that is both marketed and labeled as a gift card; Additionally, the product does not fit within the Gift Card Rule s exclusion for a general-use prepaid card that is reloadable and not marketed or labeled as a gift card; and Depending on the other terms and conditions that apply to the card, it may be covered under both the Prepaid Rule and the Gift Card Rule. Small Bank as Seller Not Issuer To the extent smaller banks merely sell prepaid accounts issued by other entities, they are NOT covered under Regulation E, since they do not satisfy either part of the definition of financial institution (i.e., they do not hold prepaid accounts, nor do they issue prepaid accounts and agree with consumers to provide EFT services in connection with prepaid accounts). Note: The burden of and liability for complying with the final rule would generally fall on the bank that issues the prepaid accounts, not on the bank selling those products. Banks that sell other financial institutions prepaid accounts in their branches will be able to provide the long form disclosure after acquisition, provided they comply with the requirements set forth in (b)(1)(ii) CCPG, LLC 17

18 Exclusions Examples of Accounts That Do NOT Satisf y the Primary Function Test Saving accounts since the primary function of a savings account is to accrue interest on funds in the account; Brokerage accounts since the primary function of a brokerage account is to hold funds so that the consumer can conduct transactions through a licensed broker or firm; Accounts that can only be used to conduct closed-loop transactions, such as on a college campus; and Products with the sole function of making a one-time transfer into a separate prepaid account (i.e., reload packs). Functionality Tests for Checks Checking accounts, including NOW and Share Draft accounts, do not meet Functionality Test and are NOT prepaid accounts; Does not matter that such accounts do not offer checkwriting capabilities (e.g., a checkless checking account); and For purposes of this test, the ability to issue preauthorized checks drawn on the account does not by itself qualify the account as a checking, share draft, or NOW account. FDIC Safe Account Model It is not entirely clear whether checkless checking accounts such as those based on the FDIC s Safe Account model are checking accounts or prepaid accounts CCPG, LLC 18

19 Coverage Coverage Currently, Regulation E s contains provisions specific to payroll card accounts only but is being amended to contain most of the prepaid card rules. A number of Subpart A requirements of Regulation E will apply to prepaid accounts such as the following sections: Sec Definitions; Sec Preauthorized transfers; Sec Procedures for resolving errors; Sec Relation to state laws; Sec Requirements for overdraft services [Note: The only impact upon this section was a statement that the term overdraft services does not include a negative balance on the asset feature of the prepaid account]; Sec Requirements for banks offering payroll card accounts; and Sec Internet posting of prepaid account agreements. [Note: This section was an addition to Regulation E rather than a modification.] Note: In certain circumstances, the prepaid rule contains additional or different requirements for prepaid accounts than for a typical Regulation E account such as the Compulsatory Use prohibition in Section CCPG, LLC 19

20 Coverage (b)(3)(i) (D) Previously, Regulation E only covered transaction accounts (checking) BUT the new rule will cover accounts such as non-reloadable products where funds are intended to be fully spent and the account then abandoned; and Where multiple accounts are associated with the same access device, the primary function of each account is determined separately and as long as one or more accounts can satisfy the definition of account the account is covered. More than 1 Wallet or Purse Intended to address situations where two or more separate wallets or purses are associated with the same access device and one is intended to be used at unaffiliated merchants and the other is to be used only for affiliated merchants. Primary Purpose An account whose primary function is other than to conduct transactions with multiple, unaffiliated merchants for goods or services, or at ATMs, or to conduct P2P transfers, does not satisfy the definition of a prepaid account CCPG, LLC 20

21 Coverage Products Traditional prepaid cards, including general purpose reloadable cards; Mobile wallets such as Paypal and Venmo; Person-to-person payment products; and Electronic prepaid accounts that can store funds. New Protections New protections for these products under Regulation E include: Disclosures; Limited liability; Error Resolution rights; Requirements for statements or free and multi-channel access to account information; Error resolution rights; and Protections for lost cards and unauthorized transactions CCPG, LLC 21

22 Website Posting Bank Website Posting (c) Beginning on April 1, 2018, ISSUERS that offers prepaid accounts to the general public must post agreements to its publicly available website and must provide agreements to customer upon request. Individual agreements provided to customers MUST: Be sent no later than five business days after the issuer receives the consumer's request; Contain content and form requirements similar to that required to be submitted to the CFPB; Be accurate as of the date the agreement is sent to the consumer; and Be provided by the bank in paper form unless the consumer agrees to receive the agreement electronically.. Note: Bank must also provide to consumer upon request. Note: Bank must determine whether it qualifies as the issuer. Note: The agreement is the document evidencing the terms of the legal obligation and may be more than one document and includes short and long form disclosure information CCPG, LLC 22

23 Website Posting Requirements Bank may provide prepaid account agreements in electronic form without regard to the consumer notice and consent requirements of ESIGN; Form and content requirements; Agreements posted on a bank s website must be updated as frequently as the issuer is required to submit amended agreements to the CFPB; Can be posted by the bank on its website in any electronic format that is readily usable by the general public; Customer must be allowed to request agreement by phone; Form and content requirements; Changes to agreements can t be submitted in forms of a CIT agreement Requirement applies if: Bank is required to submit a prepaid account agreement to the CFPB; and Prepaid account agreement is offered to the general public. Note: Banks not required to post on their publicly available websites account agreements that are not offered to the general public likely will not affect banks since this exclusion is primarily for government benefit and payroll card accounts. Note: The delayed October 1, 2018 effective date for submission of agreements to the CFPB does NOT apply to the posting requirement or the requirement to provide consumers with their individual agreements 2017 CCPG, LLC 23

24 CFPB Submission CFPB Submission (d) Effective October 1, 2018 Banks which offer prepaid accounts are generally required to submit to the CFPB new and amended prepaid account agreements and notification of withdrawn agreements no later than 30 days after the bank offers, amends, or ceases to offer the agreement; Includes new and amended account agreements; Requires notification of withdrawn agreements; Submissions must be made within 30 days of a triggering event such as new or amended agreement De minimis exception (3,000 or fewer accounts) along with limited product testing exception; and De minimis Exception De minimis exception rules: Bank not required to submit any prepaid account agreements if bank has fewer than 3,000 open prepaid accounts as of the last day of the calendar quarter; If bank formerly qualified for de minimis exception and has more than 3,000 prepaid accounts at the end of any quarter it must submit prepaid account agreements no later than 30 days after the last day of that calendar quarter; and If bank did not previously qualify for the de minimis exception but now has fewer than 3,000 prepaid accounts, bank must continue to make submissions to the CFPB on a rolling basis until the bank notifies the CFPB that it is withdrawing all agreements it previously submitted to the CFPB CCPG, LLC 24

25 CFPB Submission Product Testing Exception No agreement required to be provided if the product is: Offered as part of a product test to a limited number of consumer for a limited time; Is used for fewer than 3,000 accounts; and Is not offered other than in connection with the test. Note: Any prepaid account agreements in effect as of October 1, 2018, must be submitted to the CFPB no later than October 31, 2018 unless the de minimis rule applies. Note: CFPB will provide technical specifications for the form available in advance of the October 1, 2018 date. Note: After October 1, 2018, issuers must submit new and amended prepaid account agreements and notifications of withdrawn agreements to the Bureau within 30 days after offering, amending, or ceasing to offer the agreement CCPG, LLC 25

