[Federal Register Volume 83, Number 30 (Tuesday, February 13, 2018)]
[Rules and Regulations]
[Pages 6364-6449]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01305]



[[Page 6363]]

Vol. 83

Tuesday,

No. 30

February 13, 2018

Part III





Bureau of Consumer Financial Protection





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12 CFR Parts 1005 and 1026





 Rules Concerning Prepaid Accounts Under the Electronic Fund Transfer 
Act (Regulation E) and the Truth in Lending Act (Regulation Z); Final 
Rule

  Federal Register / Vol. 83 , No. 30 / Tuesday, February 13, 2018 / 
Rules and Regulations  

[[Page 6364]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Parts 1005 and 1026

[Docket No. CFPB-2017-0015]
RIN 3170-AA72


Rules Concerning Prepaid Accounts Under the Electronic Fund 
Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule; official interpretation; delay of effective date.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending Regulation E, which implements the Electronic Fund Transfer 
Act, and Regulation Z, which implements the Truth in Lending Act, and 
the official interpretations to those regulations. This rulemaking 
relates to a final rule published in the Federal Register on November 
22, 2016, as amended on April 25, 2017, regarding prepaid accounts 
under Regulations E and Z. The Bureau is finalizing modifications to 
several aspects of that rule, including with respect to error 
resolution and limitations on liability for prepaid accounts where the 
financial institution has not successfully completed its consumer 
identification and verification process; application of the rule's 
credit-related provisions to digital wallets that are capable of 
storing funds; certain other clarifications and minor adjustments; 
technical corrections; and an extension of the overall effective date 
to April 1, 2019.

DATES: The amendments in this final rule are effective on April 1, 
2019. The effective date of the final rule published on November 22, 
2016 (81 FR 83934), as delayed on April 25, 2017 (82 FR 18975), is 
further delayed from April 1, 2018 to April 1, 2019. The effective date 
of the final rule published on April 25, 2017 (82 FR 18975), is delayed 
from April 1, 2018 to April 1, 2019. The effective date for the 
addition of Sec.  1005.19(b), published on November 22, 2016 (81 FR 
83934), as confirmed on April 25, 2017 (82 FR 18975), is delayed from 
October 1, 2018 to April 1, 2019.

FOR FURTHER INFORMATION CONTACT: Yaritza Velez, Counsel, and Kristine 
M. Andreassen, Krista Ayoub, and Thomas L. Devlin, Senior Counsels, 
Office of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Final Rule

    The Bureau is finalizing amendments to its 2016 rule that created 
comprehensive consumer protections for prepaid accounts under 
Regulation E, which implements the Electronic Fund Transfer Act 
(EFTA),\1\ and Regulation Z, which implements the Truth in Lending Act 
(TILA) \2\ (2016 Final Rule).\3\ Through its efforts to support 
industry implementation of the 2016 Final Rule, the Bureau learned that 
some industry participants believed that they would have difficulty 
complying with certain provisions of the 2016 Final Rule that would 
have gone into effect on October 1, 2017. To facilitate compliance, 
after notice and comment, the Bureau extended the general effective 
date of the 2016 Final Rule to April 1, 2018 (2017 Effective Date 
Proposal and 2017 Effective Date Final Rule, respectively).\4\ The 2016 
Final Rule, as amended by the 2017 Effective Date Final Rule, is 
referred to herein as the Prepaid Accounts Rule.
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    \1\ 15 U.S.C. 1693 et seq.
    \2\ 15 U.S.C. 1601 et seq.
    \3\ The 2016 Final Rule was released by the Bureau on October 5, 
2016 and subsequently published in the Federal Register. 81 FR 83934 
(Nov. 22, 2016).
    \4\ 82 FR 13782 (Mar. 15, 2017); 82 FR 18975 (Apr. 25, 2017).
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    Based on feedback received by the Bureau through its outreach 
efforts to industry regarding implementation of the 2016 Final Rule as 
well as in comments received on the 2017 Effective Date Proposal, the 
Bureau proposed to amend several provisions of the 2016 Final Rule 
(June 2017 Proposal).\5\ After reviewing comments received on the 
proposal, the Bureau is finalizing the June 2017 Proposal generally as 
proposed, with certain modifications, as discussed below. These 
revisions to the Prepaid Accounts Rule are intended to address, in 
part, certain issues that were unanticipated by commenters on the 
notice of proposed rulemaking that led to the 2016 Final Rule (2014 
Proposal),\6\ and are intended to facilitate compliance and relieve 
burden on those issues. In particular, the Bureau is:
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    \5\ 82 FR 29630 (June 29, 2017).
    \6\ The Bureau released its proposal regarding prepaid accounts 
under Regulations E and Z, including model and sample disclosure 
forms, for public comment on November 13, 2014. 79 FR 77102 (Dec. 
23, 2014). The Bureau had previously issued an advance notice of 
proposed rulemaking that posed a series of questions for public 
comment about how the Bureau might consider regulating general 
purpose reloadable cards and other prepaid products. 77 FR 30923 
(May 24, 2012).
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     Revising the error resolution and limited liability 
provisions of the Prepaid Accounts Rule in Regulation E to provide that 
financial institutions are not required to resolve errors or limit 
consumers' liability on unverified prepaid accounts. For accounts where 
the consumer's identity is later verified, financial institutions are 
not required to limit liability and resolve errors with regard to 
disputed transactions that occurred prior to verification.
     Creating a limited exception to the credit-related 
provisions of the Prepaid Accounts Rule in Regulation Z for certain 
business arrangements between prepaid account issuers and credit card 
issuers that offer traditional credit card products. This exception is 
designed to address certain complications in applying the credit 
provisions of the Prepaid Accounts Rule to credit card accounts linked 
to digital wallets that can store funds where the credit card accounts 
are already subject to Regulation Z's open-end credit card rules in 
circumstances that appear to pose lower risks to consumers. This final 
rule also expands the situations in which prepaid account issuers are 
permitted to run negative balances on prepaid accounts, provided 
certain conditions are met.
     Extending the overall effective date of the Prepaid 
Accounts Rule to April 1, 2019.
     Making clarifications or minor adjustments to provisions 
of the Prepaid Accounts Rule in Regulation E related to an exclusion 
from the definition of prepaid account, unsolicited issuance of access 
devices, several aspects of the rule's pre-acquisition disclosure 
requirements, and submission of prepaid account agreements to the 
Bureau.
     Making technical corrections to certain provisions of the 
Prepaid Accounts Rule in both Regulations E and Z.
    Due to recent changes in requirements by the Office of the Federal 
Register, when amending commentary the Bureau is now required to 
reprint certain subsections being amended in their entirety rather than 
providing more targeted amendatory instructions. The length of the 
commentary in this final rule thus appears much longer than what was 
included in the June 2017 Proposal. The Bureau is releasing an 
unofficial, informal redline to assist industry and other stakeholders 
in reviewing the changes that this final rule is making to the Prepaid 
Accounts Rule.\7\
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    \7\ This redline can be found on the Bureau's regulatory 
implementation page for the Prepaid Accounts Rule, at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/prepaid-rule/. If any conflicts exist between the redline 
and the text of the 2016 Final Rule, the 2017 Effective Date Final 
Rule, or this final rule, the rules themselves, as published in the 
Federal Register, are the controlling documents.

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[[Page 6365]]

II. Background

    In the 2016 Final Rule, the Bureau extended Regulation E coverage 
to prepaid accounts and adopted provisions specific to such accounts, 
and generally expanded Regulation Z's coverage to overdraft features 
that may be offered in conjunction with prepaid accounts. Upon issuing 
the 2016 Final Rule, the Bureau initiated robust efforts to support 
industry implementation.\8\ Information regarding the Bureau's Prepaid 
Accounts Rule implementation initiatives and available resources can be 
found on the Bureau's regulatory implementation website at https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/prepaid-rule/.
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    \8\ These ongoing efforts include: (1) The publication of a 
plain-language small entity compliance guide to help industry 
understand the Prepaid Accounts Rule; (2) the publication of various 
other implementation tools regarding the Prepaid Accounts Rule, 
including an executive summary of the rule, summaries of key changes 
for payroll card accounts and government benefit accounts, a prepaid 
account coverage chart, a summary of the rule's effective date 
provisions, and a guide to preparing the short form disclosure; (3) 
the release of native design files for print and source code for 
web-based disclosures for all of the model and sample disclosure 
forms included in the Prepaid Accounts Rule; (4) meetings with 
industry, including trade associations and individual industry 
participants, to discuss and support their implementation efforts; 
and (5) participation in conferences and forums. The Bureau is 
releasing new and updated implementation materials in connection 
with this final rule.
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    In the course of the Bureau's work to help industry implement the 
2016 Final Rule, some industry participants raised concerns about what 
they described as unanticipated complexities arising from the 
interaction of certain aspects of the rule with certain business models 
and practices, including those newly adopted, that industry 
participants did not fully address in their comment letters on the 2014 
Proposal. They indicated that these issues could complicate 
implementation and affect consumers.
    In light of these concerns, on March 9, 2017, the Bureau released 
the 2017 Effective Date Proposal with a request for comment.\9\ In that 
proposal, the Bureau proposed to delay the general effective date of 
the 2016 Final Rule by six months, to April 1, 2018. While the Bureau 
did not propose in the 2017 Effective Date Proposal to amend any other 
substantive provisions of the 2016 Final Rule, many commenters 
nonetheless advocated for retaining, modifying, or eliminating various 
provisions of the 2016 Final Rule. These comments are discussed in the 
section-by-section analyses in part V, where relevant.
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    \9\ 82 FR 13782 (Mar. 15, 2017).
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    On April 20, 2017, the Bureau released the 2017 Effective Date 
Final Rule, which delayed the general effective date of the 2016 Final 
Rule until April 1, 2018.\10\ The Bureau indicated in that notice that 
it intended to seek comment on targeted substantive issues raised both 
through the Bureau's outreach efforts to industry regarding 
implementation and in comments received on the 2017 Effective Date 
Proposal.
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    \10\ 82 FR 18975 (Apr. 25, 2017). The 2017 Effective Date Final 
Rule did not delay the October 1, 2018 effective date of the 
requirement to submit prepaid account agreements to the Bureau in 
Regulation E Sec.  1005.19(f)(2).
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    The Bureau subsequently proposed to amend several provisions of the 
2016 Final Rule via the June 2017 Proposal. After reviewing public 
comments received on the proposal, the Bureau is finalizing the June 
2017 Proposal generally as proposed, with certain modifications, as 
discussed below.

III. Summary of the Rulemaking Process

A. The June 2017 Proposal

    In the June 2017 Proposal, the Bureau proposed to amend several 
provisions of the 2016 Final Rule, largely based on feedback received 
by the Bureau through its outreach efforts to industry regarding 
implementation of the 2016 Final Rule as well as in comments received 
on the 2017 Effective Date Proposal. In particular, the proposed rule 
would have: Revised the error resolution and limited liability 
provisions of the Prepaid Accounts Rule with respect to unverified 
accounts; created a limited exception to the credit-related provisions 
of the 2016 Final Rule in Regulation Z for certain business 
arrangements between prepaid account issuers and credit card issuers 
that offer traditional credit card products; and made clarifications or 
minor adjustments to several provisions of the 2016 Final Rule. The 
contents of the June 2017 Proposal are discussed in detail in the 
section-by-section analysis in part V below.
    The Bureau also solicited comment on whether a further delay of the 
rule's effective date would be necessary and appropriate in light of 
the proposed amendments, and whether a specific provision addressing 
early compliance would be necessary and appropriate.

B. Feedback Provided to the Bureau

    The comment period for the June 2017 Proposal closed on August 14, 
2017. The Bureau received 32 comment letters from consumer advocacy 
groups; national and regional trade associations; members of the 
prepaid industry, including issuing banks and credit unions, program 
managers, and a digital wallet provider; a think tank; and several 
anonymous commenters. The Bureau also considered comments received 
after the comment period closed, via several ex parte meetings and 
other communications.\11\ Materials on the record, including summaries 
of ex parte communications, are publicly available at http://www.regulations.gov. Relevant information received is discussed below 
in the section-by-section analysis and subsequent parts of this notice, 
as applicable. The Bureau considered all the comments it received 
regarding the proposal, made certain modifications, and is adopting 
this final rule as described in parts V and VI below.
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    \11\ The Bureau's Policy on Ex Parte Presentations in Rulemaking 
Proceedings is available at 82 FR 18687 (Apr. 21, 2017).
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    In addition to the comments summarized in the section-by-section 
analysis in part V below, many commenters raised other issues that were 
beyond the scope of what the Bureau proposed. These comments argued for 
the Bureau to take a number of actions, including: Refining or limiting 
the scope of the definition of ``prepaid account'' (for example, to 
clarify the treatment of so-called ``checkless checking'' accounts or 
to exempt digital wallets from coverage under the rule); making changes 
to, or exempting certain prepaid accounts from, the requirement to 
provide certain disclosures (such as the long form, short form, and/or 
oral disclosures, in various circumstances); either expanding or 
reducing the scope of Regulation E's compulsory use prohibition; 
eliminating the requirement that issuers submit their prepaid account 
agreements to the Bureau or modifying the general timeframe for 
agreement submissions; exempting credit unions from coverage under the 
rule; generally not imposing additional requirements or price caps on 
prepaid accounts; and rescinding the rule entirely. Other commenters 
provided more general feedback to the Bureau, offering suggestions 
about how the Bureau could improve both its rulemaking and regulatory 
implementation processes, both in general and in particular with 
respect to the Prepaid Accounts Rule. The Bureau will continue its 
outreach to industry and other stakeholders to understand their 
experiences in implementing the Prepaid Accounts Rule and welcomes

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feedback regarding its rulemaking and regulatory implementation 
processes more generally.

IV. Legal Authority

    The Bureau is exercising its rulemaking authority pursuant to EFTA 
section 904(a) and (c), sections 1022(b) and 1032(a) of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),\12\ 
and TILA section 105(a) to amend provisions of Regulations E and Z 
affected by the Prepaid Accounts Rule, as discussed in this part IV and 
throughout the section-by-section analysis in part V below.
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    \12\ Public Law 111-203, section 1084, 124 Stat. 2081 (2010) 
(codified at 15 U.S.C. 1693a et seq.).
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    The legal authority for the 2016 Final Rule is described in detail 
in that rule's SUPPLEMENTARY INFORMATION.\13\ As amended by the Dodd-
Frank Act, EFTA section 904(a) and (c) \14\ authorizes the Bureau to 
prescribe regulations to carry out the purposes of EFTA and provides 
that such regulations may contain such classifications, 
differentiations, or other provisions, and may provide for such 
adjustments and exceptions, for any class of electronic fund transfers 
(EFTs) or remittance transfers as in the judgment of the Bureau are 
necessary or proper to effectuate the purposes of EFTA, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.\15\ As amended by the Dodd-Frank Act, TILA section 105(a) 
\16\ directs the Bureau to prescribe regulations to carry out the 
purposes of TILA and provides that such regulations may contain such 
additional requirements, classifications, differentiations, or other 
provisions, and may provide for such adjustments and exceptions for all 
or any class of transactions as in the judgment of the Bureau are 
necessary or proper to effectuate the purposes of TILA, to prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.\17\ \18\
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    \13\ See, e.g., 81 FR 83934, 83958-60 (Nov. 22, 2016). The legal 
authority for the 2017 Effective Date Final Rule is described in 
that rule's Supplementary Information. 82 FR 18975, 18978 (Apr. 25, 
2017).
    \14\ 15 U.S.C. 1693b(a) and (c).
    \15\ EFTA section 902 establishes that the purpose of the 
statute is to provide a basic framework establishing the rights, 
liabilities, and responsibilities of participants in electronic fund 
and remittance transfer systems but that its primary objective is 
the provision of individual consumer rights. 15 U.S.C. 1693.
    \16\ 15 U.S.C. 1604(a).
    \17\ Pursuant to TILA section 102(a), a purpose of TILA is ``to 
assure a meaningful disclosure of credit terms so that the consumer 
will be able to compare more readily the various credit terms 
available to him and avoid the uninformed use of credit.'' 15 U.S.C. 
1601(a). Moreover, this stated purpose is tied to Congress' finding 
that ``economic stabilization would be enhanced and the competition 
among the various financial institutions and other firms engaged in 
the extension of consumer credit would be strengthened by the 
informed use of credit[.]'' Id.
    \18\ TILA section 105(d) generally provides that a regulation 
requiring any disclosure that differs from the disclosures 
previously required by parts A, D, or E of TILA shall have an 
effective date ``of that October 1 which follows by at least six 
months the date of promulgation.'' Section 105(d) further provides 
that the Bureau ``may at its discretion take interim action by 
regulation, amendment, or interpretation to lengthen the period of 
time permitted for creditors or lessors to adjust their forms to 
accommodate new requirements.'' As it did in the 2017 Effective Date 
Final Rule, the Bureau is exercising its discretion under TILA 
section 105(d) to lengthen the period to April 1, 2019. The Bureau 
believes that the changes the Prepaid Accounts Rule will require to 
disclosures pursuant to Regulation Z warrant a delayed effective 
date that conforms to the rest of the rule.
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    Section 1032(a) of the Dodd-Frank Act \19\ provides that the Bureau 
may prescribe rules to ensure that the features of any consumer 
financial product or service, both initially and over the term of the 
product or service, are fully, accurately, and effectively disclosed to 
consumers in a manner that permits consumers to understand the costs, 
benefits, and risks associated with the product or service, in light of 
the facts and circumstances. Additionally, under section 1022(b)(1) of 
the Dodd-Frank Act,\20\ the Bureau has general authority to prescribe 
rules as may be necessary or appropriate to enable the Bureau to 
administer and carry out the purposes and objectives of the Federal 
consumer financial laws, and to prevent evasions thereof. EFTA, TILA, 
and title X of the Dodd-Frank Act are Federal consumer financial laws. 
Accordingly, in finalizing this rule, the Bureau is exercising its 
authority under Dodd-Frank Act section 1022(b) \21\ to prescribe rules 
under EFTA, TILA, and title X of the Dodd-Frank Act that carry out the 
purposes and objectives and prevent evasion of those laws. Section 
1022(b)(2) of the Dodd-Frank Act \22\ prescribes certain standards for 
rulemaking that the Bureau must follow in exercising its authority 
under section 1022(b)(1).
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    \19\ 12 U.S.C. 5532(a).
    \20\ 12 U.S.C. 5512(b)(1).
    \21\ 12 U.S.C. 5512(b).
    \22\ 12 U.S.C. 5512(b)(2).
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V. Section-by-Section Analysis

A. Overview of the Amendments to Regulations E and Z

    As discussed above, the Prepaid Accounts Rule amended Regulation E, 
which implements EFTA, and Regulation Z, which implements TILA, along 
with the official interpretations thereto. Based on feedback received 
by the Bureau through its outreach efforts to industry regarding 
implementation as well as in comments received on the 2017 Effective 
Date Proposal, and following notice and comment on the June 2017 
Proposal, the Bureau is amending several provisions of the Prepaid 
Accounts Rule. This overview provides a summary of the amendments; each 
amendment, along with its rationale, is discussed in detail in the 
section-by-section analyses that follow.
    Error resolution and limited liability. The Bureau is amending 
Regulation E Sec. Sec.  1005.11(c)(2)(i), 1005.18(d)(1)(ii) and (e)(3), 
comments 18(e)-4 through 6, and appendix A-7(c) to provide that 
Regulation E's error resolution and limited liability requirements do 
not extend to prepaid accounts that have not successfully completed the 
financial institution's consumer identification and verification 
process (i.e., accounts that have not concluded the process, accounts 
where the process is concluded but the consumer's identity could not be 
verified, and accounts in programs for which there is no such process). 
For accounts where the consumer's identity is later verified, financial 
institutions are not required to resolve errors and limit liability 
with regard to disputed transactions that occurred prior to 
verification. The Bureau is also making related changes to model 
disclosure language. In addition, the Bureau is requiring that, for 
accounts in programs where there is no verification process, financial 
institutions either explain in their initial disclosures their error 
resolution process and limitations on consumers' liability for 
unauthorized transfers, or explain that there are no such protections, 
and that such institutions comply with the process (if any) that they 
disclose.
    Credit card accounts linked to prepaid accounts. The Bureau is 
creating a limited exception to the credit-related provisions of the 
Prepaid Accounts Rule in Regulation Z for certain business arrangements 
between prepaid account issuers and credit card issuers that offer 
traditional credit card products. This exception is designed to address 
certain complications in applying the credit provisions of the Prepaid 
Accounts Rule to credit card accounts linked to digital wallets that 
can store funds where the credit card accounts are already subject to 
Regulation Z's open-end credit card rules in circumstances that appear 
to pose lower risks to consumers.
    Specifically, the Bureau is amending the definition of ``business 
partner'' in Sec.  1026.61(a)(5)(iii) and related commentary to exclude 
business arrangements between prepaid account issuers and issuers of 
traditional credit

