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U.S. financial bureau weighs further changes to prepaid card rule
June 15, 2017 / 9:01 PM / 6 months ago

U.S. financial bureau weighs further changes to prepaid card rule

WASHINGTON, June 15 (Reuters) - The U.S. consumer financial watchdog is looking into adjusting its rule on the prepaid cards often found in racks at grocery stores to address industry concerns and make it safer to use digital versions of the cards.

The agency, the Consumer Financial Protection Bureau (CFPB), also said on Thursday it is considering further postponing the rule’s effective date, when companies must fully comply with its requirements, after delaying it in April for six months.

The CFPB, which is charged with protecting individuals against fraud, late last year, after two years of drafting work, issued the rule for an industry projected to reach $112 billion in 2018. It requires greater disclosures and overdraft limits for cards sold by companies such as Mastercard Inc and Greendot.

Recent feedback, though, led the CFPB to consider making adjustments, said its director, Richard Cordray, in a statement.

In one adjustment, customers would have to register accounts in order to receive full protections against fraud and errors. Some companies said they would have trouble giving those benefits to unregistered accounts.

In the other, protections would be extended to digital wallets on smartphones that can link to prepaid accounts.

The rule faced criticism in Congress, where Republican Senator David Perdue of Georgia proposed repealing it earlier this year. Perdue said his objections stem from his belief the CFPB has too much power.

Some rule critics also say it is too detailed and costly to implement.

The CFPB’s suggested adjustments came up during the repeal debate, said Thaddeaus King, a director in the Pew Charitable Trusts consumer finance project.

“We’re hopeful that this is the extent of what the bureau does,” he said, adding consumer advocates would primarily object to changes allowing new overdraft fees and practices.

Meanwhile, industry is seeking more adjustments.

“We remain hopeful that the CFPB will continue to consider additional changes in the final rule,” said Brian Tate, vice president of government affairs at the Network Branded Prepaid Card Association, including limiting the definition of prepaid account, revising disclosure requirements and extending the implementation timeline.

Karl Frisch, executive director of Allied Progress, a liberal group supporting the rule, said the adjustments show the bureau is willing “to listen to all stakeholders - industry, consumer groups, and others - in an effort to produce the best protections possible.” (Editing by Steve Orlofsky)

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