26 Periodic Statement and its Alternative Periodic Statement or Alternative (c) Regulation E s current Periodic Statement requirements are in Section ; Banks that offer prepaid accounts can either comply with that requirement or can utilize the periodic statement alternative from (c); If the bank provides a periodic statement it must be modified to include additional information such as a summary of fees, both monthly and YTD; Biggest difference for banks that provide periodic statements is that all fees, not just those related to EFTs, must be shown on statement; and If periodic statement method is chosen, must comply with current Reg E requirements that require monthly or quarterly statements depending on whether there was EFT activity. A bank that relies on the periodic statement alternative for prepaid accounts must provide the consumer with: Account balance information including making the account balance information readily available by telephone; Electronic account transaction history covering at least 12 months of transactions preceding the date on which the consumer electronically accesses the prepaid account; and Written account transaction history upon oral or written request covering at least 24 months preceding the date on which the bank receives the consumer s request for account transaction history. Note: Periodic statements and account transaction histories must display a summary total of the amount of all fees assessed by the bank against the consumer s prepaid account for the prior calendar month and for the calendar year to date as well as other information CCPG, LLC 26

27 Periodic Statement and its Alternative Content of Account History The 12- and 24-month history of consumer account transactions must contain the following, as applicable: Amount of the transfer; Date a transfer was credited or debited to the consumer's account; Type of transfer and type of account to or from which funds were transferred; For a transfer initiated by the consumer at an electronic terminal (except for a deposit of cash or a check, draft, or similar paper instrument), the terminal location and the name of any third party to or from whom funds were transferred; Account number; Amount of any fees assessed against the account during the statement period for EFTs, the right to make transfers, or account maintenance; Balance in the account at the beginning and at the close of the statement period; Address and telephone number to be used for inquiries or notice of errors; and Telephone number the consumer may call to ascertain whether preauthorized transfers to the consumer's account have occurred if the bank uses the telephone-notice option. Note: In addition to the standard requirements, the account transaction histories must disclose a summary total of all fees that the bank assessed against the account for the prior calendar month and for the calendar year to date. Note: The histories can be electronic or written. Unverified Accounts No written transaction history is required for any account for which the bank has not completed its customer identification and verification process CCPG, LLC 27

28 Periodic Statement and its Alternative Electronic 12- Month Histories Electronic account transaction histories must display all of the information required to be included in periodic statements for prepaid accounts, including the amount of any fees assessed against the prepaid account and the summary totals of all fees assessed by the issuer against the prepaid account for the prior calendar month and calendar year to date. Bank must make electronic account transaction histories available in a form consumers may keep, such as: On a website in a format that is capable of being printed; or Stored electronically using a web browser. Written 24- Month History Must contain all information provided in a typical periodic statement; Must be provided promptly in response to a consumer written or oral response; Must cover at least 24 months preceding the request date; If account opened for fewer than 24 months, provide information for shorter time period; If consumer requests history for a shorter period, bank can provide requested history only such as 6 months; No account history required if account has been closed for 24 or more months bank may charge for any such outdated history provided; Bank may offer automated mailings of histories on periodic basis if so, bank may charge a fee, but not for those separately requested orally or in writing; and Bank only has to provide a single written history in any one month and can charge a fee if more than 1 is provided in a month 2017 CCPG, LLC 28

29 Periodic Statement and its Alternative Change to Initial Disclosures Created by Use of Alternative Method Statement alternative method requires the following information in its initial account disclosures: Telephone number a consumer can utilize for obtaining account balance information; Means by which the consumer can obtain an electronic account transaction history such as a website; Summary of a consumers right to receive a written account transaction history upon request including a telephone number to call; and Error resolution notice substantially similar to current Appendix A-7 notice. Note: Bank can provide an annual error resolution notice from paragraph (b) of Appendix Form A-7 in Regulation E OR can provide on or with each electronic or written statement a notice substantially similar to the abbreviated periodic statement notice in paragraph (b) of Regulation E s Appendix A-3 modified to reflect the prepaid error resolution provisions CCPG, LLC 29

30 Periodic Statement and its Alternative Insufficient Data on April 1, 2018 For banks that utilize the periodic statement alternative, the rule provides leeway if the bank does not have sufficient data to comply in full with the 12- and 24-month transaction history requirements on April 1, 2018: If, on April 1, 2018, the bank does not have readily accessible the data necessary to provide such histories for the required time periods (12 and 24 months), the bank may make available or provide the histories using the data for the time period it has until the bank accumulates the necessary data to comply with the full-time periods; then Bank must make available the full 12 months of electronic account transaction history no later than April 1, 2019 (1-year after the effective date of the regulation), and provide upon request the full 24 months of written account transaction history no later than April 1, 2020 (2-years after the effective date). Note: For example, if on April 1, 2018, the bank does not have summary totals for the prior calendar month (March 2018) and the calendar YTD, the bank may display the summary totals using the data it has until the bank has accumulated the data necessary to display the summary totals as required. In this situation, the bank would first display the monthly fee total beginning on May 1, 2018 (i.e., periodic statements and histories accessed or provided in May 2017 would display the monthly fee total for April 2018); Bank would display the YTD fee total beginning on April 1, 2018 rather than for the entire calendar year 2018; and On January 1, 2019, all banks must begin displaying year-todate fee totals for calendar year CCPG, LLC 30

31 Periodic Statement and its Alternative Closed or Inactive Accounts If a prepaid account is closed or becomes inactive, as defined by the bank, the bank does NOT need to make an electronic account transaction history available for that prepaid account. However, if an inactive prepaid account becomes active, the bank must again make available 12 months of electronic account transaction history CCPG, LLC 31

32 Liability of Consumer for Unauthorized Transfers Conditions for Liability (a) A consumer may be held liable, within certain limitations, for an unauthorized EFT involving the consumer's account only if the bank has provided initial disclosures related to: (b)(1) [Liability]; (b)(2) [Phone Number and Address for reporting an unauthorized EFT]; and (b)(3) - [Business days]. Liability and Error Resolution General (e)(1) Prepaid accounts must generally comply with the limited liability provisions in existing and the error resolution requirements in , with some modifications; and Rule extends Regulation E s limited liability and error resolution requirements to all prepaid accounts, regardless of whether the bank has completed its consumer identification and verification process with respect to the account, but does not require provisional credit for unverified accounts. Modified Limitation on Liability and Error Resolution (e)(1) If a bank utilizes the alternative periodic statement methodology the 60-day period for reporting any unauthorized transfer shall begin on the earlier of: Date the consumer electronically accesses the consumer's account provided that the electronic account transaction history made available to the consumer reflects the unauthorized transfer; or Date the bank sends a written history of the consumer account transactions requested by the consumer in which the unauthorized transfer is first reflected. Note: Bank may comply by limiting the consumer s liability for an unauthorized transfer for any transfer reported by the consumer within 120 days after the transfer was credited or debited to the consumer's account. This is in contrast to the normal 60-day period for reporting unauthorized transfers CCPG, LLC 32

33 Liability of Consumer for Unauthorized Transfers Error Resolution for unverified accounts (c)(2)(i)( C) If a consumer's account has been verified, the bank must comply with all requirements for errors that satisfy the timing requirements, or the modified timing requirements, for errors that occurred prior to verification. If, at the time the bank was required to provisionally credit the account, the bank has not yet completed its identification and verification process with respect to that account, the bank may take up to the maximum length of time permitted [10, 20, 45 or 90 days] to investigate and determine whether an error occurred without provisionally crediting the account CCPG, LLC 33