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cards from coverage under the Prepaid Accounts Rule's tailored 
provisions applicable to hybrid prepaid-credit cards if certain 
conditions are satisfied. The exclusion applies only to traditional 
credit card accounts that are linked to a prepaid account. In order to 
qualify for the exclusion, certain conditions must be satisfied, 
including that the parties cannot allow the prepaid card to access 
credit from the credit card account in the course of a transaction with 
the prepaid card unless the consumer has submitted a written request to 
authorize linking the two accounts that is separately signed or 
initialized, cannot condition the acquisition or retention of either 
account on whether the consumer authorizes such a linkage, and do not 
vary certain terms and conditions based on whether the two accounts are 
linked. Under this exception, the linked credit card account will still 
receive the protections in Regulation Z that generally apply to a 
credit card account under an open-end (not home-secured) consumer 
credit plan, but the tailored provisions in the Prepaid Accounts Rule 
for hybrid prepaid-credit cards will not apply.
    Negative balances on prepaid accounts. The Bureau is making changes 
to Regulation Z to address certain complications related to prohibiting 
negative balances on digital wallets that are prepaid accounts when a 
covered separate credit feature offered by a business partner is 
attached to the digital wallet. Specifically, the Bureau is expanding 
the exception in Sec.  1026.61(a)(4) that allows prepaid account 
issuers to provide certain incidental forms of credit structured as a 
negative balance on the asset feature of prepaid accounts without 
triggering Regulation Z and the other protections for hybrid prepaid-
credit cards. Prior to this final rule, the exception only applied 
where (1) the prepaid card cannot access credit from a covered separate 
credit feature accessible by a hybrid prepaid-credit card; (2) the 
prepaid account issuer has a general policy and practice of declining 
transactions that will take the account negative (at least outside of 
the situations involving incidental credit); and (3) the prepaid 
account issuer generally does not charge credit-related fees. The 
Bureau is amending Sec.  1026.61(a)(4) to allow a prepaid account 
issuer to take advantage of the exception in Sec.  1026.61(a)(4) with 
respect to the negative balance even if a covered separate credit 
feature offered by a business partner is attached to the prepaid 
account so long as the other prerequisites contained in Sec.  
1026.61(a)(4) are satisfied. The Bureau is also making modifications to 
Sec.  1026.61(a)(1)(iii) and (a)(3)(ii) and the commentary accompanying 
Sec.  1026.61(a)(3) and (4) related to this change, as well as 
modifications to certain commentary elsewhere in Regulation Z for 
consistency with this change to Sec.  1026.61(a)(4).
    Effective date. The Bureau is extending by an additional 12 months 
the general effective date of the Prepaid Accounts Rule, to April 1, 
2019. The Bureau is also extending the effective date for the agreement 
submission requirement in Sec.  1005.19(b) to April 1, 2019. The Bureau 
is making conforming changes to Sec. Sec.  1005.18(b)(2)(ix)(D), (h), 
and 1005.19(f) and the commentary accompanying Sec.  
1005.18(b)(2)(ix)(D) and (E), and (h), and removing the commentary that 
accompanied Sec.  1005.19(f), to reflect the effective date change and 
the alignment of the general effective date with the effective date of 
the agreement submission requirement.
    Exclusion from coverage for certain loyalty, award, or promotional 
gift cards. The revisions to Regulation E Sec.  1005.2(b)(3)(ii)(D)(3) 
and new comment 2(b)(3)(ii)-4 clarify that the exclusion from the 
Prepaid Accounts Rule for loyalty, award, or promotional gift cards 
applies both to such products as defined in Sec.  1005.20(a)(4) as well 
as those that satisfy the criteria in Sec.  1005.20(a)(4)(i) and (ii) 
and are excluded from Sec.  1005.20 pursuant to Sec.  1005.20(b)(4) 
because they are not marketed to the general public.
    Unsolicited issuance of access devices and pre-acquisition 
disclosures for prepaid accounts without consumer choice. The revisions 
to comment 18(a)-1 and to Sec.  1005.18(b)(1)(i) and comment 
18(b)(1)(i)-1 clarify how the provisions regarding unsolicited issuance 
of access devices and the timing of pre-acquisition disclosures apply 
to prepaid products where a financial institution or third party making 
a disbursement via a prepaid account does not offer any alternative 
means for a consumer to receive the funds.
    Pre-acquisition disclosures. Several provisions in this final rule 
provide additional clarity and flexibility with respect to the Prepaid 
Accounts Rule's pre-acquisition disclosure requirements. The revisions 
to Sec.  1005.18(b)(1)(ii)(D) and comment 18(b)(1)(ii)-4 allow 
financial institutions offering prepaid accounts that qualify for the 
retail location exception in Sec.  1005.18(b)(1)(ii) to satisfy the 
requirement that they provide the long form disclosure after 
acquisition by allowing the long form disclosure to be delivered 
electronically without receiving consumer consent under the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act),\23\ if it 
is not provided inside the prepaid account packaging material and the 
financial institution is not otherwise mailing or delivering to the 
consumer written account-related communications within 30 days of 
obtaining the consumer's contact information. Revisions to Sec.  
1005.18(b)(6)(i)(B) and (C) and comment 18(b)(6)(i)(B)-1 and new 
comment 18(b)(6)(i)-1 (formerly comment 18(b)(1)(iii)-2) clarify that 
if a financial institution provides pre-acquisition disclosures in 
writing and a consumer subsequently completes the acquisition process 
online or by telephone, the financial institution need not provide the 
disclosures again electronically or orally. The revisions to Sec.  
1005.18(b)(2)(ix)(C) and comment 18(b)(2)(ix)(C)-1.ii provide prepaid 
account issuers additional flexibility in disclosing additional fee 
types on the short form. Specifically, they permit financial 
institutions disclosing additional fee types with three or more fee 
variations to consolidate those variations into two categories and 
allow those two categories to be disclosed on the short form.
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    \23\ 15 U.S.C. 7001 et seq.
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    Section 1005.18(b)(9)(i)(C) requires a financial institution to 
provide pre-acquisition disclosures in a foreign language if the 
financial institution provides a means for the consumer to acquire a 
prepaid account by telephone or electronically principally in that 
foreign language. The Bureau is amending Sec.  1005.18(b)(9)(i)(C), 
adding new comment 18(b)(9)-1.ii.D, and making conforming changes in 
comments 18(b)(9)-1.i.E and ii.B to provide that foreign language 
disclosures are not required for payroll card accounts and government 
benefit accounts where the foreign language is offered by telephone 
only via a real-time language interpretation service provided by a 
third party, or directly by an employer or government agency on an 
informal or ad hoc basis as an accommodation to prospective payroll 
card account or government benefit account recipients.
    Submission of prepaid account agreements. The Bureau is making 
several changes to the rules governing submission of prepaid account 
agreements to the Bureau in Sec.  1005.19. The revisions to Sec.  
1005.19(b)(2) and comment 19(a)(2)-1.vii, and new comment 19(b)(2)-2, 
allow prepaid account issuers to delay submitting a change in the list 
of names of other

[[Page 6368]]

relevant parties to a particular prepaid account agreement (such as 
employers for a payroll card agreement) until the earlier of such time 
as the issuer is submitting other changes to the Bureau or May 1 of 
each year (for any updates through April 1 that have not previously 
been submitted). The revisions to Sec.  1005.19(b)(6)(ii) and (iii) and 
comment 19(b)(6)-3 permit short form and long form disclosures to be 
provided to the Bureau as separate addenda to the agreement, rather 
than integrated into the agreement or as a single addendum. The Bureau 
is also making changes in conformance with these revisions elsewhere in 
Sec.  1005.19 and related commentary.
    Technical corrections. The Bureau is making technical corrections 
in Regulations E and Z, such as correcting typographical errors, 
editing text for consistency, and making similar minor changes to 
various provisions of the Prepaid Accounts Rule, which are not intended 
to change the meaning of the Prepaid Accounts Rule.
Regulation E
Subpart A--General
Section 1005.2 Definitions
2(b) Account
2(b)(3) Prepaid Account
2(b)(3)(ii)
2(b)(3)(ii)(D)
    In the 2016 Final Rule, the Bureau extended Regulation E coverage 
to prepaid accounts by creating a new defined term--``prepaid 
account''--in Sec.  1005.2(b)(3) as a subcategory of the definition of 
``account'' in Sec.  1005.2(b)(1). The definition of prepaid account in 
Sec.  1005.2(b)(3) covers a range of products including general purpose 
reloadable (GPR) cards, as well as other products such as certain non-
reloadable accounts and digital wallets. It also contains several 
exclusions from the definition of prepaid account, including for gift 
certificates; store gift cards; loyalty, award, or promotional gift 
cards; and general-use prepaid cards that are both marketed and labeled 
as gift cards or gift certificates, all of which are subject to a 
separate set of requirements under 2009 legislation and implementing 
regulations.\24\ The exclusion for loyalty, award, or promotional gift 
cards refers to such products as defined in Sec.  1005.20(a)(4) and 
(b).\25\ Section 1005.20(a)(4) defines the term ``loyalty, award, or 
promotional gift card'' as a card, code, or other device that is issued 
on a prepaid basis primarily for personal, family, or household 
purposes to a consumer in connection with a loyalty, award, or 
promotional program; is redeemable upon presentation at one or more 
merchants for goods or services, or usable at automated teller 
machines; and sets forth certain disclosures, as applicable, indicating 
that it is issued for loyalty, award, or promotional purposes and 
setting forth its expiration date as well as the amount of any fees and 
the conditions under which they may be imposed. Section 1005.20(b) 
lists the exclusions from coverage under the Gift Card Rule, one of 
which is for loyalty, award, or promotional gift cards.\26\
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    \24\ Sec.  1005.2(b)(3)(ii)(D). The exclusions in Sec.  
1005.2(b)(3)(ii)(D) each reference specific provisions in Sec.  
1005.20, which houses the Board's 2010 rule implementing certain 
sections of the Credit Card Accountability Responsibility and 
Disclosure Act of 2009 (Pub. L. 111-24, 123 Stat. 1734 (2009) 
(Credit CARD Act)) applicable to gift cards, gift certificates, and 
certain types of general-use prepaid cards that are marketed or 
labeled as gift cards (Gift Card Rule). For products marketed and 
sold as gift cards (and that satisfy certain other conditions), the 
Gift Card Rule requires certain disclosures, limits the imposition 
of certain fees, and contains other restrictions. The Gift Card Rule 
is distinct from the rest of subpart A of Regulation E, however, and 
does not provide consumers who use gift cards with the other 
substantive protections of Regulation E, such as error resolution 
and limited liability protections or periodic statements.
    \25\ Sec.  1005.2(b)(3)(ii)(D)(3).
    \26\ Sec.  1005.20(b)(3).
---------------------------------------------------------------------------

    The Bureau explained in the 2016 Final Rule its reasoning for 
excluding gift certificates, store gift cards, and general-use prepaid 
cards that are both marketed and labeled as gift cards or gift 
certificates from the definition of prepaid account. Specifically, the 
Bureau stated that, after considering the comments on the 2014 
Proposal, it remained convinced that subjecting this general category 
of products to both the Gift Card Rule and the requirements of the 2016 
Final Rule would place a significant burden on industry without a 
corresponding consumer benefit. In discussing its rationale for having 
proposed these exclusions in the 2014 Proposal, the Bureau also stated 
that, among other things, it was concerned about the possibility of 
consumer confusion regarding products covered by both regimes, though 
it did not believe the exclusion should extend to products that 
consumers may use as or confuse with transaction accounts even if such 
products were also covered by the Gift Card Rule.\27\ The Bureau also 
expressed concern that, were it to impose requirements for access to 
account information and error resolution and create limits on 
consumers' liability for unauthorized EFTs, the cost structure of gift 
cards could change dramatically because, unlike other types of prepaid 
products, many gift cards do not typically offer these protections.\28\
---------------------------------------------------------------------------

    \27\ With respect to general-use prepaid products, the Bureau 
excluded only such products that were both marketed and labeled as 
gift cards or gift certificates. The Bureau was concerned that, 
absent this approach, some products it intended to cover as prepaid 
accounts may be inadvertently excluded due to occasional or 
incidental marketing activities, and that consumers would 
unwittingly think they carry the same protections as other prepaid 
accounts under the Prepaid Accounts Rule. 81 FR 83934, 83977 (Nov. 
22, 2016).
    \28\ Id. at 83976-77.
---------------------------------------------------------------------------

The Bureau's Proposal
    As explained in the June 2017 Proposal, the Bureau became aware 
through its outreach efforts to industry regarding implementation that 
there may be some confusion as to whether the exception in Sec.  
1005.2(b)(3)(ii)(D)(3) extends to loyalty, award, or promotional gift 
cards that do not contain disclosures pursuant to Sec.  
1005.20(a)(4)(iii) but that are nonetheless excluded from coverage 
under the Gift Card Rule pursuant to Sec.  1005.20(b)(4) because they 
are not marketed to the general public. Industry stakeholders requested 
that the Bureau make clear that these cards are excluded from coverage 
under the Prepaid Accounts Rule. In the alternative, they requested 
that, if loyalty, award, or promotional gift cards that do not provide 
the Sec.  1005.20(a)(4)(iii) disclosures are in fact covered by the 
Prepaid Accounts Rule, the Bureau clarify the timing to add such 
disclosures in order to qualify for the exclusion under Sec.  
1005.2(b)(3)(ii)(D)(3), particularly for cards that have already been 
distributed to consumers for whom the financial institution does not 
have contact information.
    The Bureau proposed to clarify the scope of this exclusion by 
revising Sec.  1005.2(b)(3)(ii)(D)(3) to exclude a loyalty, award, or 
promotional gift card as defined in Sec.  1005.20(a)(4), or that 
satisfies the criteria in Sec.  1005.20(a)(4)(i) and (ii) and is 
excluded from Sec.  1005.20 pursuant to Sec.  1005.20(b)(4). The Bureau 
also proposed to add comment 2(b)(3)(ii)-4 to explain that proposed 
Sec.  1005.2(b)(3)(ii)(D)(3) would exclude loyalty, award, or 
promotional gift cards as defined in Sec.  1005.20(a)(4); those cards 
are excluded from coverage under Sec.  1005.20 pursuant to Sec.  
1005.20(b)(3). New comment 2(b)(3)(ii)-4 would have further explained 
that proposed Sec.  1005.2(b)(3)(ii)(D)(3) would also exclude cards 
that satisfy the criteria in Sec.  1005.20(a)(4)(i) and (ii) and are 
excluded from coverage under Sec.  1005.20 pursuant to Sec.  
1005.20(b)(4) because they

[[Page 6369]]

are not marketed to the general public; such products would not be 
required to set forth the disclosures enumerated in Sec.  
1005.20(a)(4)(iii) in order to be excluded pursuant to proposed Sec.  
1005.2(b)(3)(ii)(D)(3).
Comments Received
    Commenters, including industry trade associations, a think tank, 
and an anonymous commenter, supported the proposed revision to Sec.  
1005.2(b)(3)(ii)(D)(3). These commenters agreed that, given the limited 
nature and use of these types of loyalty, award, and promotional gift 
cards, it would be appropriate for the Bureau to exclude them from 
coverage under the Prepaid Accounts Rule. The anonymous commenter 
stated that because these cards tend to be non-reloadable, small dollar 
products that are not marketed to the general public, subjecting them 
to more robust Regulation E requirements would be overly burdensome to 
industry while providing little consumer benefit. One of the trade 
associations cautioned that, while it appreciated the proposed 
exception, it expects that few, if any, products would benefit from the 
exception because it believes that virtually all loyalty, award, and 
promotional gift cards already provide the Sec.  1005.20(a)(4)(iii) 
disclosures and thus qualify for the Sec.  1005.20(b)(3) exclusion 
under the Gift Card Rule. The Bureau received no comments opposing this 
aspect of the proposal.
    In response to the Bureau's request for comment regarding whether, 
in the alternative, loyalty, award, or promotional gift cards that do 
not provide the disclosures enumerated by Sec.  1005.20(a)(4)(iii) 
should be covered by the Prepaid Accounts Rule but provided with 
certain transitional exclusions and accommodations, a trade association 
stated that all loyalty, award, or promotional gift cards should be 
excluded from the definition of prepaid account, regardless of the 
method by which the product qualifies as a loyalty, award, or 
promotional gift card, and therefore the Bureau should not adopt this 
alternative proposal.
    Many commenters did not respond regarding the Bureau's proposed 
revision to Sec.  1005.2(b)(3)(ii)(D)(3) and related commentary 
specifically but instead commented on the definition of ``prepaid 
account'' more broadly, urging the Bureau to adopt additional 
exclusions for other types of products considered prepaid accounts 
under the 2016 Final Rule. For example, several of these commenters, 
including trade associations, a program manager, an issuing bank, and 
an anonymous commenter, urged the Bureau to exclude products that are 
not marketed to the general public, such as utility company refund 
cards, jury duty cards, prison release cards, and cards attached to 
qualified tuition savings plans (e.g., 529 plans).\29\ Some of these 
commenters also urged the Bureau to exclude certain limited-use 
disbursement cards, such as those used for customer service purposes, 
arguing that they are akin to loyalty, award, or promotional gift 
cards.\30\ In addition, a program manager and a trade association 
expressed concern about the limited examples of healthcare and employee 
benefit products that are excluded from the Prepaid Accounts Rule.\31\ 
These commenters stated that it is unclear whether other types of 
healthcare products--such as ABLE Act savings plans \32\--qualify for 
the 2016 Final Rule's exclusions for accounts loaded only with funds 
from a health savings account or dependent care assistance program.
---------------------------------------------------------------------------

    \29\ A 529 plan is operated by a State or educational 
institution, with tax advantages and potentially other incentives to 
make it easier to save for college and other post-secondary training 
for a designated beneficiary, such as a child or grandchild. 
Internal Revenue Service, 529 Plans: Questions and Answers, 
available at https://www.irs.gov/newsroom/529-plans-questions-and-answers (last visited Jan. 8, 2018); see 26 U.S.C. 529 et seq.
    \30\ An anonymous commenter similarly requested that the Bureau 
exclude from coverage products that are issued to independent 
contracts for payments in connection with commercial activity, 
asserting that, among other things, these products are not 
established primarily for personal, family, or household purposes. 
Pursuant to existing Sec.  1005.2(b)(1), Regulation E applies only 
to accounts that are established primarily for personal, family, or 
household purposes; accounts that are not established primarily for 
personal, family, or household purposes are not subject to the 
Regulation.
    \31\ An 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'' is excluded from 
the definition of a prepaid account. Sec.  1005.2(b)(3)(ii)(A).
    \32\ The ABLE Act permits a State to establish and maintain a 
tax-advantaged savings program under section 529A of the Internal 
Revenue Code. Contributions may be made to a 529A account 
established for a designated beneficiary to pay for qualified 
disability expenses. Internal Revenue Service, Tax Benefit for 
Individuals With Disabilities: IRC Section 529A, available at 
https://www.irs.gov/government-entities/federal-state-local-governments/tax-benefit-for-disability-irc-section-529a (last 
visited Jan. 8, 2018).
---------------------------------------------------------------------------

The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.2(b)(3)(ii)(D)(3) and adopting new comment 
2(b)(3)(ii)-4 as proposed. The Bureau believes it is appropriate to 
exclude loyalty, award, or promotional gift cards from coverage under 
the Prepaid Accounts Rule regardless of whether they provide 
disclosures pursuant to Sec.  1005.20(a)(4)(iii), given the limited 
nature and use of such products. Some such cards do not meet the 
definition of prepaid account, as they cannot be used with multiple, 
unaffiliated merchants, and are thus outside the scope of the Prepaid 
Accounts Rule's coverage regardless. With regard to any such cards that 
do meet the definition of prepaid account, the Bureau believes it is 
necessary and proper to exclude those cards pursuant to its authority 
under EFTA section 904(c) to further the purposes of EFTA to provide a 
framework to establish the rights, liabilities, and responsibilities of 
prepaid account consumers.
    The Bureau appreciates the trade association's comment that few if 
any products need this exclusion because, it said, virtually all 
loyalty, award, and promotional gift cards provide the disclosures 
enumerated by Sec.  1005.20(a)(4)(iii). However, since the Bureau 
received questions from industry on the status of such products without 
the disclosure, the Bureau believes it is appropriate to make this 
clarification.
    The exclusions for other types of products requested by commenters 
were beyond the scope of the Bureau's proposal, and thus the Bureau is 
not making any such changes at this time.
Section 1005.11 Procedures for Resolving Errors
11(c) Time Limits and Extent of Investigation
    As discussed in detail in the section-by-section analysis of Sec.  
1005.18(e)(3) below, the Bureau is making certain changes regarding 
error resolution and limited liability requirements to address concerns 
about the treatment of unverified accounts. This change has rendered 
unnecessary Sec.  1005.11(c)(2)(i)(C), which had been added by the 2016 
Final Rule to reflect the exception to the requirement to provide 
provisional credit for errors asserted on unverified accounts. The 
Bureau did not receive any comments regarding this portion of the 
proposal in particular.
    Specifically, Sec.  1005.11(c)(2)(i)(C) provided that a financial 
institution is not required to provisionally credit a consumer's 
account if the alleged error involves a prepaid account, other than a 
payroll card account or government benefit account, for which the 
financial institution has not successfully completed its consumer 
identification and verification process, as set forth in prior Sec.  
1005.18(e)(3)(ii). As discussed in

[[Page 6370]]

the section-by-section analysis of Sec.  1005.18(e)(3) below, the 
Bureau is not requiring a financial institution to comply with the 
liability limits and error resolution requirements under Sec. Sec.  
1005.6 and 1005.11 for any prepaid account, other than a payroll card 
account or government benefit account, for which it has not 
successfully completed its consumer identification and verification 
process. Because this final rule provides that such accounts are not 
subject to Sec.  1005.11, Sec.  1005.11(c)(2)(i)(C) is no longer 
necessary, and thus the Bureau is removing it as proposed. This final 
rule reverts the text of Sec.  1005.11(c)(2)(i) to its state prior to 
its amendment by the 2016 Final Rule.
Section 1005.18 Requirements for Financial Institutions Offering 
Prepaid Accounts
18(a) Coverage
    Section 1005.18(a) states that a financial institution shall comply 
with all applicable requirements of EFTA and Regulation E with respect 
to prepaid accounts except as modified by Sec.  1005.18. One of those 
generally applicable requirements concerns the issuance of access 
devices in Sec.  1005.5, which implements EFTA section 911.\33\ Prior 
to the 2016 Final Rule, comment 18(a)-1 explained when a consumer was 
deemed to request an access device for a payroll card account; \34\ a 
corresponding provision for government benefit accounts appeared in 
Sec.  1005.15(b).\35\ In the 2016 Final Rule, the Bureau did not modify 
either of those provisions except to add to comment 18(a)-1 two 
examples of when a consumer is deemed to request an access device for a 
prepaid account.\36\
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 1693i.
    \34\ Comment 18(a)-1 stated that, consistent with Sec.  
1005.5(a) and except as provided, as applicable, in Sec.  1005.5(b), 
a financial institution may issue an access device only in response 
to an oral or written request for the device, or as a renewal or 
substitute for an accepted access device. A consumer is deemed to 
request an access device for a payroll card account when the 
consumer chooses to receive salary or other compensation through a 
payroll card account. The 2016 Final Rule did not change this 
portion of the comment.
    \35\ Section 1005.15(b) stated that a consumer is deemed to 
request an access device for a government benefit account when the 
consumer applies for government benefits that the agency disburses 
or will disburse by means of an EFT. In addition, it provided that 
the agency shall also verify the identity of the consumer by 
reasonable means before the device is activated. This provision was 
not changed by the 2016 Final Rule.
    \36\ Specifically, the 2016 Final Rule added to comment 18(a)-1 
an explanation that a consumer is deemed to request an access device 
for a prepaid account when, for example, the consumer acquires a 
prepaid account offered for sale at a retail location or applies for 
a prepaid account by telephone or online.
---------------------------------------------------------------------------