34 Compulsatory Use Change to Prepaid Rule Regulation E s (e)(1) states that it is impermissible for a bank to condition an extension of credit on repayment by preauthorized EFT except for overdraft payments or to maintain a specified minimum balance. Current Regulation E provides an exception for overdraft accounts; New Regulation E clarifies and clearly articulates that the current overdraft exception does not apply to separate credit features accessible by hybrid prepaid-credit cards - a covered separate credit feature accessible by a hybrid prepaid-credit card is defined in new Regulation Z ; CFPB also clarifies that incidental credit described in new Regulation Z (a)(4) is exempt from the compulsory use provisions in Regulation E, similar to checking overdraft services; 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; Previously a card issuer generally was not prohibited 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 under a plan that is authorized in writing by the cardholder, so long as the card issuer does not make such deductions to the plan more frequently than once per calendar month; and Now a card issuer is prohibited under final Regulation Z (d)(3) from automatically deducting all or part of the cardholder s credit card debt from a covered separate credit feature from a deposit account (such as a prepaid account) held with the card issuer on a daily or weekly basis, or whenever deposits are made to the deposit account CCPG, LLC 34

35 Disclosures General General (b) The following must be provided to a consumer before the consumer acquires a prepaid account in addition to the current initial disclosures: Short form disclosure; Certain information disclosed in close proximity to the short form disclosure; and Long form disclosure General Concepts: Short form and the long form disclosures together provide consumers with an overview of the key information about the prepaid account and a list of fees and conditions and other important information about the account; Short form disclosure sets forth the prepaid account s most important fees and certain other information to facilitate consumer understanding of the account s key terms and aid comparison shopping among prepaid account programs; Long form disclosure provides the consumer with a comprehensive list of all of the fees associated with the prepaid account and detailed information on how those fees are assessed, as well as certain other information about the prepaid account program; and Long form disclosure provides consumers an opportunity to review all fee information about a prepaid account before acquiring it. Note: The short form provides a snapshot of key fees and information, while the long form provides a more comprehensive list of fees and greater detail regarding use of the prepaid account. Note: There must be consistent terminology regarding fee names and other terms between short and long form disclosures CCPG, LLC 35

36 Disclosures General Disclosure Requirements (b)(7)(ii)( A) In general, Regulation E requires that disclosures to be provided in writing but bank may choose to comply with ESIGN and provide e-disclosures. The Prepaid Rule addresses certain requirements for written, oral and electronic disclosures separately. Text Type and Background All text used in the short form disclosure or long form disclosure must be in a single, easy-to read type that is all black or one color. The text must be printed on a background that provides a clear contrast to the easy-to-read type. ESIGN Prepaid Rule modifies the general ESIGN rule and requires that a bank provide the pre-acquisition disclosures electronically when the consumer acquires the prepaid account through electronic means, such as via a website or mobile application. The Prepaid Rule provides that these electronic pre-acquisition disclosures NEED NOT meet the consumer consent and other applicable provisions of ESIGN. If bank relies upon the retail location exception it is required to make an electronic version of the loan form disclosure available on a website (and via phone) and must refer to the long form in the short form statement by naming website. Model Forms Model Short Form disclosures forms are in Regulation E, Appendix A-10(a) through A-10(e) CCPG, LLC 36

37 Disclosures General Foreign Language (b)(9)(i)( A). Pre-acquisition disclosures must be in a foreign language if the bank used a foreign language in connection with the acquisition of a prepaid account in any of the following circumstances: Packaging; or Bank principally uses a foreign language to advertise, solicit, or market a prepaid account and provides a means in the advertisement, solicitation, or marketing material that the consumer uses to acquire the prepaid account by telephone or electronically. Note: This would include any commercial message, appearing in any medium, that directly or indirectly promotes the availability of prepaid accounts constitutes advertising, soliciting, or marketing. Such commercial messages include electronic messages, telephone and solicitations, television and radio commercials, and printed advertisements in leaflets, promotional flyers, newspapers, and magazines. Note: A key would be whether the advertisement, such as a flyer or commercial, contained a website or phone number where a consumer could obtain the product. If no website or phone number provided, disclosures do not need to be in a foreign language. Note: The Small Entity Guide provides significant examples of when to provide disclosures in a foreign language CCPG, LLC 37

38 Short Form Disclosures Short Form General (b)(2) and (b)(3) Short Form information must be segregated from other information can only contain information required by Prepaid Rule but other information can be provided on same page as long as it is outside the confines of short form disclosure; General and specific short form requirements related to disclosure of variable fees and third-party fees as well as treatment of finance charges on overdraft credit features offered in connection with a prepaid account; First four fees (static fees) are considered the most important; and Fee name must be exact with long form disclosure can t use inactivity fee for one and dormancy fee for another. Disclosure Requirements Permits special formatting for electronic disclosures; Permits disclosure of discounts and waivers for the periodic fee; Accommodates disclosure of fees for optional services as well as those charged on non-traditional prepaid accounts, such as digital wallets, via a requirement to disclose certain information about additional types of fees not otherwise disclosed on the short form; Contains a section for fees and a section for certain other information - fee section must appear in the form of a table, and consists of two parts; Required fees must always be disclosed in the short form even when the bank does not charge a fee or does not offer the feature, in which case the bank would disclose $0 or N/A, respectively, as applicable; and For standardization purposes - rule requires disclosure of N/A, but not not offered, when a bank does not offer a feature for which a fee is required to be disclosed in the short form CCPG, LLC 38

39 Short Form Disclosures Static Fees Static fees are standardized fee disclosures that must be provided for all prepaid account programs, even if such fees are $0 or if they relate to features not offered by a particular program - standardization among issuers. If any of first 7 fees may vary, bank must show highest applicable fee followed by a symbol, such as an asterisk, linked to a statement explaining that the fee could be lower depending on how and where used. Static portion of the short form fee disclosures features a top line component highlighting four types of fees at the top of the form and these are considered the most important fees: Periodic fee, Per purchase fee, ATM withdrawal fees (parsed out for both in- and out-ofnetwork withdrawals in the United States), and Cash reload fee. Located just below the top line are disclosures for three other types of fees: ATM balance inquiry fees (included both in- and out of network balance inquiries in the U.S.); Customer service fees (includes both live and automated customer service), and Inactivity fee CCPG, LLC 39

40 Short Form Disclosures General Rule and Format General rule prohibits disclosure of third-party fees but bank must disclose cash reload fee in the top line including third-party fees. Static Fees must be in a specific format as shown in Model Form A-10(c), (d), and (e) in Regulation E s Appendix: Note: These fees are referred to as static because all prepaid accounts must list these fees on the short form disclosure, even if the amount of the fee is $0 or the fee relates to a feature that is not offered as part of the specific prepaid account program. Periodic Fee Example Blaine Bank does not charge a periodic fee for its prepaid accounts. Because the periodic fee is a static fee, Blaine Bank must include a periodic fee disclosure in its short form disclosure for the prepaid accounts. It could disclose the periodic fee as a Monthly fee or an Annual fee and must disclose the fee amount as $0. If the periodic fee may vary, the bank must disclose the highest amount that the bank could charge for the fee, but it has two options for disclosing the variance: Bank may treat the periodic fee like any other fee that could vary (i.e., disclose the highest amount followed by the same symbol that follows the amount of other fees that can vary); or Bank may disclose the highest amount followed by a different symbol, such as a dagger ( ). Note: If the bank uses a different symbol, that symbol must link to a separate statement disclosing the waiver or reduced fee amount and the circumstances under which the reduction or waiver could occur 2017 CCPG, LLC 40

41 Short Form Disclosures ATM Fees If the bank charges the same amount for all withdrawals at ATMs located in the United States, it can disclose one fee amount (instead of disclosing the same fee amount twice), and does not need to include the two tiers in-network and out-of-network in the short form disclosure. If a bank offers prepaid accounts that cannot be used to obtain cash from ATMs, short form disclosure for the prepaid accounts must either list ATM withdrawal and disclose the fee amount as N/A or separately list N/A for the in-network ATM withdrawal fee and the out-of-network ATM withdrawal fee ATM Fee as Additional Fee Type Cash Reload Fee However, the Prepaid Rule may require the bank to disclose the international ATM withdrawal fees as an additional fee type. Includes cost of: Adding cash to a prepaid account at a POS terminal; Purchasing an additional card or other device on which cash is reloaded and then transferred to the prepaid account; or Any other method a consumer may use to reload cash into the prepaid account. Does not include fees for reloading the prepaid account electronically or by check. Fee is disclosed using Cash reload or a substantially similar term, but it may be disclosed using Cash deposit if the bank permits cash deposits, such as at a bank branch, but does not permit cash reloads via a third-party reload network. Must include the total of all charges that the bank and any third party may charge for a cash reload. Any third-party fee included in the amount of the cash reload fee must be the highest fee that the bank knows a third-party charges CCPG, LLC 41

42 Short Form Disclosures Cash Reload Example Blaine Bank contracts with two separate third-party reload networks for reloading cash into its prepaid accounts One third party charges $3.99 for each cash reload, and the other charges $2.95 for each cash reload. Additionally, Blaine Bank charges $1 for each cash reload. Bank must disclose $4.99 for the cash reload fee (i.e., $3.99 plus $1), followed by a symbol, such as an asterisk, that links to a statement informing the consumer that this fee can be lower depending on how and where the card is used. Note: Bank is not required to revise its short form disclosure to reflect changes in a third party s cash reload fee until the bank manufactures, prints, or otherwise produces new prepaid account packaging materials or otherwise updates its short form. Note: Bank does not have to immediately update its electronic and oral short form disclosure to reflect the change to a thirdparty cash reload fee. Note: Bank can update the cash reload fee on its electronic and short form disclosure when it next prints packaging materials for the prepaid account program or otherwise updates its short form disclosure. ATM Balance Inquiry Fee Example Bank charges $1 for each balance inquiry at an ATM located within the U.S. whether at its own ATM or at an ATM outside of its network. In the short form disclosure, bank can list $1 after the fee heading ATM balance inquiry without including in-network and out-of-network in the short form disclosure CCPG, LLC 42

43 Short Form Disclosures Customer Service Fees Must disclose information about a fee charged for calling an IVR system, using Customer service and automated or substantially similar terms; Must also disclose information about a fee charged for calling a live customer service agent, using live agent or a substantially similar term; If applicable, the short form disclosure must inform the consumer that the fee is charged for each call, using per call or a similar term; Alternatively, if the bank charges the same amount for all customer service calls, it can disclose one fee amount (instead of disclosing the same fee amount twice), and does not need to include the two tiers automated and live agent in the short form disclosure; When providing a short form disclosure for a prepaid account program offering multiple service plans, the bank discloses only the fee for calling the live agent customer service, using the term Live customer service or a substantially similar term and, if applicable, per call or a substantially similar term; and The bank does not disclose a fee for automated customer service in the short form disclosure for multiple service plans. Inactivity or Dormancy Fee Inactivity fee, which is the fee it charges for non-use, dormancy, or inactivity of the prepaid account. The bank must disclose the inactivity fee using Inactivity or a substantially similar term and must also disclose the conditions under which it will impose the inactivity fee CCPG, LLC 43

44 Short Form Disclosures Waived or reduced fees The short form disclosure can t include information about when a fee, other than the periodic fee, may be reduced or waived, but a bank may provide such information elsewhere on prepaid account s packaging or in other materials. Detailed information about how the fee can be reduced or waived must be included in the long form disclosure. Use of symbols and alternatives When static fees vary, the bank can disclose: Highest amount followed by the same symbol that follows the amount of other fees that can vary, linked to the single statement that the fee could be lower depending on how and where the card is used; or Highest amount followed by a different symbol, such as a dagger ( ), linked to a separate statement disclosing the waiver or reduced fee amount and the circumstances under which the reduction or waiver could occur. Note: The linked separate statement must appear above or in place of the linked statement for other variable fees, and may not take up more than one line of text. Third Party Fees on Short Form Disclosure In general, third party fees are not shown on the short form disclosure. However, for the cash reload fee, the bank must disclose the total of all charges from the bank and any third parties for the cash reload CCPG, LLC 44

45 Short Form Disclosures Retainable Form and Record Retention (b)(6)(ii) Generally, a bank must provide pre-acquisition disclosures in a form that a consumer can keep (i.e., in a retainable form). However, in the following circumstances the specified preacquisition disclosures do not need to be provided in a form the consumer can keep: Pre-acquisition disclosure is provided orally when the Prepaid Rule permits or requires disclosures to be provided orally; Long form disclosure is provided via SMS for a prepaid account sold at a retail location pursuant to the retail location exception; or Disclosure of the purchase price is not provided on the exterior of the access device s packaging material for a prepaid account sold at a retail location pursuant to the retail location exception. Note: Electronic disclosures are retainable if the consumer can print, save, and the disclosures from the website or mobile application on which they are displayed. Tear Strip Issue A short form disclosure that has a tear strip running through it would not be in retainable form because the use of the tear strip would destroy a portion of the disclosure CCPG, LLC 45

46 Short Form Disclosures Short Form Highest Revenue Fees Static fees are followed by a portion of the disclosure that addresses additional types of fees specific to that prepaid account program. There are a number of incidence-based fees referred to as additional fee types which are shown together on the short form immediately following the static fee disclosures: Statement disclosing the number of additional fee types the bank may charge consumers with respect to the prepaid account; Statement explaining to consumers that what follows are examples of some of those additional fee types; and Two additional fee types that generate the highest revenue from consumers above a 5% de minimis threshold in the previous 24-month period. Two Disclosures in This Section First disclosure - informs the consumer of the number of additional fee types that the bank may charge with respect to the prepaid account program. [We will charge [x] other types of fees.] Second disclosure - generally lists the two additional fee types that generated the highest revenue from consumers during the previous 24 months. There is a transitional statement directing the consumer to the second disclosure listing the additional fee types. [Here are some of them.] Note: Language here will change if there are only 1 or 2 other types of fees to be disclosed here. Note: De-minimus rule may also change this language if only 1 fee exceeds the amount CCPG, LLC 46