    As discussed in the June 2017 Proposal, the Bureau received some 
questions about application of Sec.  1005.5 to prepaid accounts and 
believed that additional clarification may be warranted. In particular, 
industry stakeholders had asked about how Sec.  1005.5--which (along 
with EFTA section 911) appears to have been drafted with a focus on 
providing access devices for existing accounts where the consumer has 
means of accessing funds in the account other than by using the access 
device--applies to certain prepaid accounts where there is no means of 
access to the underlying funds other than via the prepaid card.\37\
---------------------------------------------------------------------------

    \37\ 82 FR 29630, 29635 (June 29, 2017).
---------------------------------------------------------------------------

    Specifically, Regulation E provides that a financial institution 
may issue an access device for an account to a consumer only when 
solicited to do so by the consumer pursuant to Sec.  1005.5(a) (that 
is, in response to an oral or written request for the device, or as a 
renewal of, or in substitution for, an accepted access device) or on an 
unsolicited basis in accordance with the requirements set forth in 
Sec.  1005.5(b). Section 1005.5(b) provides that a financial 
institution may distribute an access device to a consumer on an 
unsolicited basis if the access device is (1) not validated, meaning 
that the financial institution has not yet performed all the procedures 
that would enable a consumer to initiate an EFT using the access 
device; (2) accompanied by a clear explanation that the access device 
is not validated and how the consumer may dispose of it if validation 
is not desired; (3) accompanied by the disclosures required by Sec.  
1005.7 of the consumer's rights and liabilities that will apply if the 
access device is validated; and (4) validated only in response to the 
consumer's oral or written request for validation, after the financial 
institution has verified the consumer's identity by a reasonable means.
The Bureau's Proposal
    As noted above, the Bureau received questions from industry about 
how the unsolicited issuance rules set forth in Sec.  1005.5(b) apply 
to prepaid accounts used for making disbursements where the consumer is 
given no other option but to receive the disbursement via a prepaid 
account, such as prison release cards, jury duty cards, and certain 
types of refund cards. Specifically, the concern stemmed from Sec.  
1005.5(b)(2), which requires the financial institution to provide a 
clear explanation that the access device is not validated and how the 
consumer may dispose of it if validation is not desired. Industry 
stakeholders expressed concern that this requirement could be 
interpreted to mean, in the prepaid context, that they must provide 
another option by which consumers can receive their funds, despite the 
Bureau's decision at the time of the 2016 Final Rule not to extend the 
compulsory use prohibition in Sec.  1005.10(e)(2) to other types of 
prepaid accounts beyond payroll card accounts and government benefit 
accounts.\38\ Industry stakeholders explained that costs related to 
providing an additional payment option, such as a paper check, would 
threaten the financial viability of these generally temporary, limited-
use products and potentially cause unbanked consumers to incur check 
cashing fees to access their funds if these products were eliminated in 
favor of paper checks. One issuing bank stated that it issues prepaid 
accounts for use by prisons in work release programs, where the account 
holds funds for use by an incarcerated individual to pay for 
transportation, food, or incidentals related to participation in the 
work release program. The bank explained that, if these funds were 
disbursed in any other manner (such as in cash), the prison would not 
be able to ensure that they were used only for approved purposes.
---------------------------------------------------------------------------

    \38\ 81 FR 83934, 83985 (Nov. 22, 2016).
---------------------------------------------------------------------------

    As it stated in the June 2017 Proposal, the Bureau did not intend 
application of the unsolicited issuance requirements to mandate that 
consumers be offered other options to receive payments in circumstances 
beyond those already addressed by the compulsory use prohibition.\39\
---------------------------------------------------------------------------

    \39\ 82 FR 29630, 29636 (June 29, 2017). EFTA section 913(2), as 
implemented in Sec.  1005.10(e)(2), provides that no financial 
institution or other person may require a consumer to establish an 
account for receipt of EFTs with a particular institution as a 
condition of employment or receipt of a government benefit. Existing 
comment 10(e)(2)-1 explains that an employer (including a financial 
institution) may not require its employees to receive their salary 
by direct deposit to any particular institution. These provisions 
regarding compulsory use predate the addition of the payroll card 
provisions in current Sec.  1005.18 to Regulation E. In the 2016 
Final Rule, the Bureau added a parallel comment (comment 10(e)(2)-2) 
for clarity regarding the application of the compulsory use 
prohibition to government benefit accounts. See 81 FR 83934, 93983-
85 (Nov. 22, 2016).
---------------------------------------------------------------------------

    The Bureau proposed to clarify application of the unsolicited 
issuance rules to prepaid accounts where the consumer is not offered 
any other options by which to receive a disbursement of funds. 
Specifically, in order to make clear that Sec.  1005.5(b)(2) does not 
require a financial institution or other party to offer consumers other 
options to receive such disbursements, the Bureau proposed to add to 
comment

[[Page 6371]]

18(a)-1 a statement that, if an access device for a prepaid account is 
provided on an unsolicited basis where the prepaid account is used for 
disbursing funds to a consumer, and the financial institution or third 
party making the disbursement does not offer any alternative means for 
the consumer to receive those funds in lieu of accepting the prepaid 
account, in order to satisfy Sec.  1005.5(b)(2), the financial 
institution must inform the consumer that he or she has no other means 
by which to receive any funds in the prepaid account if the consumer 
disposes of the access device.
Comments Received
    Several industry commenters, including a trade association, an 
issuing bank, and a think tank, supported the proposed modification to 
comment 18(a)-1. The issuing bank confirmed that clarification was 
necessary because some entities had interpreted Sec.  1005.5(b) to mean 
that, for prepaid accounts where the device itself is the only means by 
which consumers can access their funds, financial institutions would be 
required to provide another method of access. The issuing bank also 
stated that the proposed modification would be especially helpful in 
connection with prison work release programs and post-incarceration 
programs that use prepaid cards to help address issues related to 
security, access to funds for both prisoners and parolees, and proper 
monitoring of card usage. The issuing bank requested that the Bureau 
specify what information financial institutions should include with the 
access device to alert consumers that there are no other means by which 
to access their funds.
    A consumer advocacy group stated that the proposed language did not 
account for refund provisions that are commonly found in prison release 
card agreements and could lead to consumer confusion. This commenter 
explained that most prison release card agreements allow the consumer 
to obtain a replacement card if the card is lost or stolen and to 
access funds in the account in a variety of ways, including by making 
an ATM withdrawal or requesting the issuance of a check. The commenter 
expressed concern that consumers might interpret the proposed 
disclosure to mean they have no ability to obtain the funds in their 
accounts other than by using the access device at the point of sale. 
This commenter also stated that, if a consumer loses his or her card 
and wishes to withdraw the remaining balance of the account via an 
alternative method, the financial institution should allow that, 
subject to reasonable identity verification procedures. The commenter 
asserted that, as written, the proposed revision could be read as 
prohibiting such a transaction. The commenter therefore suggested 
revisions to the proposed language that it believed would both alert 
consumers to the importance of retaining the physical card and clearly 
convey information about alternate methods consumers can use to access 
their funds.
    Consumer advocates and industry commenters also requested that the 
Bureau make modifications to Regulation E's compulsory use prohibition 
governing payroll card accounts and government benefit accounts. 
Specifically, the consumer advocates suggested extending the compulsory 
use prohibition to other types of prepaid accounts, such as prison 
release cards, jury duty cards, and certain other types of refund cards 
or, in the alternative, limiting the fees on cards that are provided on 
an unsolicited basis. Regarding prison release cards in particular, 
they urged the Bureau to consider a rulemaking or exercise of its 
authority under title X of the Dodd-Frank Act to prohibit unfair, 
deceptive, or abusive acts or practices (UDAAP) to specifically address 
concerns related to these accounts. On the other hand, a trade 
association cautioned that an expanded compulsory use prohibition would 
threaten the viability of these types of prepaid accounts. Another 
trade association urged the Bureau to refrain from exercising its UDAAP 
authority without first obtaining more information about the types of 
programs that do not allow for consumer choice and without providing 
additional guidance to the public about what could be construed as a 
UDAAP. An issuing bank requested an exception from the existing 
compulsory use prohibition for government benefit accounts that mirrors 
what currently exists for payroll card accounts in emergency 
situations.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to comment 18(a)-1 generally as proposed, with one 
modification discussed below. The Bureau continues to believe that, for 
prepaid accounts where an alternative means for a consumer to receive 
the funds in the account is not offered, it is reasonable for the 
disclosure required by Sec.  1005.5(b)(2) to include a statement 
explaining that there is no other way for the consumer to receive his 
or her funds if the consumer disposes of the access device. However, 
based on the comments received, the Bureau understands that the 
proposed wording of the revision could have caused confusion as to 
whether the access device is the only means to access funds being 
disbursed via the prepaid account initially or whether using the access 
device is the only way to access the funds until the account balance is 
exhausted. Therefore, the Bureau is adopting the comment with a 
revision to make clear that the financial institution must inform the 
consumer that the consumer has no other means by which to initially 
receive the funds in the prepaid account other than by accepting the 
access device, as well as the consequences of disposing of the access 
device. The Bureau believes this clarification will resolve any 
potential confusion related to the disclosure required by Sec.  
1005.5(b)(2) for prepaid accounts lacking consumer choice.
    The Bureau does not believe it is necessary to require, as part of 
the Sec.  1005.5(b) disclosure, that financial institutions provide a 
list of other means of access to funds that are deposited in a prepaid 
account or to disclose procedures for replacing a lost or stolen access 
device. The Bureau understands that financial institutions often 
encourage consumers to review the terms and conditions of their prepaid 
accounts to learn about other methods, if any, by which they can access 
their funds, and expects industry will continue doing so. The Bureau 
also notes that any methods of accessing funds for a fee must be 
included in the long form disclosure pursuant Sec.  1005.18(b)(4), and 
that financial institutions are permitted to include information about 
free services and features in the long form disclosure as well. 
Regarding the comment requesting that the Bureau provide specific 
language that financial institutions must include with the prepaid 
account device to alert consumers that there are no other means by 
which to access their funds, the Bureau does not believe it would be 
appropriate to further prescribe specific language as it expects that 
nature of the disclosure will vary from institution to institution 
based on their particular circumstances.
    Commenters' requests related to Regulation E's compulsory use 
prohibition more generally are outside the scope of this rulemaking, 
and thus the Bureau is not making any such changes at this time. The 
Bureau notes that to the extent prepaid accounts are used to disburse 
consumers' wages or covered government benefits, as defined under 
applicable law, such accounts are already covered by Sec.  
1005.10(e)(2) and will continue to be so under the Prepaid Accounts 
Rule. The Bureau notes

[[Page 6372]]

further that it is continuing to monitor financial institutions' and 
other persons' practices relating to consumers' choice of how to 
receive funds due to them in various circumstances (including with 
respect to prepaid accounts that are not subject to the compulsory use 
prohibitions). Depending on the facts and circumstances, the Bureau may 
consider whether exercise of the Bureau's authority under title X of 
the Dodd-Frank Act, including its authority over unfair, deceptive, or 
abusive acts or practices, would be appropriate.
18(b) Pre-Acquisition Disclosure Requirements
    The Prepaid Accounts Rule generally requires a financial 
institution to provide a consumer with both a ``short form'' and a 
``long form'' disclosure before the consumer acquires a prepaid 
account. The Bureau adopted those pre-acquisition disclosure 
requirements pursuant to EFTA sections 904(a), (b), and (c), 905(a), 
and 913(2),\40\ and section 1032 of the Dodd-Frank Act,\41\ and 
adjusted the timing and fee disclosure requirements as well as required 
disclosure language pursuant to EFTA section 904(c). As discussed in 
the section-by-section analyses that follow, the Bureau is modifying 
several discrete aspects of the pre-acquisition disclosure requirements 
to facilitate compliance and reduce burden.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 1693b(a), (b), and (c), 1693c(a), and 1693k(2).
    \41\ 12 U.S.C. 5532.
---------------------------------------------------------------------------

18(b)(1) Timing of Disclosures
18(b)(1)(i) General
    Section 1005.18(b)(1)(i) requires a financial institution to 
provide the short form and long form disclosures required by Sec.  
1005.18(b) before a consumer acquires a prepaid account; an alternative 
timing regime exists for prepaid accounts acquired in retail locations 
or acquired orally by telephone, as described in Sec.  
1005.18(b)(1)(ii) and (iii), respectively.
    As discussed in the 2016 Final Rule, the Bureau believed that 
consumers would benefit from receiving both the short form and long 
form disclosures in writing prior to acquisition because the 
disclosures serve different but complementary goals. The Bureau 
believed that the pre-acquisition disclosures would limit the ability 
of financial institutions to obscure key fees as well as allow 
consumers to better comparison shop among products. Even in situations 
where the consumer might not easily be able to comparison shop, such as 
when students are offered a card by their university, the Bureau 
believed that receiving the short form and long form disclosures pre-
acquisition would allow consumers to better understand the product's 
terms before deciding whether to accept it and also could inform the 
way in which consumers decide to use the product once acquired. 
Relatedly, the Bureau believed that because consumers often use their 
prepaid accounts for an extended period, whatever disclosure 
information a consumer used when selecting the prepaid account could 
have a significant and potentially long-term impact.\42\
---------------------------------------------------------------------------

    \42\ 81 FR 83934, 84017, 84022 (Nov. 22, 2016).
---------------------------------------------------------------------------

The Bureau's Proposal
    Through its outreach efforts to industry regarding implementation, 
the Bureau received some questions about what it means to provide 
disclosures ``pre'' acquisition for products where the party making the 
disbursement to the consumer (or the financial institution) does not 
offer any alternative means for the consumer to receive those funds. 
(For further discussion of such products, see the section-by-section 
analysis of Sec.  1005.18(a) above.) For example, if a refund card is 
sent by mail, industry stakeholders asked whether the financial 
institution would have to first mail the pre-acquisition disclosures to 
the consumer and then later send the card. The Bureau also heard 
concerns regarding certain in-person acquisition scenarios, such as 
with prison release or jury duty cards, although pre-acquisition 
disclosures could be provided more easily in advance of the consumer 
receiving the prepaid account in such cases.
    The Bureau continues to believe that the disclosures required by 
Sec.  1005.18(b) are important for consumers to receive for all prepaid 
products, and does not believe exclusions for certain types of products 
would be appropriate. However, as explained in the June 2017 Proposal, 
the Bureau did not intend to require that an additional separate formal 
step for disclosure delivery be added to the acquisition process for 
products where consumers are not making a choice as to whether to 
acquire the prepaid account. The Bureau did not believe that sending or 
otherwise providing the disclosures separately for prepaid accounts in 
this situation would be beneficial to consumers and acknowledged that, 
particularly if separate mailings were made, financial institutions 
could incur additional costs in delivering the pre-acquisition 
disclosures separately from the prepaid account itself.
    The Bureau therefore proposed revisions to Sec.  1005.18(b)(1)(i) 
and related commentary to clarify the timing requirements for delivery 
of pre-acquisition disclosures in this situation. Specifically, the 
Bureau proposed to add to the regulatory text of Sec.  1005.18(b)(1)(i) 
a statement that, when a prepaid account is used for disbursing funds 
to a consumer, and the financial institution or third party making the 
disbursement does not offer any alternative means for the consumer to 
receive those funds in lieu of accepting the prepaid account, the 
disclosures required by Sec.  1005.18(b) may be provided at the time 
the consumer receives the prepaid account. The Bureau also proposed to 
add an example, as comment 18(b)(1)(i)-1.ii, to illustrate such a 
scenario involving a utility company that refunds consumers' initial 
deposits for its utility services via prepaid accounts delivered to 
consumers by mail. In addition, the Bureau proposed to renumber the 
paragraphs within comment 18(b)(1)(i)-1 for clarity.
Comments Received
    Several industry trade associations and a think tank commented in 
support of the proposed revisions to Sec.  1005.18(b)(1)(i). One of the 
trade associations stated that, in situations where the only method to 
disburse funds is via a prepaid account, requiring the financial 
institution (or third party) to send the pre-acquisition disclosures 
separately from the access device offers consumers no benefit or 
protection and could instead harm consumers by delaying access to their 
funds. The Bureau received no comments opposing this aspect of the 
proposal.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.18(b)(1)(i) and comment 18(b)(1)(i)-1 as 
proposed, with a grammatical correction in the first sentence. As 
discussed above and in the 2016 Final Rule, the Bureau continues to 
believe that consumers will benefit from receiving both the short form 
and long form disclosures in writing prior to prepaid account 
acquisition because the disclosures serve different but complementary 
goals.\43\ However, as discussed above, the Bureau did not intend to 
require that an additional separate formal step for disclosure delivery 
be added to the acquisition process for products where consumers are 
not making a choice as to whether to acquire the prepaid account and

[[Page 6373]]

remains concerned about the potential additional costs for financial 
institutions balanced against limited benefits to consumers.
---------------------------------------------------------------------------

    \43\ Id.
---------------------------------------------------------------------------

    The Bureau is therefore finalizing Sec.  1005.18(b)(1)(i) to make 
clear that, when a prepaid account is used for disbursing funds to a 
consumer, and the financial institution or third party making the 
disbursement does not offer any alternative means for the consumer to 
receive those funds in lieu of accepting the prepaid account, the 
disclosures required by Sec.  1005.18(b) may be provided at the time 
the consumer receives the prepaid account. Pursuant to this change, the 
financial institution or third party is not required to first mail or 
otherwise deliver the disclosures and then later provide the card.
    The Bureau notes that the accommodation in final Sec.  
1005.18(b)(1)(i) does not apply to payroll card accounts and government 
benefit accounts because they are subject to the compulsory use 
prohibition in Sec.  1005.10(e)(2). Comments 15(c)-1 and 2 and final 
comment 18(b)(1)(i)-1.i.B address the timing of pre-acquisition 
disclosures for such accounts.
18(b)(1)(ii) Disclosures for Prepaid Accounts Acquired in Retail 
Locations
    Section 1005.18(b)(1)(ii) states that a financial institution is 
not required to provide the long form disclosure required by Sec.  
1005.18(b)(4) before a consumer acquires a prepaid account in person at 
a retail location provided certain conditions are met. Specifically, 
these conditions are: (A) The prepaid account access device must be 
contained inside the packaging material; (B) the short form disclosure 
required by Sec.  1005.18(b)(2) must be provided on or visible through 
an outward-facing, external surface of the access device's packaging 
material; (C) the short form disclosure must include the information 
set forth in Sec.  1005.18(b)(2)(xiii) that allows a consumer to access 
the information required to be disclosed in the long form by telephone 
and via a website; and (D) the long form disclosure must be provided 
after the consumer acquires the prepaid account.
    As discussed in the 2016 Final Rule and as noted above, the Bureau 
believed that consumers would benefit from receiving both the short 
form and long form disclosures in writing prior to acquisition because 
the disclosures serve different but complementary goals. However, the 
Bureau was cognizant of the potentially significant cost to industry 
related to providing the long form disclosure prior to acquisition at 
retail and making packaging adjustments necessary to accommodate such a 
disclosure given the space constraints for products sold at retail. The 
Bureau thus finalized the retail location exception in Sec.  
1005.18(b)(1)(ii), which it believed struck the appropriate balance 
between providing consumers with--or access to--important disclosures 
before acquiring a prepaid account while recognizing the packaging, 
space, and other constraints faced by financial institutions when 
selling prepaid accounts at retail.\44\
---------------------------------------------------------------------------

    \44\ Id. at 84022.
---------------------------------------------------------------------------

    Specifically, in the 2016 Final Rule, the Bureau explained that it 
was adopting Sec.  1005.18(b)(1)(ii)(D) to make clear that, to qualify 
for the retail location exception, a financial institution must provide 
the long form disclosure after the consumer acquires the prepaid 
account. The Bureau noted that this provision does not set forth a 
specific time by which the long form disclosure must be provided after 
acquisition, but explained that, in practice, it expected that 
compliance with this requirement would typically be accomplished in 
conjunction with Sec.  1005.18(f)(1), which requires a financial 
institution to provide, as part of its initial disclosures given 
pursuant to Sec.  1005.7, all of the information required to be 
disclosed pursuant to Sec.  1005.18(b)(4).\45\ The financial 
institution must make the initial disclosures required by Sec.  1005.7 
at the time a consumer contracts for an EFT service or before the first 
EFT is made involving the account. That is, standing alone, Sec.  
1005.18(f)(1) does not require inclusion in the initial disclosures of 
the long form in accordance with the form and formatting requirements 
set forth in Sec.  1005.18(b)(6) and (7); rather, it only requires that 
the Sec.  1005.18(b)(4) information be included in the initial 
disclosures.
---------------------------------------------------------------------------

    \45\ Id. In the 2014 Proposal, proposed Sec.  1005.18(f) would 
have required, in part, that a financial institution include all of 
the information required to be disclosed in the long form and be 
provided in a form substantially similar to the sample form in 
proposed appendix A-10(e). See id. at 84114.
---------------------------------------------------------------------------