47 Short Form Disclosures Additional Fee Types Bank must determine the additional fee types it may charge with respect to a prepaid account; Commentary includes a list of fees that might fit this account and bank may use names of those examples or create an appropriate name; and Not all fee types that the bank may charge the consumer are considered additional fee types. For example, fees otherwise required to be disclosed in or outside but in close proximity to the short form disclosure are not additional fee types Types of fees excluded from this section Static Fees; Finance Charges in connection with credit feature; Purchase Price of Account; Activation Fee; and Interchange Fees. Examples of Fees that May Be Included in Additional Fee Types ATM withdrawal fees and ATM balance inquiry fees are disclosed as static fees on the short form disclosure do not include fees for withdrawals or balance inquiries at ATMs located outside the United States - therefore, fees for withdrawals and fees for balance inquiries at ATMs located in foreign countries are additional fee types; Fee for reloading funds in the form of cash is a static fee - fees for reloading funds electronically or by check are additional fee types; and Certain fees for accessing the funds in a prepaid account, such as per purchase fees and fees for ATM withdrawal in the United States are static fees - but fees for electronic withdrawals, teller withdrawals, cash back at POS, or refunds at account closure are additional fee types CCPG, LLC 47

48 Short Form Disclosures Additional Fee Types These fee types must be calculated for the prepaid account program or across prepaid account programs that share the same fee schedule; Banks must assess their additional fee types every 24 months and, if necessary, update their disclosures; Exception to updating requirement banks are not required to pull and replace disclosures provided on, in, or with prepaid account packaging material if there is a change in the additional fee types required to be listed; Must disclose highest fee when the price of a service or feature may vary regulation permits use of a symbol, such as an asterisk, to indicate that those fees may vary and the statement linked to that asterisk must appear below the fee disclosures; May use a different symbol, such as a dagger, to provide specific information about waivers or discounts for the periodic fee only; and With limited exceptions, the two additional fee types that generated the highest revenue from consumers during the previous 24 months must be disclosed. Note: Excluded from this category are static fees, purchase price, activation fee, finance charges related to credit, and any fee type that generated less than 5 percent of the total revenue from consumers CCPG, LLC 48

49 Short Form Disclosures Calculating Revenue For each program or for each program that shares the same fee schedule: Calculate revenue for each fee type; Calculate total revenue for all fee types; and Determine whether any individual fees exceeded 5% of total. Coverage: Covers only fees generated from consumers; Includes revenue from static fees as well as non-static fees; Includes fees outside static box located in close proximity to static fees (e.g. activation and purchase price); and Includes finance charge on the prepaid account but not on any separate credit feature. Time Period General rule is to use previous 24 months for fee calculation. For example: Existing program on April 1, 2018 use revenue generated during any consecutive 24-month period that begins on or after April 1, 2015 for making bank s first disclosure; If bank does not have 24-month period prior to April 1, 2018 first listing of fees to be based on revenue it reasonably anticipates the program will generate during the 24-month period beginning on April 1, 2018; If program developed after April 1, 2018 utilize revenues anticipated for first 24 months of program; Must be reassessed each 24 months and disclosure updated, if necessary, within 3 months; and Bank may voluntarily reassess more frequently than every 24 months. De Minimis Not required to list any fees that generated less than 5% of total revenue but may do so voluntarily CCPG, LLC 49

50 Short Form Disclosures Revision of Fee Schedule If bank revises its fee schedule for a prepaid account program, it must determine whether it reasonably anticipates that the list of additional fee types previously disclosed will continue to comply with the Prepaid Rule s requirements for the 24 months following implementation of the fee schedule changes; and If the bank reasonably anticipates that the previously disclosed additional fee types will not continue to comply with the Prepaid Rule s requirements, it must update the disclosure based on its reasonable anticipation of what those additional fee types will be at the time the fee schedule change goes into effect. Note: Fee schedule change resets the 24-month period for reassessment. Update Printing Exception Bank is not required to update any disclosure listing additional fee types that is provided on, in, or with prepaid account packaging materials that were manufactured, printed, or otherwise produced prior to a periodic reassessment and update or prior to a fee schedule change; For prepaid accounts sold in retail locations, the bank can implement any necessary updates to disclosures listing additional fee types that appear on its physical prepaid account packaging materials at the time the bank prints new materials; and Banks are not required to destroy existing inventory in retail locations or elsewhere in the distribution channel, to the extent the disclosures on such packaging materials are otherwise accurate, in order to update the disclosure listing additional fee types CCPG, LLC 50

51 Short Form Disclosures Short Form Miscellaneous Requirements Statements regarding linked overdraft credit features; Registration and FDIC insurance information; URL for the Bureau s website where the consumer can obtain general information about prepaid accounts (i.e., cfpb.gov/prepaid); and Information on where the consumer can find the long form disclosure Overdraft Credit Features Statement indicating whether an overdraft credit feature may be offered in connection with the prepaid account and, if so, an explanation that the feature may be offered after a certain number of days and that fees would apply. [ You may be offered overdraft/credit after [x] days. Fees would apply. ] Note: Bank must provide this information in the short form disclosure for all prepaid accounts that offer such a feature, even if a specific consumer will not be solicited for the feature or will not qualify for it. Note: Use No overdraft/credit feature or similar language if a consumer will not be offered such a credit feature in connection with the prepaid account at any time. FDIC Insured Disclosure when a prepaid account is set up to be eligible for FDIC/NCUA insurance and when it is not, and combine this statement with the call to action for the consumer to register the account, if applicable CCPG, LLC 51

52 Short Form Disclosures CFPB Website Location URL for a CFPB website from which consumers can obtain general information on prepaid accounts. Information on all fees and services Statement directing consumers to where they can obtain information on all fees and services for a particular prepaid account program. Timing Short form disclosures must be provided before a consumer acquires a prepaid account such as when prepaid accounts are offered at a bank s location. Note: Commentary explains that a consumer acquires a prepaid account by purchasing, opening, or choosing to be paid via a prepaid account, and includes several examples. Short Form Other Requirements Outside, but in close proximity to the short form disclosure, the following must be disclosed: Bank name; Name of the prepaid account program; Purchase price for the prepaid account; and Fee for activating the prepaid account. Note: For online disclosures must be on same webpage as short form disclosure. Note: Same piece of paper or same packaging materials is acceptable. Note: For oral disclosures, must be read immediately before or after the fee and other information CCPG, LLC 52

53 Offsite or Third-Party Retail Location Retail Location Disclosures If bank offers its prepaid accounts at a retail location - defined as a store or other physical site where a consumer can purchase a prepaid account in person and that is operated by an entity other than the bank that issues the prepaid account, or orally; o Bank may provide the long form disclosure AFTER acquisition; IF Short form disclosure contains information enabling the consumer to access the long form disclosure by telephone or on a website and other requirements are met. Note: A bank s branch office is NOT a retail location. Note: Bank must provide methods for consumers to access the long form by telephone and via a website prior to acquisition. Foreign Language Accounts Must provide pre-acquisition disclosures in a foreign language if the bank uses that same foreign language in connection with the acquisition of a prepaid account in certain circumstances. Bank must provide the long form disclosure in English upon a consumer s request and on its website. Disclosures on Prepaid Account Access Devices Following must be disclosed on the access device: Bank Name; Bank website URL; Phone number where customer can contact bank. Note: If no access device provided, disclosure must appear on: Website; Mobile application; Any entry point a consumer must visit to access the account electronically CCPG, LLC 53

54 Oral or Phone Acquisition Oral Disclosures Bank must read short form disclosure information and close proximity information at the time the customer acquires an account by phone. Bank not required to provide the long form disclosures before a consumer acquires a prepaid account orally by telephone if the following conditions are met: Bank communicates to the consumer orally, before the consumer acquires the prepaid account, that the information required to be disclosed in the Long Form disclosure is available both by telephone and on a web site; Bank makes the Long Form information available both by telephone and on a web site; and Long form disclosures are provided after the consumer acquires the prepaid account. Note: Prepaid accounts acquired by a mobile device without speaking to a customer service agent or using an interactive voice response (IVR) system are not acquired orally by telephone for purposes of the Prepaid Rule 2017 CCPG, LLC 54

55 Initial Disclosures Current Reg E Requirement Current Regulation E requirement is written disclosure of terms and conditions this will now include prepaid accounts. Content requirements are modified because of periodic statement alternative and customer liability. Contents of Initial Notice Contents: Summary of the consumer's liability, under Sec or under state or other applicable law or agreement, for unauthorized electronic fund transfers need not provide if customer not held liable; Telephone number and address of the person or office to be notified when the consumer believes that an unauthorized electronic fund transfer has been or may be made; Business days; Type of EFTs that the consumer may make and any limitations on the frequency and dollar amount of transfers; All of the information in the long form in lieu of the fees imposed by the bank for EFTs or for the right to make transfers; Summary of the consumer's right to receipts and periodic statements and notices regarding preauthorized transfers; Summary of the consumer's right to stop payment of a preauthorized EFT and the procedure for placing a stoppayment order; Summary of the bank s liability to the consumer for failure to make or to stop certain transfers; Circumstances under which, in the ordinary course of business, the bank may provide information concerning the consumer's account to third parties; Error Resolution notice similar to Appendix Form; and Notice that a fee may be imposed by an ATM operator when the consumer initiates an EFT or makes a balance inquiry and by any network used to complete the transaction CCPG, LLC 55

56 Initial Disclosures Timing At the time a bank contracts for an EFT service or before the first EFT is made involving the account. Form In writing or electronically if conforms with ESIGN. Exception to Provisional Crediting If bank intends to rely on the exception to provisional crediting for certain unverified prepaid accounts, bank must include additional information in the error resolution notice provided in the initial disclosures. Must disclose risks of not registering the prepaid account using a notice similar to paragraph (c) of Model Clause A-7 Exception for Periodic Statement Alternative The initial statement is shown on the next 3 pages and must be in a form substantially similar to that in Appendix A-7. Error resolution notices must be provided annually or with each electronic and written transaction history. Banks should also revise their error resolution training, any written procedures and the methodology for prepaid accounts CCPG, LLC 56

57 Initial Disclosures Model Form A-7 A-7 MODEL CLAUSES FOR FINANCIAL INSTITUTIONS OFFERING PREPAID ACCOUNTS ( (D) AND (E)(3)) (a) Disclosure by financial institutions of information about obtaining account information for prepaid accounts ( (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 a 12-month history of account transactions, is also available online at [Internet address]. [For accounts that are or can be registered:] [If your account is registered with us,] You also have the right to obtain at least 24 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 CCPG, LLC 57

58 Initial Disclosures Model Form A-7 (Continued) (b) Disclosure of error-resolution procedures for financial institutions that do not provide periodic statements ( (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 us at [ 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, [and your account is registered with us,] 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 CCPG, LLC 58

59 Initial Disclosures Model Form A-7 (Continued) [Keep reading to learn more about how to register your card.] For errors involving new accounts, point-of-sale, or foreigninitiated 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]] CCPG, LLC 59

60 Initial Disclosures Model Form A-7 (Continued) (c) Warning regarding unregistered prepaid accounts ( (e)(3)). It is important to register your prepaid account as soon as possible. Unless you register your account, we may not credit your account in the amount you think is in error until we complete our investigation. 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 CCPG, LLC 60

61 Long Form Disclosures General Provides more comprehensive fee information that shortform; Provides certain other key information about the prepaid account such as conditions under which any fee may be imposed, waived, reduced; Banks can utilize sample form (Appendix A Form A-10(f); Must be segregated from other information; Can only contain information that is required or specifically permitted by the Prepaid Rule; Sets forth in a table all of the prepaid account s fees and their qualifying conditions as well as other information about the prepaid account program; Contains a series of statements following the fee table containing certain other key information regarding the prepaid account; and For prepaid accounts offering an overdraft credit feature, the long form disclosure must also include the Regulation Z disclosures described in (e)(1) CCPG, LLC 61

62 Long Form Disclosures Title Heading including the name of the prepaid account program and a statement that the disclosure contains a list of all fees for that particular account program. Fees Must list: Amount of all fees; Conditions for assessing, waiving or imposing fees; and Any third-party fees known to the bank that apply; May disclose but not required: List of any services or features bank provided to consumer free of charge; and For third-party fees, may include either or both a statement that the fee is accurate as of or through a specific date or the at the third-party fee is subject to change. Note: If bank is aware a third-party fee may apply but is aware of the amount, the bank must provide statement indicating a third-party fee may apply without specifying a fee amount. Note: May not use symbols such as asterisks to explain conditions FDIC Insurance and Registration Statement regarding registration and FDIC insurance eligibility that mirrors the statement required for the short form, with an explanation of the benefit of FDIC or NCUA insurance coverage or the consequence of the lack of such coverage. Overdraft Features Statement indicating whether an overdraft credit feature may be offered in connection with the prepaid account and, if so, an explanation that the feature may be offered after a certain number of days and that fees would apply; this statement also mirrors the one required in the short form disclosure CCPG, LLC 62

63 Long Form Disclosures Finance Charges Finance charges imposed in connections with a covered separate credit feature but not those imposed on the separate credit feature itself. Third Party Fees Third party fees known to the issuer; May include a statement that the fees are accurate as of a certain date and subject to change; and May state that a third-party fee may apply but does not need to state any fee amount if unknown such as out of network ATM withdrawals Regulation Z disclosures Regulation Z disclosures ( (e)(1) if, at any point, a covered separate credit feature accessible by a hybrid prepaidcredit card may be offered in connection with the prepaid account. Note: Safe harbor for banks from having to reprint the long form disclosure due to changes in third-party fees or the Regulation Z disclosures. Must appear below statement regarding CFPB website. Other Contact information for the bank (phone number, mailing address or website URL of the person or office where consumer may obtain more information; CFPB URL website and phone number where consumer can obtain general information on prepaid accounts; CFPB URL and phone number where consumer can complaint about a prepaid account CCPG, LLC 63

64 Form and Format Formatting (b)(7) There are currently general formatting requirements in Regulation E s which require disclosures to be: Clear and readily understandable; No particular type size; and Number of pages, or relative conspicuousness unimportant. New Section requires new prominence and size requirements. These requirements include multiple service plan short forms as well as several additional exceptions to the general retainability requirement for the pre- acquisition disclosures. The rule contains a provision requiring that fee names and other terms be used consistently within and across the short form and long form disclosures. Short Form General Whether in writing or electronic: Tabular format; Form substantially similar to Appendix A Sample Model Form A-10(a)-(d); For accounts with multiple service plans may use Appendix A - Sample Model Form A-10(e) - which has columns for each service plan; and Grouped together based on order in regulation Long Form General Whether in writing or electronic: Tabular format; Form substantially similar to Appendix A Sample Model Form A-10(f); Grouped together based on order in regulation; and No special provision for multiple service plans CCPG, LLC 64