The Bureau's Proposal
    During the Bureau's outreach efforts to industry regarding 
implementation, a trade association told the Bureau that providing the 
long form disclosure--in accordance with the form and formatting 
requirements set forth in Sec.  1005.18(b)(6) and (7)--as part of the 
initial disclosures for the prepaid account contained inside the 
packaging material for prepaid accounts sold at retail may pose 
problems for financial institutions. The trade association explained 
that, for at least some institutions, this requirement might 
necessitate a substantial increase in the size of the packages in order 
to accommodate the long form disclosure, thus requiring retooling of 
their ``J-hook'' packaging. Because the 2016 Final Rule did not specify 
the method by which the long form disclosure must be provided pursuant 
to Sec.  1005.18(b)(1)(ii)(D), the trade association said that 
financial institutions might resort to sending the long form disclosure 
to the consumer by mail to avoid increasing the size of retail 
packaging to accommodate the disclosure. The trade association also 
asked whether the long form disclosure could be provided electronically 
without E-Sign consent, similar to the transitional accommodation in 
Sec.  1005.18(h)(2)(iv) for providing certain notices to consumers.
    In light of these concerns, the Bureau proposed to revise Sec.  
1005.18(b)(1)(ii)(D) to state that, if a financial institution does not 
provide the long form disclosure inside the prepaid account packaging 
material, and it is not otherwise already mailing or delivering to the 
consumer written account-related communications within 30 days of 
obtaining the consumer's contact information, it may provide the long 
form disclosure in electronic form without regard to the consumer 
notice and consent requirements of section 101(c) of the E-Sign Act. 
That is, this accommodation would only be available to financial 
institutions that are not otherwise mailing or delivering written 
account-related communications to the consumer post-acquisition. The 
Bureau also proposed to add language to comment 18(b)(1)(ii)-4 that 
would explain that a financial institution that has not obtained the 
consumer's contact information is not required to comply with the 
requirements set forth in proposed Sec.  1005.18(b)(1)(ii)(D). A 
financial institution is able to contact the consumer when, for 
example, it has the consumer's mailing address or email address.
Comments Received
    Several industry commenters, including trade associations, an 
issuing bank, and a think tank, supported the proposed revisions to 
Sec.  1005.18(b)(1)(ii)(D). Two trade associations and the issuing bank 
stated that the proposed revisions would also afford financial 
institutions some flexibility without increasing costs or harming 
consumers. These commenters argued that increasing the size of 
packaging material for prepaid accounts sold at retail, or 
alternatively separately

[[Page 6374]]

mailing the long form disclosure to the consumer, would impose 
significant costs on industry and offer little if any consumer benefit, 
given that consumers will already have access to the information on the 
long form disclosure by telephone and via a website and that such 
information will also be included in the initial disclosures. Another 
trade association stated that providing the long form disclosure inside 
the prepaid card packaging might not always be feasible because space 
constraints would require financial institutions to increase the size 
of the packaging, which could in turn necessitate retail locations to 
adjust their displays to accommodate the larger packaging.
    A group of consumer advocates opposed the proposed revisions to 
Sec.  1005.18(b)(1)(ii)(D) because, they argued, the result would be 
that consumers who may not be able to receive electronic communications 
may never receive the long form disclosure. They also asserted that the 
retail packaging constraints are not a significant issue, stating that 
many prepaid cards sold via ``J-hook'' displays already contain printed 
material that can accommodate the long form disclosure. In response to 
the Bureau's request for comment on whether a similar modification to 
Sec.  1005.18(b)(1)(iii)(C) is necessary for prepaid accounts acquired 
orally by telephone, these commenters agreed with the Bureau's initial 
assessment that E-Sign consent should not be waived for accounts 
acquired by telephone because consumers can easily receive the long 
form disclosure by mail (with their access device) or can consent to 
electronic communications.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.18(b)(1)(ii)(D) and comment 18(b)(1)(ii)-4 as 
proposed. As noted above and in the 2016 Final Rule, the Bureau was 
aware of the potential significant costs to industry related to the 
requirement to provide the long form disclosure prior to acquisition at 
retail and thus finalized the retail location exception in Sec.  
1005.18(b)(1)(ii).\46\ Based on information received through the 
Bureau's implementation outreach to industry and in comments on the 
June 2017 Proposal, the Bureau believes that adding this additional 
accommodation to the exception is warranted to avoid increased costs 
and is therefore finalizing Sec.  1005.18(b)(1)(ii)(D) to allow a 
financial institution to provide the long form disclosure 
electronically without E-Sign consent, if it does not already provide 
the long form disclosure inside the prepaid account packaging material, 
and it is not otherwise already mailing or delivering written account-
related communications.
---------------------------------------------------------------------------

    \46\ Id. at 84022.
---------------------------------------------------------------------------

    The Bureau requested comment on a number of specific questions 
about financial institutions' processes and plans for providing the 
long form disclosure to consumers and whether the Bureau could make 
other accommodations regarding the retail location exception to 
facilitate the inclusion of the long form disclosure inside the 
packaging.\47\ The Bureau did not receive any information in response 
that suggested alternative methods of managing the cost concerns 
discussed in the proposal. The Bureau recognizes the concerns raised by 
the group of consumer advocates, but believes it is nonetheless 
appropriate to make this modification as proposed in light of the 
concerns raised by industry, described above, that led the Bureau to 
include this modification in the June 2017 Proposal and echoed in 
industry's general comments on this aspect of that proposal.
---------------------------------------------------------------------------

    \47\ See 82 FR 29630, 29638 (June 29, 2017).
---------------------------------------------------------------------------

    Under this final rule, even consumers who do not have access to 
electronic communications will nonetheless continue to receive the 
important information about their prepaid accounts, even though it may 
not be in the format the Bureau believed would be most beneficial to 
consumers. For example, consumers will still receive the information 
required to be disclosed in the long form via the initial disclosures 
required by Sec. Sec.  1005.7 and 1005.18(f)(1), which are typically 
provided inside the packaging of prepaid accounts sold at retail. In 
addition, financial institutions cannot avail themselves of this new 
accommodation if they are mailing or delivering any account-related 
communications (such as sending to the consumer an access device 
embossed with the consumer's name) within 30 days of obtaining the 
consumer's contact information. In that instance, the financial 
institution must include the long form disclosure, in accordance with 
the form and formatting requirements set forth in Sec.  1005.18(b)(6) 
and (7),\48\ in that mailing (or in a separate mailing); they are not 
permitted to provide it electronically without E-Sign consent.\49\ 
Financial institutions that sell GPR cards at retail typically mail to 
consumers a card embossed with their names following successful 
completion of the identification and verification process. The Bureau 
thus believes that most consumers who successfully verify their GPR 
card accounts will receive the long form disclosure as part of that 
mailing.
---------------------------------------------------------------------------

    \48\ The form and formatting requirements in Sec.  1005.18(b)(6) 
and (7) require, among other things, that the long form disclosure 
be presented in the form of a table, appear in a minimum type size 
of eight points, be segregated from other information, and contain 
only information that is required or permitted for that disclosure.
    \49\ If the financial institution includes the long form 
disclosure inside the prepaid account packaging material, it does 
not need this E-Sign waiver. Likewise, if a consumer gives E-Sign 
consent, the financial institution may provide the disclosure 
electronically even if it is mailing or delivering to the consumer 
written account-related communications within 30 days of obtaining 
the consumer's contact information.
---------------------------------------------------------------------------

    The Bureau did not receive any requests to adopt a similar 
modification to Sec.  1005.18(b)(1)(iii)(C) for prepaid accounts 
acquired orally by telephone, and thus is not making any changes to 
that provision. As explained in the June 2017 Proposal, the Bureau does 
not believe that such a modification is necessary because, in this 
situation, financial institutions would already be mailing an access 
device and initial disclosures to consumers and, unlike ``J-hook'' 
packaging, the Bureau does not believe, nor did commenters assert, that 
mailing would face the same space constraints.\50\
---------------------------------------------------------------------------

    \50\ 82 FR 29630, 29638 (June 29, 2017).
---------------------------------------------------------------------------

    The Bureau is renumbering comment 18(b)(1)(iii)-2, regarding 
disclosures for prepaid accounts acquired by telephone, as comment 
18(b)(6)(i)(C)-1 and making certain revisions thereto. See the section-
by-section analysis of Sec.  1005.18(b)(6)(i) below for further 
details.
    In addition, the Bureau is also making certain technical 
corrections in Sec.  1005.18(b)(1)(ii) and related commentary. 
Specifically, the Bureau is correcting grammar and typographical errors 
in Sec.  1005.18(b)(1)(ii) (changing ``disclosures'' to ``disclosure'', 
``are'' to ``is'', and ``include'' to ``includes'') \51\ and in the 
last sentence of comment 18(b)(1)(ii)-2 (changing ``disclosures'' to 
``disclosure'').
---------------------------------------------------------------------------

    \51\ The proposed text of Sec.  1005.18(b)(1)(ii)(D) also 
included similar corrections in the first sentence (changing 
``disclosures'' to ``disclosure'' and ``are'' to ``is''), which the 
Bureau is finalizing.
---------------------------------------------------------------------------

18(b)(2) Short Form Disclosure Content
18(b)(2)(ix) Disclosure of Additional Fee Types
    The Prepaid Accounts Rule's provisions governing the short form 
require disclosure of certain ``static'' fees that are relatively 
common across the industry as well as disclosure of certain additional 
types of fees that the

[[Page 6375]]

financial institution may charge with respect to a particular prepaid 
account program. Specifically, Sec.  1005.18(b)(2)(ix) requires a 
financial institution to disclose the two fee types that generate the 
highest revenue from consumers for the prepaid account program or 
across prepaid account programs that share the same fee schedule during 
the time period provided in Sec.  1005.18(b)(2)(ix)(D) and (E), subject 
to certain exclusions, including a de minimis threshold. If an 
additional fee type required to be disclosed has two fee variations, 
the 2016 Final Rule's version of Sec.  1005.18(b)(2)(ix)(C) requires 
the financial institution to disclose the name of the additional fee 
type along with the names of the two fee variations and the fee 
amounts; if an additional fee type has more than two fee variations, 
the financial institution must disclose the name of the additional fee 
type and the highest fee amount in accordance with Sec.  
1005.18(b)(3)(i).\52\ Comment 18(b)(2)(ix)(C)-1 provides examples 
illustrating how to disclose two-tier fees and other fee variations in 
additional fee types.
---------------------------------------------------------------------------

    \52\ Section 1005.18(b)(2)(ix)(C) contains modified requirements 
for disclosing additional fee types on a short form disclosure for 
multiple service plans pursuant to Sec.  1005.18(b)(6)(iii)(B)(2).
---------------------------------------------------------------------------

    As discussed in the 2016 Final Rule, the Bureau believed that it 
was important for financial institutions to disclose to consumers 
certain fee types not included in the static fees list. The Bureau 
believed that disclosing additional fee types would create a dynamic 
disclosure while reducing incentives for manipulating fee structures 
by, for example, lowering the amount of the static fees in favor of 
higher fees on fee types incurred less often, thus hiding potential 
costly charges. The Bureau also believed that putting consumers on 
notice of such additional fee types would alert them to account 
features for which they may end up incurring a significant expense. In 
addition, the Bureau believed that eschewing full standardization in a 
static short form disclosure in favor of the dynamic disclosure of 
additional fee types would enable the disclosure to capture market 
changes and innovations. Furthermore, the Bureau believed that the 
requirement to disclose additional fee types would allow the short form 
to reflect the advent of new fee types that consumers may come to incur 
frequently and for significant cost that otherwise would be prohibited 
from disclosure in the short form and thus could render it outdated and 
of diminished value to consumers over time.\53\
---------------------------------------------------------------------------

    \53\ 81 FR 83934, 84041 (Nov. 22, 2016).
---------------------------------------------------------------------------

The Bureau's Proposal
    Through its outreach efforts to industry regarding implementation, 
the Bureau heard concerns about the requirement to disclose the highest 
fee (accompanied by an asterisk indicating the fee may be lower 
depending on how and where the card is used) for additional fee types 
with more than two fee variations, where one of those fee variations is 
significantly higher than the others; this may occur, for example, with 
expedited delivery of a replacement card or a bill payment. Because the 
2016 Final Rule's version of Sec.  1005.18(b)(2)(ix)(C) did not allow 
financial institutions to disclose fee variations within additional fee 
types when the additional fee type has more than two variations, some 
industry stakeholders suggested that, rather than disclosing the 
highest fee in these situations, financial institutions were 
considering eliminating the service for which that highest fee is 
charged so as to avoid having to disclose it without additional 
explanation on the short form.
    In response to these concerns, the Bureau proposed to modify Sec.  
1005.18(b)(2)(ix)(C) by providing that, for disclosures other than for 
multiple service plans, a financial institution may, but is not 
required to, consolidate the fee variations into two categories and 
disclose the names of those two fee variation categories and the fee 
amounts in a format substantially similar to that used to disclose the 
two-tier fees required by Sec.  1005.18(b)(2)(v) (ATM balance inquiry 
fees) and (vi) (customer service fees) and in accordance with Sec.  
1005.18(b)(3)(i) and (b)(7)(ii)(B)(1). The Bureau also proposed to 
revise comment 18(b)(2)(ix)(C)-1.ii to illustrate the two options that 
a financial institution would have to disclose an additional fee type 
with more than two fee variations. Specifically, proposed comment 
18(b)(2)(ix)(C)-1.ii would provide the following example: A financial 
institution offers two methods of bill payment--via ACH and paper 
check--and offers two modes of delivery for bill payments made by paper 
check--regular standard mail service and expedited delivery. The 
financial institution charges $0.25 for bill pay via ACH, $0.50 for 
bill pay via paper check sent by regular standard mail service, and $3 
for bill pay via paper check sent via expedited delivery. The financial 
institution must calculate the total revenue generated from consumers 
for all methods of bill pay and all modes of delivery during the 
required time period to determine whether it must disclose bill payment 
as an additional fee type pursuant to Sec.  1005.18(b)(2)(ix). Because 
there are more than two fee variations for the fee type ``bill 
payment,'' if bill payment is required to be disclosed as an additional 
fee type pursuant to Sec.  1005.18(b)(2)(ix)(A), the financial 
institution has two options for the disclosure. The financial 
institution may disclose the highest fee, $3, followed by a symbol, 
such as an asterisk, linked to a statement explaining that the fee 
could be lower depending on how and where the prepaid account is used, 
pursuant to Sec.  1005.18(b)(3)(i). Thus, the financial institution 
would disclose on the short form the fee type as ``Bill payment'' and 
the fee amount as ``$3.00 *''. Alternatively, the financial institution 
may consolidate the fee variations into two categories, such as regular 
delivery and expedited delivery. In this case, the financial 
institution would make this disclosure on the short form as: ``Bill 
payment (regular or expedited delivery)'' and the fee amount as ``$0.50 
* or $3.00''.
Comments Received
    Several industry commenters, including a trade association and an 
issuing bank, supported the proposed revisions to Sec.  
1005.18(b)(2)(ix)(C), stating that the changes would provide needed 
flexibility to this aspect of the Prepaid Accounts Rule's disclosure 
requirements. In addition, the issuing bank stated that the proposed 
revisions would allow financial institutions to provide clearer 
information about additional fee types, as well as better information 
about lower fee options that consumers would find useful. No commenters 
opposed this aspect of the proposal.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.18(b)(2)(ix)(C) and comment 18(b)(2)(ix)(C)-
1.ii as proposed. The Bureau believes it is appropriate to give 
financial institutions additional flexibility to provide more detail 
about additional fee types with multiple fee variations, even though it 
could add some additional complexity to the short form. Although the 
Bureau believes that consumers generally will benefit from simplified 
fee structures, allowing for some flexibility with respect to 
additional fee types will provide consumers more information about a 
prepaid account prior to acquisition and

[[Page 6376]]

will hopefully incentivize financial institutions to keep services that 
are useful for consumers and that they may have otherwise eliminated if 
this requirement had remained unchanged. The Bureau acknowledged in the 
June 2017 Proposal that allowing financial institutions to avail 
themselves of this alternative could reduce the amount of ``white 
space'' on the short form disclosure, which the Bureau has stated is 
paramount to clarity and consumer comprehension.\54\ However, the 
Bureau believes that the reduction here would be minimal, particularly 
when contrasted with the potential diminished benefit to consumers of 
financial institutions eliminating certain relatively expensive but 
beneficial features, such as expedited card replacement or bill pay.
---------------------------------------------------------------------------

    \54\ 82 FR 29630, 29639 (June 29, 2017); see also 81 FR 83934, 
84024-25 (Nov. 22, 2016).
---------------------------------------------------------------------------

    The Bureau notes that it expects that, if the three or more fee 
variations cannot be consolidated into two categories in a logical 
manner, or if doing so would cause consumer confusion, the financial 
institution must disclose the name of the additional fee type and the 
highest fee amount in the manner that was required under the 2016 Final 
Rule, rather than avail itself of the new alternative.
    In addition, the Bureau is revising dates in the regulatory text 
and headings in Sec.  1005.18(b)(2)(ix) to reflect the new overall 
effective date of the Prepaid Accounts Rule adopted in this final rule, 
as discussed in detail in part VI below. Section 1005.18(b)(2)(ix)(D) 
describes the timing requirements for the initial assessment of an 
additional fee types disclosure, and Sec.  1005.18(b)(2)(ix)(E) 
describes the timing for the periodic reassessment and update of 
additional fee types disclosures. The Bureau is revising dates in Sec.  
1005.18(b)(2)(ix)(D) and in commentary accompanying Sec.  
1005.18(b)(2)(ix)(D)(1) and (2) and (b)(2)(ix)(E)(2) and (3), including 
the headings, to reflect the new April 1, 2019 effective date. The 
Bureau is not, however, changing the October 1, 2014 date in Sec.  
1005.18(b)(2)(ix)(D)(1) and related commentary, which is the beginning 
of the time frame for which financial institutions may calculate 
additional fee types to disclose, so as not to impose additional burden 
on financial institutions that have already prepared their additional 
fee types calculations in reliance on that date.
    The Bureau is also making certain technical corrections in Sec.  
1005.18(b)(2)(ix) and related commentary. Specifically, the Bureau is 
adjusting terminology for consistency with other portions of the 
regulatory text and commentary in the heading for Sec.  
1005.18(b)(2)(ix)(D) (changing ``additional fee type'' to ``additional 
fee types'') and in comment 18(b)(2)(ix)(E)(4)-1 (changing ``update 
additional fee types disclosures'' to ``update the additional fee types 
disclosure'' and ``listing of the additional fee types disclosures'' to 
``listing of the additional fee types''). The Bureau is also correcting 
grammar and typographical errors in Sec.  1005.18(b)(2)(ix)(E)(2) 
through (4) (changing ``disclosures'' to ``disclosure'' and 
``additional fee types disclosures'' to ``an additional fee types 
disclosure'') and in comments 18(b)(2)(ix)(A)-5.i (changing 
``disclose'' to ``disclosed'') and 18(b)(2)(ix)(E)(2)-1 (changing 
``disclosures'' to ``disclosure'').
18(b)(6) Form of Pre-Acquisition Disclosures
18(b)(6)(i) General
    Section 1005.18(b)(6)(i) states that the pre-acquisition 
disclosures required by Sec.  1005.18(b) must be provided in writing, 
except in certain circumstances where they must be provided 
electronically or orally by telephone pursuant to Sec.  
1005.18(b)(6)(i)(B) and (C), respectively. Specifically, the 2016 Final 
Rule's version of Sec.  1005.18(b)(6)(i)(B) provides, in part, that 
these disclosures must be provided in electronic form when a consumer 
acquires a prepaid account through electronic means, including via a 
website or mobile application, and must be viewable across all screen 
sizes. The 2016 Final Rule's version of Sec.  1005.18(b)(6)(i)(C) 
provides, in part, that the disclosures required by Sec.  1005.18(b)(2) 
and (5) must be provided orally when a consumer acquires a prepaid 
account orally by telephone as described in Sec.  1005.18(b)(1)(iii).
    As explained in the 2016 Final Rule, although the Bureau believed 
that consumers can best review the terms of a prepaid account before 
acquiring it when seeing the terms in written form, the Bureau 
recognized that in certain situations, it is not practicable to provide 
written disclosures. With respect to electronic disclosures, the Bureau 
believed it was important for consumers who decide to go online to 
acquire prepaid accounts to see the relevant disclosures for that 
prepaid account in electronic form. Furthermore, regarding oral 
disclosures, the Bureau believed that when, for example, a consumer 
acquires a prepaid account orally by telephone, it would not be 
practicable for a financial institution to provide these disclosures in 
written form; however, the Bureau believed that consumers should 
nonetheless have the benefit of these pre-acquisition disclosures.\55\
---------------------------------------------------------------------------

    \55\ 81 FR 83934, 84075-77 (Nov. 22, 2016).
---------------------------------------------------------------------------

The Bureau's Proposal
    Through its outreach efforts to industry regarding implementation, 
the Bureau heard concerns from an issuing bank that it would actually 
be more practicable and convenient to provide the short form and long 
form disclosures required by Sec.  1005.18(b) in writing rather than 
electronically or orally for certain payroll card accounts and 
government benefit accounts. The issuing bank explained that, in these 
situations under existing practice today, consumers first receive 
disclosures in writing from the employer or agency; in order to 
actually acquire the account, consumers either go online or call a 
customer service line. The issuing bank also expressed concern about 
the cost to some employers and agencies to train their customer service 
representatives to provide disclosures orally by telephone or to update 
their websites to accommodate the requirements set forth in the 2016 
Final Rule for electronic disclosures, particularly when written 
disclosures are already being provided under existing practice to the 
consumer in advance of acquisition.
    In light of these concerns, the Bureau proposed to revise Sec.  
1005.18(b)(6)(i)(B) and (C) and comment 18(b)(6)(i)(B)-1 to make clear 
that financial institutions are permitted to provide written 
disclosures prior to acquisition rather than having to give the 
disclosures electronically or orally by telephone. The Bureau also 
proposed to add new comment 18(b)(6)(i)-1 to illustrate this proposed 
revision in the payroll card account context. Specifically, the 
proposed comment would have given an example stating that, if an 
employer distributes to new employees printed copies of the disclosures 
required by Sec.  1005.18(b) for a payroll card account, together with 
instructions to complete the payroll card account acquisition process 
online if the employee wishes to be paid via a payroll card account, 
the financial institution is not required to provide the Sec.  
1005.18(b) disclosures electronically via the website because the 
consumer has already received the disclosures pre-acquisition in 
written form. The Bureau believed that the proposed clarification would 
alleviate the concern described above without harm to consumers, 
because the requirement to provide consumers with the disclosures 
before