65 Form and Format Long Form Order Organized under subheadings by the categories or functions for which the bank may impose a fee; and Text describing conditions under which a fee may be charged must be in close proximity to the fee amount; Prominence and Size For both short and long form: Single, easy to read type; All black or a single color; Minimum type size of eight (8) points (or 11 pixels); Appear in the same or a smaller type size than what is used for the fee headings such as Periodic Fees; and Printed on a background that provides a clear contrast. Short Form Fee Formatting (b)(2)(i) through (iv) Periodic Fee, Per Purchase Fee, ATM Fee and Cash withdrawal fee: Bold-faced type; Single fee amounts in a minimum type size of 15 points (or 21 pixels); Two-tier fee amounts for ATM withdrawal in a minimum type size of 11 points (or 16 pixels) and in no larger a type size than what is used for the single fee amounts; and Fee headings in a minimum type size of eight points (or 11 pixels) and in no larger a type size than what is used for the single fee amounts. SF Various Fees (b)(2)(v) through (ix) ATM Balance Inquiry, Customer Service Fee, Inactivity Fee, and Additional Fee Types: Minimum type size of 8 points (or 11 pixels) and appear in the same or a smaller type size than what is used for the fee headings required by paragraphs (b)(2)(i) through (iv) of this section CCPG, LLC 65

66 Form and Format SF (b)(2)(x) through (xiii) Statement Regarding Overdraft Services, Statement Regarding FDIC Insurance, CFPB Website, and Statement Regarding information on all fees and Services: Minimum type size of seven points (or nine pixels); and Appear in no larger a type size than what is used for the information required to be disclosed for various fees above. SF Additional Fee Types Statement Regarding Number of Additional Fee types, Telephone number, URL information, and Statement of Overdraft Fees: Bold-faced type. (SF b)(2)(iii), (v), (vi), and (ix) Text used to distinguish each of the two-tier fees (ATM, ATM Balance Inquiry, and Customer Service Fees); Text used to explain that the customer service fee applies per call, where applicable; and Text used to explain the conditions that trigger an inactivity fee and that the fee applies monthly or for the applicable time: o Minimum type size of six points (or eight pixels); and o No larger type size that what is used for the Statement Regarding Overdraft Service, FDIC Insurance Information, CFPB Website, and Statement Regarding Information on All Fees and Services CCPG, LLC 66

67 Replacement of Existing Brochures Replacement of Existing Brochures There is no requirement to pull and replace non-compliant prepaid account access devices and packaging materials after the effective date CCPG, LLC 67

68 Error Resolution Coverage In general, Regulation E s limited liability (Section ) and error resolution (Section ) sections will apply to prepaid account with some exceptions such as: Extension of Regulation E s limited liability and error resolution requirements to all prepaid accounts - regardless of whether the bank has completed its consumer identification and verification process with respect to the account - but does not require provisional credit for unverified accounts; and Once a prepaid account has been verified, the bank generally may take longer than ten days to investigate and determine whether an error occurred only if it provisionally credits the consumer s account in the amount of the alleged error, minus a maximum of $50. Provisional Crediting (c)(2)(i) (C) [Note: Subject to Proposed Change] Banks can forego extending provisional credit to unverified accounts as part of the error resolution process and can take up to 45 days (or 90 days, where applicable) to investigate an error claim without provisionally crediting the account in the amount at issue for prepaid accounts with respect to which the bank has not completed its consumer identification and verification process. This provides an exception to (c)(2) which states that a bank must provide provisional credit if it takes longer than 10 business days to investigate and determine whether an error occurred. Bank does not have to provisionally credit a consumer s account if the alleged error involves a prepaid account for which the bank has not completed its consumer identification and verification process CCPG, LLC 68

69 Error Resolution CFPB Customer Liability Tables Small Entity Guide provides two (2) Tables that illustrate Customer Liability for Unauthorized EFTs: Attachment A is to be used when a bank provides periodic statements; and Attachment B, is to be used when the bank utilizes the alternative method. Investigation and Response Same as current Regulation E reasonable steps by the consumer and doesn t have to be reported to any particular bank employee; Consumer must identify account in question but doesn t need account number; Can report in writing, in person or via phone; Notice considered given when bank becomes aware of circumstances leading to a reasonable belief that an unauthorized EFT has been made; In lieu of applying liability limits in Table A and B, bank may limit customer liability to unauthorized EFTs reported by the consumer within 120 days after the EFT was credit or debited to the prepaid account; and If bank does choose the 120 day method, it can still disclose the error resolution time period set forth in Model A-7 or the summary of the consumer s liability in the initial disclosures 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 bank allows a consumer to assert a notice of error up to 120 days from the date of posting of the alleged error CCPG, LLC 69

70 Error Resolution Customer Identification and Verification Process Bank has not completed its consumer identification and verification process where it: Has not concluded its consumer identification and verification process, provided the bank has disclosed to the consumer the risks of not registering the account using a notice that is substantially similar to the model notice contained in paragraph (c) of appendix A-7 of this part. Has concluded its consumer identification and verification process, but could not verify the identity of the consumer, provided the bank has disclosed to the consumer the risks of not registering the account using a notice that is substantially similar to the model notice contained in paragraph (c) of appendix A-7 of this part; or Does not have a consumer identification and verification process by which the consumer can register the prepaid account. CIP Consumer identifying information may include the consumer s: Full name; Address; Date of birth; and Social Security number or other government-issued identification number. Note: A bank 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 2017 CCPG, LLC 70

71 Change in Terms Notices CIT CIT Notice will apply to Prepaid Accounts; Prepaid Rule expands the circumstances that may require a CIT Notice; and No CIT notice required solely to reflect a change in terms and conditions that apply to a covered separate credit feature or to reflect a change in the amount of a third-party fee (these changes can wait until the next scheduled update). Note: Fees charged by a service provider for a service performed on the part of the bank are not third-party fees. CIT Notice Required If Term or condition required to be disclosed in the initial disclosures (includes any information required in the long form) changes AND The change results in any of the following: o Increased fee for the consumer; o Increased liability; o Fewer Types of available EFTs; OR o Stricter Limits on the frequency or dollar amounts of EFTs. 12 CFR (a)(2). Regulation E requires a CIT Notice at least 21 days before the effective date of the change. If an immediate change in the terms or conditions is necessary to maintain or restore the security of a prepaid account or an EFT system, a bank does not need to give prior notice of the change. If the change is made permanent and disclosure would not jeopardize the security of the account or system, the bank must notify the consumer in writing of the change on or with the next regularly scheduled periodic statement or within 30 days of making the change permanent CCPG, LLC 71

72 Change in Terms Notices Access Device Cancellation Cancellation of an access device, such as a prepaid card, or the closing of some of an ATM does not require a change-in terms notice under Regulation. Form Must be provided in writing unless the bank complies with ESIGN; Must be in a form the consumer can keep and be clear and conspicuous; and Can be provided on a periodic statement or as a separate statement or in revised disclosures if the change is highlighted CCPG, LLC 72

73 Overdraft Credit Features Coverage The rule regulates overdraft credit features that are offered in connection with prepaid accounts; Generally, the Prepaid Rule requires such credit features to be structured as a separate credit subaccount or account (i.e., as a separate credit feature) distinct from the prepaid account s asset feature; BUT Permits credit to be accessed through a negative balance on a prepaid account s asset feature if certain conditions are met. Hybrid Prepaid Credit Card The Prepaid Rule adds the term hybrid prepaid-credit card to Regulation Z and applies specific requirements to hybrid prepaid-credit cards and separate credit features that are accessed by them; If a prepaid card can access credit through a separate credit feature, it might be a hybrid prepaid-credit card depending on who offers the credit, the circumstances under which the credit can be accessed and other conditions set forth in the Prepaid Rule; A separate credit feature accessed by a hybrid prepaid-credit card is called a covered separate credit feature ; Certain existing requirements in Regulation Z are applicable to hybrid-prepaid cards; Account is not a hybrid account if the related credit account is not held by the same issuer, affiliate or business partner; and Generally, a prepaid account issuer with a covered separate credit feature must provide the same account terms, conditions, and features to prepaid accounts without a covered separate credit feature in the same prepaid account program. Note: However, the issuer may impose higher fees or charges on a prepaid account with a covered separate credit feature CCPG, LLC 73