[[Page 6377]]

they agree to acquire a prepaid account would remain.
Comments Received
    Several industry commenters, including trade associations and an 
issuing bank, supported the proposed changes to Sec.  
1005.18(b)(6)(i)(B) and (C) and related commentary. The issuing bank 
stated that the proposed revisions would illustrate the value of 
printed materials and allow financial institutions and third parties to 
leverage the existing practice of providing consumers with a printed 
copy of the initial disclosures before asking whether they want to 
acquire the prepaid account. One of the trade associations stated that 
printed disclosures are likely more effective and accurate than oral 
disclosures (especially if they are lengthy) because consumers would 
have more time to review them. Another trade association stated that 
providing disclosures electronically or orally when they have already 
been provided in printed form would be inconvenient, redundant, and 
costly and would provide little consumer benefit. This commenter 
further stated that redundancies would burden the enrollment process 
and could negatively impact employees' perception of the payroll card 
option.
    These commenters also offered a few suggested changes. 
Specifically, one of the trade associations stated that the final rule 
should not use the term ``written'' to distinguish printed disclosures 
from electronic disclosures because electronic disclosures are written 
disclosures, as recognized by numerous regulations, including 
Regulation E. This commenter suggested that the Bureau instead refer to 
the written disclosures as ``printed'' or ``paper'' disclosures, which 
it believed would avoid any potential confusion. In addition, the 
issuing bank and another trade association recommended modifying 
comments 18(b)(1)(iii)-1 and 2 to conform to the proposed changes in 
Sec.  1005.18(b)(6)(i)(B) and (C).\56\ The issuing bank also suggested 
renumbering comment 18(b)(1)(iii)-2 as new comment 18(b)(6)(i)(C)-1 and 
inserting a clause at the beginning of that new comment that mirrors 
the clause at the beginning of the first sentence of proposed new 
comment 18(b)(6)(i)(B)-1.
---------------------------------------------------------------------------

    \56\ Specifically, the issuing bank suggested revising comment 
18(b)(1)(iii)-1 to clarify that Sec.  1005.18(b)(1)(iii) applies 
only when a financial institution does not provide the long form 
disclosure before acquisition. The trade association suggested 
revising comment 18(b)(1)(iii)-2 by either referencing Sec.  
1005.18(b)(6)(i)(C) or specifically stating that the disclosures 
need not be provided orally if provided in written form prior to 
acquisition.
---------------------------------------------------------------------------

    The Bureau did not receive any comments opposing this aspect of the 
proposal.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.18(b)(6)(i)(B) and (C) and comment 
18(b)(6)(i)(B)-1 and adopting new comment 18(b)(6)(i)-1 as proposed. 
Final Sec.  1005.18(b)(6)(i)(B) and (C) make clear that financial 
institutions are permitted to provide written disclosures prior to 
acquisition rather than having to give the disclosures electronically 
or orally by telephone. The Bureau continues to believe it is important 
for consumers to receive pre-acquisition disclosures via the method by 
which they acquire a prepaid account. As noted above, however, the 
Bureau also believes that consumers can best review the terms of a 
prepaid account before acquiring it when seeing the terms in written 
form. The Bureau appreciates the concerns raised by commenters 
regarding providing electronic or oral disclosures in this context, and 
believes that if written pre-acquisition disclosures are provided, it 
is not necessary to also require electronic and oral disclosures.
    In addition, as suggested by one of the commenters, the Bureau is 
modifying comment 18(b)(1)(iii)-2, renumbered as new comment 
18(b)(6)(i)(C)-1, for consistency with final Sec.  1005.18(b)(6)(i)(C). 
The Bureau does not believe a similar modification to comment 
18(b)(1)(iii)-1 is necessary as the purpose of that comment is to 
illustrate when a prepaid account is acquired orally by telephone; it 
does not discuss the disclosures required for accounts acquired in that 
manner. Regarding the suggestion from one of the trade associations to 
refer to the written disclosures as ``printed'' or ``paper'' 
disclosures, the Bureau notes that comment 18(b)-1 explains that 
because electronic disclosures need not meet the consumer consent or 
other applicable provisions of the E-Sign Act, Sec.  1005.18(b) 
addresses certain requirements for written and electronic disclosures 
separately. This usage of the terms ``written'' and ``electronic'' is 
also consistent with, for example, the periodic statement alternative 
that is currently in effect for payroll cards under existing Sec.  
1005.18 as well as the modified version for prepaid accounts in the 
2016 Final Rule. Therefore, the Bureau does not believe it is necessary 
to change the term ``written'' disclosure to ``printed'' or ``paper'' 
disclosure and is concerned that doing so might result in additional 
complexities in the rule and create confusion regarding other uses of 
the term ``written'' in the Prepaid Accounts Rule.
    The Bureau is also making technical corrections in the last 
sentence of Sec.  1005.18(b)(6)(i)(C) to correct grammar and a cross-
reference (changing ``disclosures'' to ``the disclosure'' and 
``(b)(1)(ii)(B)'' to ``(b)(1)(ii)(C)'').
18(b)(9) Prepaid Accounts Acquired in Foreign Languages
    Section 1005.18(b)(9)(i) requires a financial institution to 
provide the pre-acquisition disclosures required by Sec.  1005.18(b) in 
a foreign language if the financial institution uses that same foreign 
language in connection with the acquisition of a prepaid account in 
certain circumstances. Specifically, the financial institution must 
provide the disclosures in a foreign language if it principally uses a 
foreign language on the prepaid account packaging material; it 
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; or it provides a 
means for the consumer to acquire a prepaid account by telephone or 
electronically principally in a foreign language. Section 
1005.18(b)(9)(ii) requires financial institutions providing the 
disclosures in a foreign language pursuant to Sec.  1005.18(b)(9)(i) to 
also provide the information required to be disclosed in the long form 
pursuant to Sec.  1005.18(b)(4) in English upon a consumer's request 
and on any part of the website where it discloses this information in a 
foreign language.
    As discussed in the 2016 Final Rule, the Bureau believed that, if a 
financial institution affirmatively targets consumers by advertising, 
soliciting, or marketing to them in a foreign language, principally 
uses a foreign language on the interface that a consumer sees or uses 
to initiate the process of acquiring a prepaid account, or provides a 
way for a consumer to acquire a prepaid account in a foreign language, 
the financial institution is making a deliberate effort to obtain the 
consumer's business using a foreign language and therefore should be 
required to provide the pre-acquisition disclosures in that foreign 
language. The Bureau believed that requiring financial institutions to 
provide pre-acquisition disclosures in a foreign language is 
appropriate in the circumstances described above to ensure that non- 
and limited-English speaking consumers are able to

[[Page 6378]]

understand the terms of a prepaid account prior to acquisition.\57\
---------------------------------------------------------------------------

    \57\ 81 FR 83934, 84091-92 (Nov. 22, 2016).
---------------------------------------------------------------------------

The Bureau's Proposal
    During its outreach efforts to industry regarding implementation, 
the Bureau discussed with an issuing bank its experiences with 
employers and government agencies that contract with third parties to 
provide real-time oral language interpretation services in order to 
facilitate general processes administered by the employer (such as new 
employee on-boarding) or agency (enrollment in a benefits program), 
which may include acquisition of a prepaid account. The issuing bank 
expressed concern that use of these language interpretation services, 
although generally beneficial to affected consumers, may potentially 
present difficulties in providing interpretations of the required 
disclosures to consumers in foreign languages, while also increasing 
costs for the employer or agency due to longer call times.\58\
---------------------------------------------------------------------------

    \58\ 82 FR 29630, 29640 (June 29, 2017).
---------------------------------------------------------------------------

    The issuing bank explained that these language interpretation 
services allow consumers to choose from more than one hundred 
languages, though the employer or agency may not know it will need 
interpretation services in a particular language until a consumer 
requests it. The issuing bank emphasized that it is not involved in 
selecting the third parties providing language interpretation services 
that employers and government agencies might use as part of their 
general enrollment processes, and that the interpreters, who are hired 
to provide language interpretation services only, may not have any 
particular experience with financial disclosures. The issuing bank also 
stated that it would not be able to ensure that the long form 
disclosures, translated into every possible foreign language that could 
be selected by a consumer, could be provided either electronically 
(pursuant to Sec.  1005.18(b)(1)(iii)(B)) or in writing (pursuant to 
Sec.  1005.18(b)(1)(iii)(C)) to the consumer.
    The Bureau thus proposed revisions to Sec.  1005.18(b)(9)(i)(C) to 
provide an exception that would cover the situation described above 
regarding language interpretation services. Specifically, proposed 
Sec.  1005.18(b)(9)(i)(C) would have stated that financial institutions 
must provide the pre-acquisition disclosures in a foreign language in 
connection with the acquisition of a prepaid account if the financial 
institution provides a means for the consumer to acquire a prepaid 
account by telephone or electronically principally in a foreign 
language, except for payroll card accounts and government benefit 
accounts where the foreign language is offered by telephone only via a 
real-time language interpretation service provided by a third party.
Comments Received
    Several industry commenters, including trade associations, an 
issuing bank, and a program manager, supported the proposed revisions 
to Sec.  1005.18(b)(9)(i)(C), stating that without an exception for 
payroll card accounts and government benefit accounts acquired using a 
real-time language interpretation service provided by a third party, 
the costs and compliance risk associated with the Prepaid Accounts 
Rule's foreign language requirement would cause entities to stop 
offering certain foreign language services to the detriment of non- and 
limited-English speaking consumers. The issuing bank and one of the 
trade associations asserted that the rule's original requirement would 
make compliance virtually impossible because government agencies would 
have to anticipate all the languages that might be requested by 
consumers in order to provide properly translated disclosures in 
accordance with the Prepaid Accounts Rule's timing requirements. A 
group of consumer advocates stated that they did not object to the 
narrow exclusion proposed by the Bureau. The program manager urged the 
Bureau to extend the proposed exception to all prepaid products.
    In response to the Bureau's request for comment regarding whether 
it should completely exclude payroll card accounts or government 
benefit accounts from the Sec.  1005.18(b)(9)(i)(C) requirement, a 
trade association representing community banks argued that a complete 
exclusion would be the only meaningful way to eliminate obstacles 
associated with having to provide foreign language disclosures to 
payroll card and government benefit account holders. This commenter 
asserted that community banks are not suited to finance, implement, 
manage, and guarantee a third party's ability to accurately interpret 
and provide real-time financial disclosures pertaining to prepaid 
accounts, and that these issues exist regardless of who delivers the 
disclosures. In contrast, the group of consumer advocates argued that 
payroll card accounts and government benefit accounts should not have a 
categorical exclusion because employees and government benefit 
recipients that are being solicited to open a payroll card account or 
government benefit account in a foreign language should receive the 
pre-acquisition disclosures in that language.
    In response to the Bureau's request for comment about whether there 
are other ways the Bureau might address the issues related to language 
interpretation services explained above, several of these commenters 
stated that the proposed exception in Sec.  1005.18(b)(9)(i)(C) should 
be expanded to include foreign language assistance offered by internal 
resources, not just third parties. One of the trade associations also 
urged the Bureau to clarify that the Sec.  1005.18(b)(9)(i)(C) 
requirement would not be triggered if the financial institution does 
not formally offer language interpretation services in connection with 
telephone acquisition of prepaid accounts but an employee provides 
informal foreign language assistance during the acquisition process, 
because in this case, the financial institution is not affirmatively 
targeting the consumer in a foreign language. It explained that 
language interpretation for onboarding employees and enrolling 
consumers in payroll card or government benefit programs is not always 
performed by a third party, and that employees occasionally use their 
language skills to provide translation and interpretation services for 
consumers without explicit instruction from their employer to do so. It 
also stated that, unless the exception is modified, employers and 
government agencies would likely discourage or even prohibit their 
employees from offering informal assistance and instead use a third-
party language interpretation service in order to qualify for the 
exception, which would be detrimental to consumers who benefit from 
immediate foreign language assistance and would create unnecessary 
impediments to the employers and agencies.\59\
---------------------------------------------------------------------------

    \59\ A trade association also commented that, without some 
flexibility, the foreign language requirement would be particularly 
burdensome for financial institutions that originate prepaid 
products exclusively through a branch network and that have already 
made significant efforts to service areas with a high number of non- 
and limited-English speaking consumers (such as by hiring staff with 
foreign language speaking abilities and opening offices in those 
areas). The Bureau notes that, as discussed in the 2016 Final Rule, 
even principally using a foreign language in person does not require 
financial institutions to provide pre-acquisition disclosures in a 
foreign language pursuant to Sec.  1005.18(b)(9). 81 FR 83934, 84091 
(Nov. 22, 2016).
---------------------------------------------------------------------------

    In addition, one of the trade associations and the issuing bank 
requested that the Bureau consider clarifying that a third party's 
(e.g., they said, an employer's or retail partner's)

[[Page 6379]]

telephone or electronic acquisition activities that are unrelated to 
the financial services offered by the financial institution are not 
imputed to the financial institution.
    Relatedly, the issuing bank requested that the Bureau consider 
clarifying that certain State-required pre-acquisition disclosures for 
payroll card accounts would not implicate the advertising, soliciting, 
and marketing trigger under Sec.  1005.18(b)(9)(i)(B). This commenter 
expressed concern that employee onboarding materials translated 
pursuant to State law could be deemed a solicitation under Sec.  
1005.18(b)(9)(i)(B) if such material includes information about how to 
acquire the payroll card account by telephone or electronically, thus 
requiring financial institutions to provide pre-acquisition disclosures 
in a foreign language. This commenter explained that financial 
institutions might not be made aware of such scenarios and, even if 
they are, may not have enough lead time to respond appropriately. This 
commenter further stated that because accurate translations take time 
to develop, it believes that card acquisition delays could result and 
engender claims of disparate treatment by non-English speaking 
employees.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revision to Sec.  1005.18(b)(9)(i)(C) with an additional clarification 
regarding informal or ad hoc telephone conversations, as described 
below. Specifically, final Sec.  1005.18(b)(9)(i)(C) provides that 
foreign language pre-acquisition disclosures are required when a 
financial institution provides a means for the consumer to acquire a 
prepaid account by telephone or electronically principally in a foreign 
language. However, foreign language pre-acquisition disclosures are not 
required for payroll card accounts and government benefit accounts 
where the foreign language is offered by telephone via a real-time 
language interpretation service provided by a third party or by an 
employer or government agency on an informal or ad hoc basis as an 
accommodation to prospective payroll card account or government benefit 
account holders. Relatedly, the Bureau is adding a cross-reference to 
final Sec.  1005.18(b)(9)(i)(C) in comments 18(b)(9)-1.i.E and ii.B, 
which set forth examples regarding acquisition of prepaid accounts by 
telephone. The Bureau is also making a technical correction in comment 
18(b)(9)-1 introductory text to correct a cross-reference (changing 
``Sec.  1005.18(b)(2) of this section'' to ``Sec.  1005.18(b)'').
    In addition, the Bureau is adopting new comment 18(b)(9)-1.ii.D to 
provide an example of an informal telephone conversation that would not 
trigger the requirement in final Sec.  1005.18(b)(9)(i)(C). New comment 
18(b)(9)-1.ii.D provides the following example of a situation in which 
the financial institution would not be required to provide the pre-
acquisition disclosures in a foreign language: A consumer calls a 
government agency to enroll in a government benefits program. The 
government agency does not offer through its telephone system an option 
for consumers to proceed in a foreign language. An employee of the 
government agency assists the consumer with the enrollment process, 
including helping the consumer acquire a government benefits account. 
The employee also happens to speak the foreign language in which the 
consumer is most comfortable communicating, and chooses to communicate 
with the consumer in that language to facilitate the enrollment 
process. In this case, the employee offered language interpretation 
assistance on an informal or ad hoc basis to accommodate the 
prospective government benefits account holder.
    The Bureau intended the foreign language requirements to cover 
situations where a financial institution affirmatively targets 
consumers in a foreign language, including providing the means to 
acquire a prepaid account by telephone in that foreign language. 
However, the Bureau believes that the situations described by industry 
stakeholders regarding real-time language interpretation services 
offered over the telephone by a third party for payroll card accounts 
and government benefit accounts--as well as informal interpretation 
assistance provided by employees of an employer or government agency--
are distinct, particularly to the extent they involve providing such 
services in the course of facilitating more general processes by an 
employer or government agency, such as the onboarding of a new employee 
or enrollment of a consumer in a benefits program. With respect to 
informal and ad hoc telephone assistance, the Bureau understands, based 
on comments received from industry, that such conversations may occur 
over the telephone in a foreign language, where the employer or 
government agency itself (rather than a third party) is communicating 
in a foreign language as an accommodation to prospective payroll card 
account or government benefit account holders. The Bureau is thus 
adopting language in final Sec.  1005.18(b)(9)(i)(C) providing that 
such activities do not trigger the Sec.  1005.18(b)(9)(i) requirement 
to provide pre-acquisition disclosures in a foreign language. The 
Bureau remains concerned that applying the foreign language disclosure 
requirements of Sec.  1005.18(b)(9)(i) in such circumstances might 
discourage employers and agencies from making language interpretation 
services available at all.
    Nonetheless, the Bureau does not believe it would be appropriate to 
completely exclude payroll card accounts and government benefit 
accounts from the foreign language disclosure requirements of Sec.  
1005.18(b)(9) as requested by one commenter. When prospective payroll 
card account or government benefit account holders are affirmatively 
targeted in a foreign language, the Bureau continues to believe it is 
appropriate to require the financial institution to provide foreign 
language pre-acquisition disclosures in accordance with Sec.  
1005.18(b)(9)(i).\60\
---------------------------------------------------------------------------

    \60\ Financial institutions, including government agencies 
pursuant to Sec.  1005.15(a)(1), must provide the pre-acquisition 
disclosures required by Sec.  1005.18(b) in a foreign language in 
connection with the acquisition of a prepaid account, if they 
principally use that foreign language in certain circumstances. The 
provision discussed in this section, Sec.  1005.18(b)(9)(i)(C), 
requires a financial institution to provide foreign language 
disclosures if it provides a means for a consumer to acquire a 
prepaid account by telephone or electronically principally in a 
foreign language. Foreign language disclosures are also required 
when the financial institution principally uses the foreign language 
on the prepaid account packaging material, or it principally uses 
that foreign language to advertise, solicit, or market a prepaid 
account and provide a means in the advertisement, solicitation, or 
marketing material that the consumer uses to acquire the prepaid 
account by telephone or electronically. Sec.  1005.18(b)(9)(i)(A) 
and (B).
---------------------------------------------------------------------------

    The Bureau believes the modifications made in final Sec.  
1005.18(b)(9)(i)(C) sufficiently address the specific concerns raised 
by industry. The exception regarding real-time language interpretation 
services offered over the telephone by a third party addresses industry 
concerns about the costs and operational challenges associated with 
providing the pre-acquisition disclosures for payroll card accounts and 
government benefit accounts in any language a consumer could select 
through a third-party language interpretation service, including 
concerns that financial institutions would be unable to ensure the 
disclosures are interpreted accurately or provided to the consumer in 
accordance with Sec.  1005.18(b)(1)(iii)(B) and (C). In addition, the 
exception regarding assistance offered on an informal or ad hoc basis 
as an accommodation to prospective payroll card account or

[[Page 6380]]

government benefit account holders addresses the concerns raised by 
industry about employers and government agencies that would likely 
discourage or even prohibit their employees from offering such 
interpretation assistance to the detriment of consumers who benefit 
from the immediate assistance.
    Furthermore, the Bureau is not excluding any other type of prepaid 
account from the Sec.  1005.18(b)(9)(i)(C) requirement at this time, as 
requested by one commenter, because the Bureau is not persuaded that 
financial institutions are likely to face the same challenges related 
to language interpretation services outside the payroll and government 
benefit context.
    The Bureau declines to clarify, as one commenter suggested, that 
providing certain State-required pre-acquisition disclosures for 
payroll card accounts would not implicate the advertising, soliciting, 
and marketing trigger for providing foreign language disclosures. The 
Bureau does not believe that such a blanket clarification would be 
appropriate; if State-required disclosures rise to the level of 
principal usage of a foreign language in advertising, soliciting, or 
marketing a payroll card account (or any other type of prepaid 
account), the Bureau believes that consumers deserve to have the full 
pre-acquisition disclosures for that account provided in that foreign 
language.
    Regarding a related issue raised by two commenters, the Bureau 
agrees that the foreign language activity of a third party that is 
wholly unrelated to a financial institution's prepaid accounts should 
not implicate the financial institution's obligations under the Prepaid 
Accounts Rule. However, the Bureau does not believe that a modification 
to the regulatory text or commentary of the rule is necessary on this 
point as the rule is targeted to address situations involving use of 
foreign languages on the prepaid account packaging material, in 
advertising, solicitation, or marketing, and in electronic or 
telephonic acquisition processes.
18(d) Modified Disclosure Requirements
18(d)(1) Initial Disclosures
18(d)(1)(ii) Error Resolution
    As discussed in detail in the section-by-section analysis of Sec.  
1005.18(e)(3) below, the Bureau is making certain changes regarding 
error resolution and limited liability requirements to address concerns 
about the treatment of unverified prepaid accounts. Relatedly, the 
Bureau is amending Sec.  1005.18(d)(1)(ii), which requires certain 
disclosures regarding error resolution. One prepaid issuer commented in 
support of this aspect of the proposal; no other commenters addressed 
this provision specifically. The Bureau is thus finalizing these 
amendments as proposed.
    EFTA section 905(a)(7) requires financial institutions to provide a 
summary of the error resolution provisions in EFTA section 908 and the 
consumer's rights thereunder as part of the initial disclosures and on 
an annual basis thereafter.\61\ These requirements are implemented for 
accounts generally in Sec. Sec.  1005.7(b)(10) and 1005.8(b). In the 
2016 Final Rule, the Bureau in Sec.  1005.18(d)(1)(ii) required 
financial institutions following the periodic statement alternative in 
Sec.  1005.18(c)(1) to modify their Sec.  1005.7(b) initial disclosures 
by disclosing a notice concerning error resolution that is 
substantially similar to the notice contained in appendix A-7(b), in 
place of the notice required by Sec.  1005.7(b)(10). The notice in 
appendix A-7(b) explains to consumers the error resolution timeframes 
that apply when financial institutions follow the periodic statement 
alternative. To further the purposes of EFTA to provide a framework to 
establish the rights, liabilities, and responsibilities of prepaid 
account consumers, the Bureau is exercising its authority under EFTA 
section 904(c) to adopt an adjustment to the error resolution notice 
requirement of EFTA section 905(a)(7), to permit notices for prepaid 
accounts as described in Sec.  1005.18(d)(1)(ii), in order to 
facilitate compliance with error resolution requirements.
---------------------------------------------------------------------------

    \61\ 15 U.S.C. 1693c(a)(7) and 1693f.
---------------------------------------------------------------------------

    Specifically, the Bureau is amending Sec.  1005.18(d)(1)(ii) to 
clarify that, for prepaid account programs for which the financial 
institution does not have a consumer identification and verification 
process, the financial institution must describe its error resolution 
process and limitations on consumers' liability for unauthorized 
transfers or, if none, state that there are no such protections. The 
revisions to Sec.  1005.18(e)(3), discussed below, will not require a 
financial institution to offer limited liability and error resolution 
protections on prepaid accounts in a program for which the financial 
institution does not have a consumer identification and verification 
process. The clarification in Sec.  1005.18(d)(1)(ii) is intended to 
ensure that financial institutions accurately disclose to consumers the 
limited liability and error resolution protections (if any) that would 
apply to any such prepaid account in their initial disclosures.\62\
---------------------------------------------------------------------------

    \62\ As discussed in the section-by-section analysis of Sec.  
1005.18(e)(3) below, that provision as amended by this final rule 
provides that financial institutions must comply with any error 
resolution and limited liability protections they disclose for 
prepaid accounts in programs for which the financial institution 
does not have a consumer identification and verification process.
---------------------------------------------------------------------------

18(e) Modified Limitations on Liability and Error Resolution 
Requirements
18(e)(3) Limitations on Liability and Error Resolution for Unverified 
Accounts
    EFTA section 908 governs the timing and other requirements for 
consumers and financial institutions pertaining to error resolution, 
including provisional credit.\63\ EFTA section 909 governs consumer 
liability for unauthorized EFTs.\64\ These requirements are implemented 
for accounts generally in Sec. Sec.  1005.11 and 1005.6, respectively. 
In the 2014 Proposal, the Bureau proposed to use its exceptions 
authority under EFTA section 904(c) to add new Sec.  1005.18(e)(3) to 
except unverified prepaid accounts from the error resolution and 
limited liability requirements of EFTA sections 908 and 909 to the 
extent such accounts remained unverified. That paragraph would have 
provided that for prepaid accounts that are not payroll card accounts 
or government benefit accounts,\65\ if a financial institution 
disclosed to the consumer the risks of not registering and verifying 
the prepaid account using language substantially similar to the model 
clause proposed by the Bureau, a financial institution would not have 
been required to comply with the liability limits and error resolution 
requirements under Sec. Sec.  1005.6 and 1005.11 for any prepaid 
account for which it had not completed its collection of consumer 
identifying information and identity verification.\66\

[[Page 6381]]

The 2014 Proposal would have required financial institutions to comply 
with Regulation E requirements regarding limited liability and error 
resolution, including provisional credit, for accounts that were 
verified; this would have included applying those protections even to 
unauthorized transfers or other errors that occurred prior to 
verification.\67\ The Bureau solicited comment on this aspect of the 
2014 Proposal, including regarding whether the limited liability and 
error resolution provisions of Regulation E should apply to unverified, 
as well as verified, accounts.\68\
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    \63\ 15 U.S.C. 1693f.
    \64\ 15 U.S.C. 1693g.
    \65\ As explained in the 2016 Final Rule, the Bureau excluded 
payroll card accounts and government benefit accounts from this 
provision to ensure that, among other things, they maintain the same 
level of error resolution and limited liability protections that 
they have under existing Regulation E. 81 FR 83934, 84112 n.502 
(Nov. 22, 2016). Furthermore, employers and government agencies are 
generally required to verify the identity of a prospective payroll 
card account or government benefit account holder to determine 
employment status or eligibility for benefits.
    \66\ As the Bureau explained in the 2014 Proposal, this 
provision primarily affects GPR cards that are purchased at retail, 
where the financial institution may--but does not always--obtain 
consumer identifying information and perform verification at the 
time the consumer calls or goes online to activate the card. Because 
of restrictions imposed by the Financial Crimes Enforcement 
Network's (FinCEN) Prepaid Access Rule (31 CFR 1022.210(d)(1)(v)) 
and the payment card networks' operating rules, among other things, 
the Bureau understands that consumer identification and verification 
is almost always performed before a card can be reloaded, used to 
make cash withdrawals, or used to receive cash back at the point of 
sale. However, the Bureau stated it was aware at the time of the 
2014 Proposal that some providers allow consumers to use GPR cards 
purchased at retail to make purchases immediately. 79 FR 77102, 
77185 (Dec. 23, 2014).
    \67\ Regulation E sets certain timelines for investigation of 
alleged errors. A financial institution may take up to the maximum 
length of time permitted under Sec.  1005.11(c)(2)(i) or (3)(ii), as 
applicable, to complete an investigation if it extends provisional 
credit to the consumer for the amount of the alleged error, so that 
consumers may continue to access the funds while the financial 
institution conducts its investigation.
    \68\ 79 FR 77101, 77185 (Dec. 23, 2014).
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    The Bureau altered its approach in the 2016 Final Rule in several 
respects, drawing on two primary sources of information. The first was 
its analysis of 325 prepaid account agreements, in which the Bureau 
found that a large majority of the agreements reviewed purported to 
offer Regulation E error resolution and limited liability 
protections.\69\ The second was comments received from both industry 
and consumer advocacy groups reflecting a wide spectrum of views on 
this aspect of the 2014 Proposal, with some consumer groups stating 
they believed it struck a good balance and others advocating for 
increased protections, while industry commenters focused mainly on 
provisional credit rather than error resolution and limited liability 
protections in general. In response to these considerations, the Bureau 
finalized Sec.  1005.18(e)(3) and related commentary with several 
substantive revisions. Specifically, under the 2016 Final Rule's 
version of Sec.  1005.18(e)(3), financial institutions were required to 
provide error resolution and limited liability protections for all 
prepaid accounts, including accounts for which the financial 
institution has not successfully completed its consumer identification 
and verification process (i.e., accounts that have not concluded the 
process, accounts where the process is concluded but the consumer's 
identity could not be verified, and accounts in programs for which 
there is no such process). However, for unverified accounts, financial 
institutions were not required to provide provisional credit while 
investigations are pending. The Bureau also added additional clarifying 
language to emphasize that financial institutions were not required to 
adopt a consumer identification and verification process for all 
prepaid accounts and to clarify when a financial institution would be 
deemed to have completed its consumer identification and verification 
process for a particular prepaid account.
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    \69\ Bureau of Consumer Financial Protection, Study of Prepaid 
Account Agreements, at 13 tbl. 3 and 16 tbl. 4 (Nov. 2014) (Study of 
Prepaid Account Agreements), available at http://files.consumerfinance.gov/f/201411_cfpb_study-of-prepaid-account-agreements.pdf. Specifically, the Bureau found that 77.85 percent of 
all agreements reviewed appeared to provide full error resolution 
protections, with provisional credit available for all consumers 
where the error could not be resolved within a defined period of 
time, and 88.92 percent of all agreements reviewed appeared to 
provide liability limitations consistent with Regulation E (or 
better). Id. In conducting this study, the Bureau observed that very 
few agreements expressly differentiated between the protections 
applicable to verified and unverified accounts. In fact, many of the 
account agreements reviewed by the Bureau suggested that error 
resolution and limited liability protections were provided in 
accordance with Regulation E. 82 FR 29630, 29643 n. 57 (June 29, 
2017). The Bureau further understood from comments on the 2014 
Proposal that many financial institutions provided some limited 
liability and error resolution protections--though no provisional 
credit--for prepaid accounts that had not or could not be verified. 
Thus, the Bureau believed that the 2016 Final Rule's version of 
Sec.  1005.18(e)(3) generally reflected industry practice at the 
time. 81 FR 83934, 84112 (Nov. 22, 2016).
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The Bureau's Proposal
    Based on concerns raised by industry during the Bureau's outreach 
efforts regarding implementation and in connection with the 2017 
Effective Date Proposal,\70\ the Bureau proposed to revise Sec.  
1005.18(e)(3) and related commentary to provide that, for prepaid 
accounts that are not payroll card accounts or government benefit 
accounts, a financial institution is not required to comply with the 
liability limits and error resolution requirements in Sec. Sec.  1005.6 
and 1005.11 for any prepaid account for which it has not successfully 
completed its consumer identification and verification process. For 
purposes of this provision, the Bureau proposed that a financial 
institution would be deemed to have not successfully completed its 
consumer identification and verification process where: (A) The 
financial institution has not concluded its consumer identification and 
verification process with respect to a particular prepaid account, 
provided that it has disclosed to the consumer the risks of not 
verifying the account using a notice that is substantially similar to 
the model notice contained in proposed appendix A-7(c); (B) the 
financial institution has concluded its consumer identification and 
verification process with respect to a particular prepaid account, but 
could not verify the identity of the consumer, provided that it has 
disclosed to the consumer the risks of not registering and verifying 
the account using a notice that is substantially similar to the model 
notice contained in proposed appendix A-7(c); or (C) the financial 
institution does not have a consumer identification and verification 
process for the prepaid account program, provided that it has made the 
alternative disclosure described in proposed Sec.  1005.18(d)(1)(ii), 
discussed above, and complies with the process it has disclosed.\71\ 
The proposal would have thus returned Sec.  1005.18(e)(3) to 
approximately what the Bureau had proposed in the 2014 Proposal, with 
additional modifications to clarify treatment of prepaid account 
programs for which there is no consumer identification and verification 
process.
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    \70\ These concerns are discussed in detail in the June 2017 
Proposal. See 82 FR 29630, 29642-43 (June 29, 2017).
    \71\ Comment 18(e)-5 (to which the Bureau proposed some 
modifications for clarity and consistency, as discussed below) makes 
clear that a financial institution may not delay completing its 
consumer identification and verification process or refuse to verify 
a consumer's identity based on the consumer's assertion of an error.
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    Proposed Sec.  1005.18(e)(3)(iii) would have provided that, once a 
financial institution successfully completes its consumer 
identification and verification process with respect to a prepaid 
account, the financial institution must limit the consumer's liability 
for unauthorized transfers and resolve errors that occurred prior to 
verification with respect to any unauthorized transfers or other errors 
that satisfy the timing requirements of Sec.  1005.6 or Sec.  1005.11, 
or the modified timing requirements in Sec.  1005.18(e), as applicable.
    The Bureau also proposed changes to the commentary accompanying 
Sec.  1005.18(e). The proposed revisions to comment 18(e)-4 would have 
aligned it with the proposed text of Sec.  1005.18(e)(3) as well as 
added commentary from the 2014 Proposal to explain that, for an 
unauthorized transfer or other error asserted on a previously 
unverified prepaid account, whether a consumer has timely reported the 
unauthorized transfer or other error would be based

[[Page 6382]]

on the date the consumer contacts the financial institution to report 
the unauthorized transfer or other error, not the date the financial 
institution successfully completes its consumer identification and 
verification process. For an error asserted on a previously unverified 
prepaid account, the time limits for the financial institution's 
investigation pursuant to Sec.  1005.11(c) would begin on the day 
following the date the financial institution successfully completed its 
consumer identification and verification process.
    The Bureau also proposed to revise comments 18(e)-5 and 6 to more 
closely align with the proposed text of Sec.  1005.18(e)(3) and to 
clarify the example provided in comment 18(e)-5 illustrating a 
situation where a financial institution has not successfully completed 
its consumer identification and verification process. Proposed comment 
18(e)-5 would have continued to make clear that financial institutions 
may not delay completing their consumer identification and verification 
processes or refuse to verify a consumer's identity in order to avoid 
investigating an error asserted by a consumer.
Comments Received
    The Bureau received a number of comments on its proposed revisions 
to the error resolution and limited liability regime for prepaid 
accounts. Industry commenters (including trade associations, issuing 
banks, program managers, and others) as well as a think tank supported 
the Bureau's proposal to except prepaid accounts that have not 
successfully completed the consumer identification and verification 
process from error resolution and limited liability requirements to the 
extent such accounts remain unverified.\72\ Industry commenters 
generally cited the difficulty of determining whether an asserted error 
was actually erroneous without having access to information about the 
consumer provided during the registration process. These commenters 
suggested that this would lead to increased fraud losses for the 
industry, primarily arising from instances where a transaction that was 
in fact authorized by the accountholder is fraudulently asserted as an 
error (often referred to as friendly fraud or first-party fraud). They 
asserted that, because of the increased risk of friendly fraud, 
financial institutions would limit pre-verification functionality on 
their prepaid accounts.
---------------------------------------------------------------------------

    \72\ The think tank also suggested that the Bureau monitor 
issues relating to pre-verification errors and consider whether 
adjustments are necessary in the future.
---------------------------------------------------------------------------

    Several commenters stated that financial institutions' error 
resolution procedures often require comparison of information provided 
by the consumer when asserting an error with information previously 
provided by the consumer to the financial institution (for example, by 
matching the purchaser's name and shipping address for an online 
purchase with the consumer's information on file with the financial 
institution); such information would not be available if the 
identification and verification process has not been completed.
    Commenters also asserted that the provision in the 2016 Final Rule 
excepting unverified accounts from the provisional credit requirement 
does not provide meaningful relief because financial institutions often 
are ultimately unable to establish whether a given transaction on an 
unverified account was in fact unauthorized. Under EFTA section 909(b), 
the burden of proof is on the financial institution to show that an 
alleged error was in fact an authorized transaction; if the financial 
institution cannot establish proof of valid authorization, the 
financial institution must credit the consumer's account. These 
commenters concluded that the rule would therefore increase financial 
institutions' fraud protection and mitigation costs.
    A trade association predicted that, if required to resolve errors 
on unverified prepaid accounts that allow immediate access to funds, 
financial institutions would likely issue refunds on disputed 
transactions via paper check rather than by refunding directly to the 
prepaid account in order to avoid fraud and having to recredit accounts 
for alleged unauthorized transactions that the financial institution 
does not have sufficient information to investigate. However, issuing 
refunds by paper check would increase financial institutions' costs and 
delay consumers' receipt of refunds.
    In response to the Bureau's proposal to require financial 
institutions to limit consumers' liability for unauthorized transfers 
and their obligation to resolve errors that occurred prior to 
verification for accounts that are subsequently verified (subject to 
the timing requirements of Sec.  1005.6 or Sec.  1005.11, or the 
modified timing requirements in Sec.  1005.18(e), as applicable), 
several industry commenters urged the Bureau to further limit the scope 
of pre-verification transactions subject to Regulation E error 
resolution and limited liability protections.
    A number of industry commenters requested that the Bureau only 
require error resolution and limited liability protections for 
transactions that take place within a specified time period (generally 
30 days) prior to either the consumer's initial submission of 
registration information or successful completion of the consumer 
identification and verification process. Several of these commenters 
stated that requiring error resolution and limited liability 
protections over a longer time period increases the potential for fraud 
losses because investigation becomes increasingly difficult as time 
goes on; a trade association suggested that financial institutions may 
not have access to information necessary to investigate errors that 
occur on unverified accounts more than 30 days prior to assertion of 
the error. A prepaid issuer and a trade association suggested in their 
comment letters that, because the vast majority of consumers who ever 
register a prepaid account do so within 30 days after acquiring the 
account, a 30-day cap would cover most consumers who ultimately 
successfully complete the identification and verification process. The 
same issuer and two trade associations also suggested that a prepaid 
account may be used by multiple individuals prior to verification, 
which could further complicate subsequent investigations.
    Other industry commenters suggested that the Bureau exclude from 
the rule's error resolution and limited liability protections all 
transactions that occur prior to either the consumer's initial 
submission of information or successful completion of the consumer 
identification and verification process, rather than upon the 
consumer's acquisition of the account. Several of these commenters 
stated that because financial institutions rely on verified consumer 
information to identify fraudulent transactions when they are 
attempted, it would be inherently more difficult for financial 
institutions to limit their fraud exposure on pre-verification 
transactions, even for accounts that are ultimately verified. 
Specifically, a program manager commented that fraudsters may use 
stolen identities to complete the registration process, which may go 
undetected for an extended period; this would allow those fraudsters to 
collect provisional credits on pre-verification transactions that are 
fraudulently asserted as erroneous. A business advocacy group and a 
trade association both suggested that financial institutions would not 
be able to meet the Regulation E timing requirements for errors that 
occur before registration is completed, thus requiring financial 
institutions to provide refunds even on

[[Page 6383]]

some errors that could have been fraudulently asserted, either because 
investigations would take too long or because financial institutions 
would lack access to necessary information regardless of the amount of 
time available for an investigation, respectively. Several industry 
commenters argued that, rather than requiring Regulation E error 
resolution and limited liability protections on pre-verification 
errors, the Bureau should highlight to consumers the importance of 
promptly registering their prepaid accounts in order to receive full 
protections under Regulation E, or help consumers better understand the 
differences between consumer protections associated with prepaid 
accounts and gift cards. One industry commenter opposed providing any 
error resolution and limited liability protections to pre-verification 
transactions based on the argument that it would reward consumers for 
their failure to register prepaid accounts.
    Consumer advocates did not oppose the Bureau's proposal, but did 
urge the Bureau to expressly deem certain types of prepaid accounts 
registered and verified upon issuance in order to make clear such 
accounts were not eligible for the proposed exception. For example, a 
group of consumer advocates suggested that where the person to whom a 
prepaid account is issued is known to the furnisher of the account 
(including, they urged, prepaid accounts used to pay individuals for 
jury service, prison release cards, and utility refunds), the prepaid 
account should be deemed to have successfully completed the consumer 
identification and verification process because the furnisher already 
has significant information about the consumer. Another consumer 
advocate urged the Bureau to deem prison release cards to have 
successfully completed the consumer identification and verification 
process upon issuance, both because the correctional facility or law 
enforcement agency already has significant information about that 
person and because, this commenter contended, people who have recently 
been released from prison or jail are particularly likely to lack 
regular and reliable access to a telephone or the internet, making 
prompt registration of this type of prepaid account prohibitively 
difficult.
    A program manager and a trade association both urged the Bureau not 
to adopt the alternative approach described in the proposal, in which 
the Bureau considered whether it might be appropriate to apply a 
different standard to prepaid accounts for which a consumer has 
attempted but failed to complete the consumer identification and 
verification process. These commenters noted the difficulty, identified 
in the proposal, in determining whether a consumer has definitively 
``failed to complete'' the process, as opposed there being a delay in 
the consumer's providing information requested by the financial 
institution that is needed to complete the process. They also suggested 
that ``failed to complete'' accounts may in fact be particularly 
susceptible to fraudulent activity because, in many cases, they 
represent instances where the financial institution's fraud prevention 
protocols have detected a higher likelihood of an attempted fraudulent 
registration (such as, for example, the provided name and address not 
matching public records).
    Commenters also raised issues related to error resolution and 
limited liability issues addressed by the 2016 Final Rule but outside 
the scope of the June 2017 Proposal. Specifically, a trade association 
requested that the Bureau make several modifications to the error 
resolution and limited liability protections applied to prepaid 
accounts after they have successfully completed the financial 
institution's consumer identification and verification process (rather 
than before, which was the subject of the proposal). Separately, an 
anonymous commenter stated that financial institutions should incur 
full liability for any error that is not resolved within 30 days.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.18(e)(3)(iii) and comment 18(e)-4 with 
substantial modification; Sec.  1005.18(e)(3)(i), (e)(3)(ii), and 
(e)(3)(ii)(C) and comment 18(e)-5 are finalized as proposed; and 
comment 18(e)-6 is finalized as proposed with one minor revision for 
consistency. The final rule provides that for prepaid accounts that are 
not payroll card accounts or government benefit accounts, a financial 
institution is not required to comply with the liability limits and 
error resolution requirements in Sec. Sec.  1005.6 and 1005.11 for any 
prepaid account for which it has not successfully completed its 
consumer identification and verification process. Unlike the proposal, 
the final rule does not require financial institutions to limit 
liability or resolve errors that occurred prior to verification on 
accounts that are later successfully verified.
    The changes to Sec.  1005.18(e)(3)(iii) revise the paragraph 
heading and text to provide that once a financial institution 
successfully completes its consumer identification and verification 
process with respect to a prepaid account, the financial institution 
must limit the consumer's liability for unauthorized transfers and 
resolve errors that occur following verification in accordance with 
Sec.  1005.6 or Sec.  1005.11, or the modified timing requirements in 
this paragraph (e), as applicable. The revisions to comment 18(e)-4 
parallel the revisions in Sec.  1005.18(e)(3)(iii), and explain that a 
financial institution is not required to limit a consumer's liability 
for unauthorized transfers or resolve errors that occur prior to the 
financial institution's successful completion of its consumer 
identification and verification process with respect to a prepaid 
account. The Bureau is not finalizing the proposed text that would have 
clarified the timelines associated with Regulation E's error resolution 
and limited liability provisions on pre-verification transactions, as 
it is no longer necessary in light of the other changes to Sec.  
1005.18(e)(3).
    To further the purposes of EFTA to provide a framework to establish 
the rights, liabilities, and responsibilities of prepaid account 
consumers and to facilitate compliance with its provisions, the Bureau 
believes it is necessary and proper to exercise its authority under 
EFTA section 904(c) to revise Sec.  1005.18(e)(3) to except accounts 
that have not successfully completed the consumer identification and 
verification process from the error resolution and limited liability 
requirements of EFTA sections 908 and 909. The Bureau continues to 
believe that providing error resolution and limited liability rights to 
consumers even on unverified accounts would be beneficial to consumers, 
and remains concerned, as it expressed in the June 2017 Proposal, that 
consumers with prepaid accounts that have not been or cannot be 
verified will not have a right to Regulation E error resolution and 
limited liability protections. However, absent the change made in this 
final rule, the Bureau is also concerned that financial institutions' 
fear of fraud losses in connection with the 2016 Final Rule would 
prompt them to stop offering prepaid accounts at retail that allow for 
immediate access to funds, to begin providing refunds for accounts that 
fail verification via paper check (thus delaying consumers' ability to 
access their funds), or to make other changes to their programs that 
would decrease the availability or utility of prepaid accounts to 
consumers.\73\ The