74 Overdraft Credit Features Definition of Credit Feature 12 CFR (a)(5)(iv) The Prepaid Rule defines credit feature as a separate credit account or a credit sub-account of a prepaid account through which credit can be extended in connection with a prepaid card, or a negative balance on the asset feature of a prepaid account through which credit can be extended in connection with a prepaid card. Prohibitions and Structure of Credit Sub- Account Structuring a credit feature that is accessible by a hybrid prepaidcredit card as a negative balance on the asset feature of a prepaid account. A credit feature that is accessible by a hybrid-prepaid card must be structured as a separate credit feature, either as a separate credit account or as a separate credit subaccount. If the separate credit feature is structured as a credit sub-account, the credit subaccount must be set up as a separate balance on the prepaid account such that there are at least two balances on the prepaid account the asset account balance and the credit account balance CCPG, LLC 74

75 Overdraft Credit Features Conditions for Offering Credit through Sub- Accounts Because the Prepaid Rule prohibits a negative balance on a prepaid account s asset feature from being accessible by a hybrid prepaid-credit card the following three conditions must be met to offer credit through a negative balance on the prepaid account s asset feature: Prepaid account issuer must have an established policy and practice of either: o Declining to authorize transactions where it reasonably believes the consumer has insufficient or unavailable funds in the prepaid account s asset feature to cover the transaction at the time it is authorized; or o Declining to authorize such transactions except when: amount of the transaction will not cause the asset feature balance to be negative by more than $10 at the time of the authorization; or the transaction is conducted when incoming deposits are pending and the transaction will not cause the prepaid account to be negative at the time of the authorization by more than the amount of the pending deposit. Note: These two circumstances are not mutually exclusive. For example, a prepaid account issuer could adopt the $10 purchase cushion and the delayed load cushion; Prepaid account issuer cannot charge credit-related fees on the prepaid account s asset feature; and Prepaid card cannot access credit from a covered separate credit feature. Note: Prepaid card cannot be used to access credit from both a negative balance on the prepaid account s asset feature and a covered separate credit feature. However, it could access credit from both a negative balance on the prepaid account s asset feature and a non-covered separate credit feature CCPG, LLC 75

76 CIP Interagency March 21, 2016 Guidance Guidance clarifies that a bank should apply its CIP to cardholders of CERTAIN prepaid accounts. Bank should have effective mitigating controls such as placing limits on card value, managing frequency and amount of transfers and due diligence on third party program managers and on customers. Bank must obtain information sufficient to form a reasonable belief regarding the identity of each customer opening a new account. Bank s CIP must include risk-based procedures for verifying its customers identities to the extent reasonable and practicable. In particular, the CIP rule requires banks to implement a CIP that includes certain minimum requirements. Third-Party Program Managers Guidance clarifies that certain prepaid cards issued by a bank should be subject to the bank s CIP, including when a bank issues prepaid cards under arrangements with third-party program managers that sell, distribute, promote, or market the prepaid cards issued by the bank. This may be the only relationship that the cardholder has with the bank. Third-party program manager is not the customer but instead is an agent of the bank. As with any other activity performed on behalf of the bank, the bank ultimately is responsible for compliance with the requirements of the bank s CIP rule as performed by that agent or other contracted third party CCPG, LLC 76

77 CIP Contracts with Third-Party Program Managers Issuing bank should enter into well-constructed, enforceable contracts with third-party program managers that clearly define the expectations, duties, rights, and obligations of each party in a manner consistent with the interagency guidance. More information on this can be found in the FFIEC Information Technology Examination Handbook: Outsourcing Technology Booklet A contract should, at a minimum: Outline CIP obligations of the parties; Ensure the right of the issuing bank to transfer, store, or otherwise obtain immediate access to all CIP information collected by the third-party program manager on cardholders; Provide for the issuing bank s right to audit the third-party program manager and to monitor its performance (generally, banks need to ensure that periodic independent internal and external audits are conducted to ensure prudent operations and compliance with applicable laws and regulations); and If applicable, indicate that, pursuant to the Bank Service Company Act (BSCA) or other appropriate legal authority, the relevant regulatory body has the right to examine the third-party program manager CCPG, LLC 77

78 CIP Most Important Step In order to determine if CIP requirements apply to purchasers of prepaid cards, the bank should first determine whether the issuance of a prepaid card to a purchaser results in the creation of an account; and if so, ascertain the identity of the bank s customer; This determination depends on the functionalities of the prepaid card issued; and For purposes of the CIP rule, prepaid cards that provide a cardholder with the ability to reload funds or access to credit or overdraft features should be treated as accounts. General Purpose Cards The Agencies believe that issuing a general purpose prepaid card with features such as reloading by the cardholder or another party on behalf of the cardholder creates a formal banking relationship and is equivalent to opening an account for purposes of the CIP rule. Conversely, the issuance of a general purpose prepaid card that, under the program s terms, cannot be reloaded by a cardholder or another party on behalf of the cardholder, does not establish an account for CIP purposes as these cards do not bear the characteristics of a typical deposit, transaction, or asset account because they do not permit the cardholder or other party on behalf of the cardholder to reload funds CCPG, LLC 78

79 CIP Credit or Overdraft Features General purpose prepaid cards that permit withdrawals in excess of the card balance and/or also provide the cardholder with access to an overdraft line or an established line of credit similar to a lender/borrower or credit card relationship are of concern. Any product that allows either functionality constitutes a formal banking relationship with the issuing bank and is an account for purposes of the CIP rule. An account is not established until a reload, credit, or overdraft feature is activated by cardholder registration Verification CIP rule requires bank to verify the identity of the named accountholder. When a general purpose prepaid card issued by a bank allows the cardholder to conduct transactions evidencing a formal banking relationship, such as by adding monetary value or accessing credit, the cardholder should be considered to have established an account with the bank for purposes of the CIP rule. The cardholder should be treated as the bank s customer for purposes of the CIP rule, even if the cardholder is not the named accountholder, but has obtained the card from an intermediary who uses a pooled account with the bank to fund bank-issued cards CCPG, LLC 79

80 Appendix A A-10(C) MODEL FORM FOR SHORT FORM DISCLOSURES FOR PREPAID ACCOUNTS, EXAMPLE CCPG, LLC 80

81 Appendix B A-10(D) MODEL FORM FOR SHORT FORM DISCLOSURES FOR PREPAID ACCOUNTS, EXAMPLE CCPG, LLC 81

82 Appendix C A-10(E) MODEL FORM FOR SHORT FORM DISCLOSURES FOR PREPAID ACCOUNTS WITH MULTIPLE SERVICE PLANS ( (B)(2), (3), (6), AND (7)) 2017 CCPG, LLC 82

83 Appendix D Long Form 2017 CCPG, LLC 83

84 Appendix E Long Form (continued) 2017 CCPG, LLC 84