[[Page 6384]]

Bureau thus believes that, on balance, it is appropriate to adopt this 
change with respect to unauthorized transactions or other errors that 
occur on prepaid accounts that have not been or cannot be verified.\74\
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    \73\ The Bureau acknowledges that there is some risk that 
changing the approach of the 2016 Final Rule may increase the 
incentive for financial institutions to offer prepaid accounts for 
which there is no consumer identification and verification process 
and are therefore excepted from error resolution and limited 
liability protections. However, the Bureau believes that any such 
incentives are likely to be outweighed by the potential benefits to 
the financial institution of encouraging consumers to register their 
prepaid accounts to increase the functionality and thus the 
longevity of the consumer's use of the account.
    \74\ As noted in the June 2017 Proposal, prepaid accounts that 
require verification prior to issuance will not be affected by this 
provision.
---------------------------------------------------------------------------

    Specifically, the Bureau believes that consumers can obtain 
substantial benefits from those prepaid products that provide immediate 
functionality upon purchase at retail. However, such benefits would be 
lost if such products are no longer offered because of fraud concerns. 
Similarly, consumers who purchase prepaid products but are not able to 
complete the consumer identification and verification process 
successfully could be subject to a period of financial disruption if 
they are required to wait for a return of their funds by check. For 
example, consider a consumer who loads funds into a new prepaid account 
and is subsequently unable to successfully complete the financial 
institution's consumer identification and verification process. Under 
current industry practice, many financial institutions allow those 
consumers to spend down the funds that have been loaded into the 
account in this situation. But if the financial institution were to 
deactivate the prepaid card and provide a refund in this situation via 
paper check, the consumer would be unable to access those funds until 
receiving the check, which is likely to take at least several business 
days. Furthermore, the consumer may encounter difficulties in receiving 
the refund check if the consumer lacks a fixed address, and may incur 
fees to cash the refund check.
    The Bureau is also aware that consumers use prepaid accounts for a 
variety of reasons, and that consumers who do not wish to submit their 
personal information for verification or who may not be able to have 
their identities verified would have few other options if financial 
institutions stop allowing any functionality prior to successful 
verification. Such consumers could choose instead to use open loop gift 
cards,\75\ for which there is generally not an identification and 
verification process, but in that case would not receive any of the 
other benefits of the Prepaid Accounts Rule.
---------------------------------------------------------------------------

    \75\ An ``open loop'' gift card can be used to make purchases at 
locations where cards that run on one of the major card networks are 
accepted. However, such cards are generally excluded from coverage 
under the 2016 Final Rule, and instead are generally covered by the 
Gift Card Rule, which requires certain disclosures, limits the 
imposition of certain fees, and contains other restrictions. As 
discussed in the 2016 Final Rule, the Gift Card Rule was adopted by 
the Federal Reserve Board in 2010 to implement certain sections of 
the Credit CARD Act. See 81 FR 83934, 83946-47 (Nov. 22, 2016). The 
Bureau believes that consumers who use cards that are not labeled 
and marketed as gift cards should be provided the same protections 
as other prepaid accounts under the 2016 Final Rule, rather than the 
more limited protections of the Gift Card Rule. Id. at 83977.
---------------------------------------------------------------------------

    Accordingly, to avoid such outcomes, the Bureau concludes that it 
is appropriate to not require compliance with Regulation E error 
resolution and limited liability provisions with regard to transactions 
on prepaid accounts that have not been or cannot be verified. Although 
the Bureau proposed to require financial institutions to comply with 
these requirements once an account has been successfully verified with 
regard to transactions that occurred prior to the completion of the 
verification process, the Bureau has concluded based on information 
presented in the comments and further analysis that a requirement to do 
so in all circumstances could present complications and fraud risks 
that may not be justified by the potential benefits. The Bureau is 
aware that some financial institutions provide limited liability and 
error resolution protections (though perhaps without provisional 
credit) on unverified accounts, for pre-verification transactions, or 
both, as matter of contract or customer service.\76\ The Bureau 
encourages financial institutions to continue and expand offering such 
services to consumers in appropriate circumstances.
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    \76\ In conducting its Study of Prepaid Account Agreements, the 
Bureau observed that very few agreements expressly differentiated 
between the protections applicable to verified and unverified 
accounts. In fact, as noted above, many of the account agreements 
reviewed by the Bureau suggested that error resolution and limited 
liability protections were provided in accordance with Regulation E.
---------------------------------------------------------------------------

    In particular, the Bureau believes, based on comments received and 
its understanding of the market, that the impact on consumers of this 
change from the June 2017 Proposal should be extremely limited for 
several reasons. First, the only accounts at issue here are those that 
consumers acquire before the financial institution conducts its 
consumer identification and verification process (generally, prepaid 
accounts sold at retail). Second, in most prepaid programs where 
accounts are acquired prior to verification, consumers must attempt the 
identification and verification process before they can use the 
account; verification generally occurs in the course of the initial 
activation phone call or website visit, so consumers whose identities 
are successfully verified will thus complete the process prior to using 
the prepaid account and therefore should be unaffected by this 
change.\77\ Likewise, consumers who fail the verification process would 
not have been entitled to error resolution and limited liability rights 
under the June 2017 Proposal in any event. Third, the Bureau 
understands that for programs that allow usage prior to attempted or 
completed verification, most consumers who successfully verify their 
accounts do so shortly after acquisition. Finally, the Bureau 
understands that any consumers who do conduct pre-verification 
transactions infrequently assert errors.
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    \77\ The Bureau understands that in nearly all cases, consumers 
who attempt the identification and verification process will either 
immediately be successfully verified or fail verification; only in a 
small number of cases will the verification process take longer than 
a few minutes. Thus, consumers with prepaid accounts that require 
attempted verification before use will largely not conduct pre-
verification transactions at all.
---------------------------------------------------------------------------

    Other factors also limit potential losses to consumers. For 
example, as noted above, the Bureau understands that, for a variety of 
reasons--including FinCEN's Prepaid Access Rule and the payment card 
networks' operating rules--the consumer identification and verification 
process is almost always performed before a card can be reloaded, used 
to make cash withdrawals, or used to receive cash back at the point of 
sale. Thus, even for consumers with prepaid accounts that can be used 
prior to attempting or completing verification, disputes are generally 
limited to purchase transactions because other functions (such as 
reloads and ATM withdrawals) are not typically permitted prior to 
verification. Additionally, consumers' potential losses from pre-
verification errors will be, at most, the amount of the initial load, 
which the Bureau understands to generally be limited to a maximum of 
$500, and in practice often may be significantly less. Thus, the Bureau 
believes that, in the current market, both the frequency and magnitude 
of pre-verification errors are low for these accounts. More broadly, 
the Bureau intends to engage in market monitoring to assess the impact 
on both financial institutions and consumers of not requiring limited 
liability and error resolution protections on unverified prepaid 
accounts.

[[Page 6385]]

    At the same time, commenters on the June 2017 Proposal expressed 
concern that a rigid requirement to provide Regulation E limited 
liability and error resolution rights in connection with all 
transactions that occur prior to a successful registration could 
attract more first-party fraud attempts and create complexity and 
uncertainty for issuers. As noted above, several of these commenters 
stated that because financial institutions rely on information about 
consumers obtained during the identification and verification process 
to identify fraudulent transactions when they are attempted, it would 
be inherently more difficult for financial institutions to limit their 
fraud exposure on pre-verification transactions, even for accounts that 
are ultimately verified.
    The Bureau considered requiring financial institutions to provide 
error resolution and limited liability protections on transactions 
occurring up to 30 days prior to verification, as suggested by some 
commenters. While the Bureau appreciates that a 30-day ``lookback'' 
period may allow some consumers on the margins to resolve pre-
verification errors, the small number of accounts that would be 
implicated would limit the value of this protection, while adding 
additional complexity to the regulation with a new time period and 
exposing financial institutions to some potential losses from first-
party fraud. On balance, the Bureau believes that a bright-line test 
based on successful verification of the prepaid account will simplify 
compliance without significantly increasing costs to consumers. In 
addition, requiring error resolution and limited liability protections 
only for post-verification errors aligns the treatment of prepaid 
accounts with the treatment of traditional checking accounts under 
Federal anti-money laundering requirements, where identifying 
information must be collected from the consumer before the account is 
opened and verification must be complete at the same time or shortly 
thereafter.\78\
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    \78\ See 31 CFR 1022.210.
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    With respect to industry commenters' suggestions that the Bureau 
encourage consumers to register prepaid accounts more quickly rather 
than require error resolution and limited liability protections on pre-
verification transactions, or that the Bureau's proposal would have led 
to consumers being rewarded for failing to register their accounts, the 
Bureau agrees that prompt registration of prepaid accounts provides 
important benefits to consumers (even beyond this aspect of the rule). 
The Bureau expects that the pre-acquisition disclosures regarding 
registration and deposit insurance, pursuant to Sec.  1005.18(b)(2)(xi) 
and (b)(4)(iii), will help encourage consumers to register their 
prepaid accounts promptly. This final rule makes prompt registration 
even more important for consumers, and the Bureau encourages financial 
institutions to continue to promote to consumers the benefits of 
registering their accounts promptly (including the availability of 
error resolution and limited liability protections).
    The Bureau also considered imposing a requirement that financial 
institutions additionally disclose any process they do have for 
investigating and resolving pre-verification errors, similar to the 
requirement in final Sec.  1005.18(d)(1)(ii) that financial 
institutions disclose, for prepaid account programs with no consumer 
identification and verification process, their error resolution process 
and limitations on consumers' liability for unauthorized transfers, if 
any. However, the Bureau is concerned that imposing such an additional 
disclosure requirement for prepaid accounts more generally might have 
the unintended effect of discouraging financial institutions from 
offering any assistance to consumers regarding concerns with pre-
verification issues, to the extent that institutions had previously 
provided such assistance on a discretionary basis.\79\
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    \79\ In contrast, the Bureau concluded that it was appropriate 
to impose such a disclosure requirement on prepaid accounts in 
programs without consumer identification and verification processes 
because the model language in appendix A-7(b) is inapplicable to 
accounts in those programs.
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    The Bureau agrees with industry commenters that urged the Bureau 
not to adopt the alternative approach described in the proposal, which 
would have created a third category of error resolution and limited 
liability protections for accounts that have begun, but failed to 
successfully complete, the financial institution's consumer 
identification and verification process. As the Bureau noted in the 
proposal, adding a third category of accounts would increase the 
complexity of the rule, and it may be difficult for financial 
institutions to distinguish between a consumer's failure to complete 
the verification process and a consumer who is merely delayed in 
providing additional requested information. The Bureau also appreciates 
the concerns raised by commenters that ``failed to complete'' accounts 
may in fact be disproportionately likely to be involved in fraudulent 
activity, because many accounts that fail to complete verification do 
so based on the financial institution's fraud prevention protocols. 
Accordingly, the Bureau is not adopting this alternative approach.
    With respect to the comments raised by consumer advocates regarding 
whether certain types of prepaid accounts should be deemed verified at 
issuance, the Bureau notes that final comment 18(e)-6 provides that a 
financial institution that collects and verifies consumer identifying 
information, or that obtains such information after it has been 
collected and verified by a third party, prior to or as part of the 
account acquisition process, is deemed to have successfully completed 
its consumer identification and verification process with respect to 
that account. While the comment provides one example of a situation 
where that condition is met, that example is not intended to be 
exclusive. Thus, while the Bureau is not further modifying the text of 
Sec.  1005.18(e)(3) or comment 18(e)-6, the Bureau emphasizes that, 
where the conditions described in that comment are met, a financial 
institution is deemed to have successfully completed its consumer 
identification and verification process with respect to that account 
upon issuance of the account. The Bureau believes that, in at least 
some cases, the types of prepaid accounts mentioned by consumer 
advocates (including prison release cards) will in fact meet the 
conditions described in comment 18(e)-6.
18(h) Effective Date and Special Transition Rules for Disclosure 
Provisions
    As discussed in detail in part VI below, the Bureau is extending 
the overall effective date of the Prepaid Accounts Rule to April 1, 
2019. Section 1005.18(h) includes several transitional exceptions and 
accommodations related to the effective date. The Bureau is revising 
dates in the regulatory text and headings throughout Sec.  1005.18(h) 
and in comments 18(h)-1, 2, and 6 to reflect the new April 1, 2019 
effective date.
    The Bureau is also making several technical corrections in Sec.  
1005.18(h) and related commentary. First, the Bureau is revising 
comment 18(h)-2 for clarity and to conform with usage of terms 
elsewhere in that comment and in the regulatory text (changing 
``disclosures and access devices'' to ``disclosures on, in, or with 
access devices or packaging materials'' in the last sentence). Finally, 
the Bureau is revising comment 18(h)-5 to clarify the provision to 
which that comment is

[[Page 6386]]

referring (changing ``applicable portions of those provisions'' to 
``requirements of Sec.  1005.18(h)(2)(ii)''), and adding a missing 
space between words.
Section 1005.19 Internet Posting of Prepaid Account Agreements
19(b) Submission of Agreements to the Bureau
    Section 1005.19 requires prepaid account issuers to post and submit 
agreements to the Bureau, pursuant to the Bureau's authority under EFTA 
sections 904(c) and 905(a) and sections 1022(c)(4) and 1032(a) of the 
Dodd-Frank Act.\80\ As discussed in the section-by-section analyses 
that follow, the Bureau is narrowing the scope of several aspects of 
Sec.  1005.19(b) to facilitate compliance and reduce burden.
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    \80\ 15 U.S.C. 1693b(c) and 1693c(a); 12 U.S.C. 5512(c)(4) and 
5532(a).
---------------------------------------------------------------------------

19(b)(2) Amended Agreements
    Section 1005.19(b)(1) requires issuers to make submissions of 
prepaid account agreements to the Bureau on a rolling basis, in the 
form and manner specified by the Bureau. Submissions must be made to 
the Bureau no later than 30 days after an issuer offers, amends, or 
ceases to offer a prepaid account agreement and must contain certain 
information, including other relevant parties to the agreement (such as 
the employer for a payroll card program).\81\ As explained in the 2016 
Final Rule, the Bureau believes that providing this information about 
each agreement will help the Bureau, consumers, and other parties 
locate agreements on the Bureau's website quickly and effectively.\82\ 
The 2016 Final Rule's version of Sec.  1005.19(b)(2) stated that, if a 
prepaid account agreement previously submitted to the Bureau is 
amended, the issuer must submit the entire amended agreement to the 
Bureau, in the form and manner specified by the Bureau, no later than 
30 days after the change becomes effective. Comment 19(a)(2)-1 provides 
examples of changes to an agreement that generally would be considered 
substantive, and therefore would be deemed amendments to the agreement.
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    \81\ Specifically, Sec.  1005.19(b)(1)(i), as finalized in the 
2016 Final Rule, requires issuers to submit identifying information 
about the issuer and the agreements submitted, including the 
issuer's name, address, and identifying number (such as an RSSD ID 
number or tax identification number); the effective date of the 
prepaid account agreement; the name of the program manager, if any; 
and the names of other relevant parties, if applicable (such as the 
employer for a payroll card program or the agency for a government 
benefit program).
    \82\ 81 FR 83934, 84136 (Nov. 22, 2016).
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The Bureau's Proposal
    As explained in the June 2017 Proposal, the Bureau learned through 
its outreach efforts to industry regarding implementation that some 
industry stakeholders were concerned about needing to notify the Bureau 
every time relevant parties to a prepaid account agreement are added or 
removed; this concern was particularly acute for payroll card accounts. 
The Bureau understands that while payroll card issuers may customize 
some payroll card programs for specific employers, payroll card issuers 
often use a standard account agreement with multiple employers, so that 
they may add or remove employers without changing the agreement itself. 
Some stakeholders explained that changes to the list of these employers 
as relevant parties to the agreement might occur on a somewhat frequent 
basis, and they expressed concern about continually needing to notify 
the Bureau of these changes.\83\
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    \83\ 82 FR 29630, 29645 (June 29, 2017).
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    Although the Bureau continues to believe that information about 
other relevant parties to agreements will be useful to the Bureau, 
consumers, and others, the Bureau acknowledged in the June 2017 
Proposal that reporting frequent changes of relevant parties to an 
agreement for an otherwise unchanging agreement could be time consuming 
for some issuers.
    The Bureau proposed to revise Sec.  1005.19(b)(2) to provide that 
an issuer may delay submitting a change in the names of other relevant 
parties to an agreement until such time as the issuer is submitting an 
amended agreement pursuant to Sec.  1005.19(b)(2) or changes to other 
identifying information about the issuer and its submitted agreements 
pursuant to Sec.  1005.19(b)(1)(i), in lieu of submitting such a change 
no later than 30 days after the change becomes effective. The Bureau 
also proposed to revise comment 19(a)(2)-1.vii to add a reference to 
Sec.  1005.19(b)(2) regarding the timing of submitting such changes to 
the Bureau. The Bureau also requested, but did not receive, comment on 
whether there are any alternative approaches the Bureau might adopt to 
reduce burden on issuers while still ensuring that information about 
other relevant parties is submitted in a timely manner, such as by 
requiring submission of updated information on other relevant parties 
at least once per quarter.
Comments Received
    A number of industry commenters, including trade associations, a 
program manager, an issuing bank, and a think tank, supported the 
proposed revisions to Sec.  1005.19(b)(2). Specifically, several of 
these commenters stated that the proposed revisions would facilitate 
compliance and help reduce the cost and burden of having to make a 
submission every time they made changes to the other relevant parties 
to an agreement where the agreement itself is not amended. In addition, 
the issuing bank commenter confirmed that, because issuers frequently 
offer a single payroll card program to multiple employers (or similar 
third parties), the requirement in the 2016 Final Rule, if left 
unchanged, would trigger constant filings with the Bureau because in 
some cases issuers add employers to these types of programs on a weekly 
basis.
The Final Rule
    For the reasons set forth herein, the Bureau is finalizing Sec.  
1005.19(b)(2) with modifications as described below. First, the Bureau 
is bifurcating the requirements of Sec.  1005.19(b)(2) into final Sec.  
1005.19(b)(2)(i), which sets forth the requirements for the submission 
of amended agreements generally, and final Sec.  1005.19(b)(2)(ii), 
which sets forth the requirements for the submission of updated lists 
of names of other relevant parties,\84\ and is adding new headings to 
each for organizational purposes. Final Sec.  1005.19(b)(2)(ii) 
provides that, notwithstanding Sec.  1005.19(b)(2)(i), an issuer may 
delay submitting a change to the list of names of other relevant 
parties to a particular agreement until the earlier of: (A) Such time 
as the issuer is otherwise submitting an amended agreement or changes 
to other identifying information about the issuer and its submitted 
agreements pursuant to Sec.  1005.19(b)(1)(i); or (B) May 1 of each 
year, for any updates to the list of names of other relevant parties 
for that agreement that occurred between the issuer's last submission 
of relevant party information and April 1 of that year. The Bureau is 
also adding new comment 19(b)(2)-2 to provide examples illustrating the 
submission requirement in final Sec.  1005.19(b)(2)(ii). In addition, 
the Bureau is adding a new sentence to Sec.  1005.19(b)(2)(i), for 
clarity, stating that if other identifying information about the issuer 
and its submitted agreements previously submitted to the Bureau is 
amended, the

[[Page 6387]]

issuer must submit updated information to the Bureau, in the form and 
manner specified by the Bureau, no later than 30 days after the change 
becomes effective.\85\ This addition parallels existing language 
regarding amended agreements and is intended to avoid confusion about 
whether issuers must submit to the Bureau agreements that are revised 
as well as changes to related required information. The Bureau is 
adopting the proposed revision to comment 19(a)(2)-1.vii (to add a 
reference to Sec.  1005.19(b)(2) regarding the timing of submitting 
such changes to the Bureau), with an additional conforming change to 
align it with revised language in Sec.  1005.19(b)(2)(ii). The Bureau 
is also making conforming changes in Sec.  1005.19(b)(1)(i) and (iii), 
(c)(3), and (d)(2)(v), and comments 19(b)(1)-1, 19(b)(2)-1, and 
19(b)(6)-1 to reflect the changes made in final Sec.  1005.19(b)(2).
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    \84\ The Bureau is finalizing these revisions using the term 
``lists of names of other relevant parties,'' rather than ``names of 
other relevant parties,'' for clarity.
    \85\ The proposed text of Sec.  1005.19(b)(2) also included a 
technical correction (changing ``comes'' to ``becomes''), which the 
Bureau is finalizing.
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    The Bureau continues to believe that revisions to Sec.  
1005.19(b)(2) are warranted to address the concerns raised by industry 
related to the requirement that an issuer update its submission to the 
Bureau each time there is a change to the list of names of other 
relevant parties to an agreement. At the same time, the Bureau is 
cognizant of the necessity for industry to provide timely information 
in order for their submissions to be useful to the Bureau, consumers, 
and other interested parties. As noted above, the Bureau sought comment 
on alternative approaches the Bureau might adopt to reduce burden on 
issuers while still ensuring that information about other relevant 
parties is submitted in a timely manner, such as by requiring 
submission of updated information on other relevant parties at least 
once per quarter. Although the Bureau received no responses to that 
solicitation for comment, it has continued its own analysis. Upon 
further consideration, the Bureau believes it is appropriate to include 
an annual backstop as part of this accommodation, ensuing that the 
Bureau will have reasonably up-to-date information about other relevant 
parties to all prepaid account agreements while still permitting 
issuers to delay submitting changes to the list of names of other 
relevant parties to an agreement beyond 30 days after the change 
becomes effective.
    Thus, in most cases, what triggers the requirement to make a 
submission regarding the names of other relevant parties to a 
particular prepaid account agreement is a substantive change to the 
content of the agreement itself or the identifying information 
enumerated in Sec.  1005.19(b)(1)(i) other than the names of other 
relevant parties to the agreement. Amendments to one agreement 
submitted to the Bureau do not trigger the requirement to submit 
updated lists of the names of other relevant parties to all the 
issuers' agreements. Issuers may, but are not required to, submit 
changes to the list of names of other relevant parties to an agreement 
within 30 days of the change becoming effective (that is, following the 
same schedule as for submitting other changes to the Bureau). However, 
in situations in which the Bureau does not have an up-to-date relevant 
party list from the issuer as of April 1 of a given year, the issuer 
must provide such updates by May 1 of that year.
19(b)(6) Form and Content of Agreements Submitted to the Bureau
19(b)(6)(ii) Fee Information
    The 2016 Final Rule's version of Sec.  1005.19(b)(6)(ii) stated 
that fee information must be set forth either in the prepaid account 
agreement or in a single addendum to that agreement. It further stated 
that the agreement or the addendum thereto must contain all of the fee 
information, which Sec.  1005.19(a)(3) defines as the short form 
disclosure for the prepaid account pursuant to Sec.  1005.18(b)(2) and 
the fee information and statements required to be disclosed in the pre-
acquisition long form disclosure for the prepaid account pursuant to 
Sec.  1005.18(b)(4). As explained in the 2016 Final Rule, the Bureau 
believed that permitting issuers to include the short form and long 
form disclosures together as part of the prepaid account agreement or 
in a single addendum to that agreement would provide issuers some 
flexibility, while ensuring that consumers and other parties reviewing 
the agreements have access to such information.\86\
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    \86\ 81 FR 83934, 84143 (Nov. 22, 2016).
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The Bureau's Proposal
    As explained in the June 2017 Proposal, the Bureau was concerned 
that permitting the short form and long form disclosures to be included 
either as part of the prepaid account agreement or in a single addendum 
might not provide issuers the flexibility the Bureau intended.\87\ 
Given the form and content requirements of the short form and long form 
disclosures, the Bureau expects that many issuers will likely create 
two separate documents, making the task of combining the documents into 
the agreement or a single addendum potentially unnecessarily 
complex.\88\
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    \87\ 82 FR 29630, 29645 (June 29, 2017).
    \88\ As noted above, Sec.  1005.19(a)(3) defines fee 
information, in part, as the fee information and statements required 
to be disclosed in the pre-acquisition long form disclosure for the 
prepaid account pursuant to Sec.  1005.18(b)(4). It does not require 
that the long form itself, in accordance with the form and 
formatting requirements of Sec.  1005.18(b)(6) and (7), be 
submitted. Some issuers may integrate the long form in that fashion 
into, or append it to, their agreements, in order to satisfy the 
requirements of Sec. Sec.  1005.7(b), 1005.18(b)(4) and (f)(1) 
simultaneously.
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    The Bureau therefore proposed to revise Sec.  1005.19(b)(6)(ii) to 
allow issuers to submit the pre-acquisition disclosures either as one 
or separate addenda. Specifically, proposed Sec.  1005.19(b)(6)(ii) 
would have provided that fee information must be set forth either in 
the prepaid account agreement or in addenda to that agreement that 
attach either or both the short form disclosure for the prepaid account 
pursuant to Sec.  1005.18(b)(2) and the fee information and statements 
required to be disclosed in the long form disclosure for the prepaid 
account pursuant to Sec.  1005.18(b)(4). The agreement or addenda 
thereto must contain all of the fee information, as defined by Sec.  
1005.19(a)(3). The Bureau also proposed to make conforming changes to 
Sec.  1005.19(b)(6)(iii) and comment 19(b)(6)-3, which govern the 
requirements for integrated prepaid account agreements and which 
reference an optional fee information addendum, to reflect the proposed 
changes to Sec.  1005.19(b)(6)(ii).
Comments Received
    Several industry commenters, including trade associations, a 
program manager, and a think tank, supported the proposed revisions to 
Sec.  1005.19(b)(6)(ii) and (iii). One of the trade associations 
confirmed the Bureau's expectation that many issuers will likely create 
two separate documents (one for the short form disclosure and another 
for the long form disclosure) and thus would be forced to combine the 
documents into the agreement or into a single addendum, which they 
asserted will complicate the submission process if the requirement is 
left unchanged. Several of the other industry commenters stated that 
the proposed changes would facilitate compliance and potentially reduce 
the cost and burden associated with the Sec.  1005.19 submission and 
posting requirements.
    A group of consumer advocates stated that, although they had no 
objection to the Bureau's proposal to permit issuers to submit the 
short form and long form disclosures as separate documents, the

[[Page 6388]]

Bureau should require the fee information to be submitted separately 
from the full prepaid account agreements, which they believed would 
allow consumers and other parties to find the fee information more 
quickly and easily without having to read the entire terms and 
conditions document to search for the fee information.\89\
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    \89\ This group also stated they supported the proposed 
revisions to Sec.  1005.19(b)(6)(iii), which prohibits issuers from 
providing the Bureau provisions of an agreement or fee information 
in the form of change-in-terms notices or riders, because they 
believed a series of change-in-terms notices or riders would be 
complicated to piece together. However, the proposed changes to 
Sec.  1005.19(b)(6)(iii) were not substantive in nature and were 
proposed merely to conform to the revisions to Sec.  
1005.19(b)(6)(ii).
---------------------------------------------------------------------------

The Final Rule
    For the reasons set forth herein, the Bureau is finalizing the 
revisions to Sec.  1005.19(b)(6)(ii) and (iii) and comment 19(b)(6)-3 
as proposed to provide issuers some flexibility when submitting prepaid 
account agreements and fee information, as it intended in the 2016 
Final Rule. The Bureau continues to believe that allowing issuers to 
include the fee information either as part of the prepaid account 
agreement or as one or separate addenda will also facilitate 
compliance.\90\ The Bureau is also making a conforming change in 
comment 19(b)(2)-1 to align with the modified language in the 
regulatory text.
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    \90\ Final Sec.  1005.19(b)(6)(iii) states that an issuer may 
not provide provisions of the agreement or fee information to the 
Bureau in the form of change in terms notices or riders (other than 
the optional fee information addenda described in Sec.  
1005.19(b)(6)(ii)). Changes in provisions or fee information must be 
integrated into the text of the agreement, or the optional fee 
information addenda, as appropriate. This requirement is unchanged 
from the 2016 Final Rule other than the revision from ``addendum'' 
to ``addenda'' and the addition of the cross-reference to Sec.  
1005.19(b)(6)(ii).
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    With respect to the advocates' suggestion to require fee 
information to be submitted separately, the Bureau is not adopting the 
advocates' suggestion because doing so would impose an additional 
affirmative requirement to create separate addenda for the fee 
information (if an issuer does not already have such information 
separated) and would be contrary to the Bureau's reasoning for revising 
Sec.  1005.19(b)(6)(ii), which was to provide issuers flexibility when 
submitting prepaid account agreements to the Bureau pursuant to Sec.  
1005.19(b). However, as discussed above, the Bureau expects that many 
issuers will likely create a separate document at least for the short 
form disclosure, and possibly for the long form disclosure as well, 
given the form and content requirements for such disclosures set forth 
in Sec.  1005.18(b); the Bureau expects that those issuers will prefer 
to submit the fee information separately, even without a requirement to 
do so.\91\ The Bureau will monitor the quality and format of agreements 
and addenda submitted by issuers, and may revisit this issue in a 
future rulemaking if warranted.
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    \91\ The Bureau is designing the submission system for prepaid 
account agreements to allow issuers to submit separate files for the 
agreement, the short form disclosure, and the long form disclosure 
information and statements. Issuers will not be required to submit a 
single file that contains the agreement combined with short form and 
long form disclosures.
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19(f) Initial Submission Date
    As discussed in detail in part VI below, the Bureau is extending by 
an additional 12 months the general effective date of the Prepaid 
Accounts Rule, to April 1, 2019. The Bureau is likewise extending the 
effective date of Sec.  1005.19(b) for the agreement submission 
requirement to April 1, 2019, as it does not believe it is warranted to 
have an earlier effective date for only that provision. The unified 
effective date of April 1, 2019 for all Prepaid Accounts Rule 
provisions renders most of the text of Sec.  1005.19(f) unnecessary, 
and thus the Bureau is making substantial changes to Sec.  1005.19(f) 
and related commentary to reflect this..
    In the June 2017 Proposal, the Bureau proposed revisions to clarify 
how the October 1, 2018 effective date was described in Sec.  
1005.19(f)(2) and comment 19(f)-1 to avoid any potential confusion 
between the delayed effective date for Sec.  1005.19(b) and the general 
effective date of the Prepaid Accounts Rule. In that proposal, the 
Bureau also stated its continued belief that the October 1, 2018 
effective date for the agreement submission requirement of Sec.  
1005.19(b) was appropriate, given its ongoing work to develop a 
streamlined electronic submission process. Although the Bureau received 
comments seeking a further extension of the April 1, 2018 general 
effective date, the Bureau did not receive any comments specific to the 
proposed changes to clarify the interaction of the two effective dates.
    As stated in the June 2017 Proposal, the Bureau expects that its 
streamlined electronic submission process will be fully operational 
before that provision's original effective date of October 1, 2018. 
However, because the Bureau is extending the effective date for all 
provisions of the Prepaid Accounts Rule to April 1, 2019, much of Sec.  
1005.19(f)--which had established the separate effective date of the 
agreement submission requirement along with related provisions (both as 
set forth in the 2016 Final Rule and as proposed in the June 2017 
Proposal)--is now unnecessary. Accordingly, the Bureau is removing most 
of Sec.  1005.19(f), including its three sub-paragraphs, and replacing 
it with simplified regulatory text stating the general April 1, 2019 
effective date. The Bureau is retaining the portion of Sec.  
1005.19(f)(2), renumbered as Sec.  1005.19(f), stating that an issuer 
must submit to the Bureau no later than May 1, 2019 all prepaid account 
agreements it offers as of April 1, 2019. The Bureau is also revising 
the heading for Sec.  1005.19(f) for clarity and removing the 
commentary that accompanied Sec.  1005.19(f). These changes do not 
affect the substance of issuers' obligations to submit prepaid account 
agreements to the Bureau pursuant to Sec.  1005.19(b).
Appendix A-7 Model Clauses for Financial Institutions Offering Prepaid 
Accounts (Sec.  1005.18(d) and (e)(3))
    The 2016 Final Rule's version of appendix A-7(c) provides model 
language for use by a financial institution that chooses not to provide 
provisional credit while investigating an alleged error for prepaid 
accounts for which it has not completed its consumer identification and 
verification process, in accordance with the 2016 Final Rule's general 
limited liability and error resolution provisions. The Bureau proposed 
to revise that model language to reflect the proposed amendments to 
Sec.  1005.18(d)(1)(ii) and (e)(3). The proposed language was similar 
to the language used in the 2014 Proposal, with additional language to 
clarify that limited liability and error resolution rights would apply 
only upon successful verification of the consumer's identity. \92\ One 
prepaid issuer commented in support of the proposed model language. The 
Bureau has removed the last sentence of the proposed model language to 
conform to the change to Sec.  1005.18(e)(3) pursuant to which 
financial institutions are not required to resolve pre-verification 
errors, but otherwise is adopting the model language as proposed.
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    \92\ The Bureau tested a version of this model language with 
consumers as part of its pre-proposal disclosure testing. See 79 FR 
77102, 77203 and n.327 (Dec. 23, 2014) and ICF Int'l, ICF Report: 
Summary of Findings: Design and Testing of Prepaid Card Fee 
Disclosures, at 23 (Nov. 2014), available at https://www.consumerfinance.gov/documents/4776/201411_cfpb_ summary-
findings-design-testing-prepaid-card-disclosures.pdf.
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    The language of final appendix A-7(c) reads: ``It is important to 
register your prepaid account as soon as possible. Until you register 
your account and we

[[Page 6389]]

verify your identity, we are not required to research or resolve any 
errors regarding your account. To register your account, go to 
[internet address] or call us at [telephone number]. We will ask you 
for identifying information about yourself (including your full name, 
address, date of birth, and [Social Security Number] [government-issued 
identification number]), so that we can verify your identity.''
Regulation E Technical Corrections
    The Bureau is making technical corrections, such as correcting 
typographical errors, editing text for consistency, and making similar 
minor changes, to various provisions of the Prepaid Accounts Rule in 
Regulation E, which are not intended to change the meaning of the 
Prepaid Accounts Rule. Where these changes are being made to provisions 
that the Bureau is also revising for other reasons, these changes are 
noted in the section-by-section analyses above.\93\ In addition, the 
Bureau is making the following other technical corrections in 
Regulation E:
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    \93\ See the section-by-section analyses of Sec.  
1005.18(b)(1)(ii), (b)(2)(ix), (b)(6)(i), (b)(9), and (h) above.
---------------------------------------------------------------------------

     Changing ``customer'' to ``consumer'' identification and 
verification in Sec.  1005.18(b)(2)(xi) and comments 18(b)(2)(xi)-2 and 
18(b)(4)(iii)-1 for consistency with usage of that term elsewhere in 
Regulation E, including the error resolution and limited liability 
provisions in revised Sec.  1005.18(e). The Bureau is also correcting 
the cross-reference at the end of comment 18(b)(2)(xi)-2 (changing 
``comments 18(e)-4 and 5'' to ``comments 18(e)-4 through 6'').
     Revising the last sentence of comment 18(b)(5)-2, for 
consistency with the regulatory text, to state that the Sec.  
1005.18(b)(5) disclosure is deemed in close proximity to the ``access 
device's packaging material'', rather than the ``short form 
disclosure'', when disclosure of the purchase price is made on or near 
the sales rack or display for the packaging material at retail 
locations. The Bureau is also making a grammatical correction in that 
paragraph (changing ``written short form disclosures'' to ``a written 
short form disclosure'').
     Adjusting terminology for consistency with other portions 
of the regulatory text and commentary in Sec.  1005.18(b)(7)(i)(B) 
(changing ``information'' to ``statements'' in reference to Sec.  
1005.18(b)(4)(iii) through (vi) and ``disclosures'' to ``statements'' 
in reference to Sec.  1005.18(b)(4)(vi)) and in comments 2(b)(3)(i)-6 
(changing ``prepaid account'' to ``product'' in the heading), 
18(b)(2)(viii)(A)-2.i introductory text and 2.ii introductory text 
(changing ``fees'' to ``fee types'' in the first sentence of each 
comment), 18(b)(4)(vii)-1 (changing ``disclosures'' to ``statements'' 
in reference to Sec.  1005.18(b)(4)(vi)), 18(b)(7)(ii)-1 (changing 
``type/pixel'' to ``point/pixel''), 18(c)-5 (changing ``make 
available'' to ``provide''), and 19(a)(4)-2 (changing ``submit'' to 
``make submissions of'').
     Correcting grammar and typographical errors in Sec.  
1005.18(b)(1)(iii) (changing ``disclosures'' to ``disclosure'' and 
``are'' to ``is''), Sec.  1005.18(b)(6)(ii) (changing ``long form 
disclosures'' to ``a long form disclosure''), Sec.  
1005.18(b)(6)(iii)(A) (changing ``disclosures'' to ``disclosure''), 
Sec.  1005.18(b)(6)(iii)(B)(2) (changing ``preferred-'' to 
``preferred''), Sec.  1005.18(b)(7)(i)(B) (changing ``Sec.  
1005.18(b)(4)(vii)'' to ``paragraph (b)(4)(vii) of this section''), and 
Sec.  1005.18(b)(7)(ii)(C) (changing ``long form disclosures'' to ``the 
long form disclosure''), and in comments 18(b)(2)(iv)-1 (changing 
``comments'' to ``comment'') and 18(b)(2)(viii)(A)-2.v (adding ``the'' 
before the first reference to ``United States'').
     Correcting a cross-reference in comment 18(c)-6 (changing 
``Sec.  1005.18(e)(3)(i)(A) through (C)'' to ``Sec.  
1005.18(e)(3)(ii)(A) through (C)'').
Regulation Z
Subpart G--Special Rules Applicable to Credit Card Accounts and Open-
End Credit Offered to College Students
Section 1026.61 Hybrid Prepaid-Credit Cards
61(a) Hybrid Prepaid-Credit Card
Background
    In the 2016 Final Rule, the Bureau amended Regulations Z and E to 
establish a set of requirements in connection with ``hybrid prepaid-
credit cards'' that can access overdraft credit features offered by the 
prepaid account issuer, its affiliate, or its business partner.\94\ The 
Bureau was concerned about overdraft credit features associated with 
prepaid accounts in part because of the way that such services have 
evolved on traditional checking accounts. As explained in detail in the 
2016 Final Rule, checking account overdraft originally developed as an 
occasional courtesy to consumers by honoring checks that would 
otherwise overdraw their accounts, and was exempted from the normal 
rules governing credit under Regulation Z.\95\ As debit card use 
expanded and fees rose, overdrafts increased substantially and 
depository institutions changed their account pricing structures in 
part in reliance on overdraft income. In the 2016 Final Rule, the 
Bureau noted that a substantial number of consumers have moved to 
prepaid accounts specifically because they have had difficult 
experiences with overdraft services on traditional checking accounts, 
and that prepaid account providers have frequently marketed their 
products as safer and easier to use than comparable products with 
credit features. In light of these and other considerations, the Bureau 
concluded that it was appropriate to apply traditional credit card 
rules to overdraft credit features accessible by hybrid prepaid-credit 
cards, as well as to adopt a short list of tailored provisions to 
reduce the risk that consumers would experience problems in accessing 
and managing prepaid accounts linked to such credit features.\96\
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    \94\ Under the Prepaid Accounts Rule, overdraft credit features 
involve credit that can be accessed from time to time in the course 
of authorizing, settling, or otherwise completing transactions 
conducted with a prepaid card to obtain goods or services, obtain 
cash, or conduct P2P transfers.
    \95\ 81 FR 83934, 84158 (Nov. 22, 2016).
    \96\ Id. at 84158-61.
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    Overdraft credit features accessible by hybrid prepaid-credit cards 
are referred to as ``covered separate credit features'' in the Prepaid 
Accounts Rule, as set forth in Sec.  1026.61(a)(2)(i). The Bureau 
designed this portion of the Prepaid Accounts Rule to ensure that these 
products will be treated consistently regardless of certain details 
about how the credit relationship is structured. For example, the rules 
for covered separate credit features accessible by hybrid prepaid-
credit cards apply regardless of whether the credit is offered by the 
prepaid account issuer itself, its affiliate, or its business partner. 
The 2016 Final Rule's version of Sec.  1026.61(a)(5)(iii) defined the 
term ``business partner'' as a person (other than the prepaid account 
issuer or its affiliate) that can extend credit through a separate 
credit feature where the person or its affiliate has an arrangement 
with a prepaid account issuer or its affiliate. The 2016 Final Rule's 
version of comment 61(a)(5)(iii)-1 explained that there are two types 
of arrangements that create a business partner relationship for 
purposes of Sec.  1026.61(a)(5)(iii): (1) An agreement between the 
parties under which a prepaid card can from time to time draw, 
transfer, or authorize a draw or transfer of credit in the course of

[[Page 6390]]

authorizing, settling, or otherwise completing transactions conducted 
with the prepaid card to obtain goods or services, obtain cash, or 
conduct P2P transfers; and (2) a cross-marketing or other similar 
agreement between the parties to cross-market the credit feature or the 
prepaid account, where the prepaid card from time to time can draw, 
transfer, or authorize the draw or transfer of credit from the credit 
feature in the course of transactions conducted with the prepaid card 
to obtain goods or services, obtain cash, or conduct P2P transfers.
    As explained in the 2016 Final Rule, the Bureau believed that it 
was appropriate to consider a third party that can extend credit to be 
the prepaid account issuer's business partner in the above 
circumstances because such arrangements can be used to replicate 
overdraft programs on a prepaid account. Specifically, the Bureau 
believed that these types of relationships between the prepaid account 
issuer and the unaffiliated third party were likely to involve revenue 
sharing or payments between the two companies and the pricing structure 
of the two accounts may be related.\97\
---------------------------------------------------------------------------

    \97\ Id. at 84253.
---------------------------------------------------------------------------

    However, the Bureau did not apply the rules related to hybrid 
prepaid-credit cards in situations where there is less of a connection 
between the person offering credit and the prepaid account issuer, such 
that the person offering credit may not be aware its credit feature is 
being used as an overdraft credit feature with respect to a prepaid 
account.\98\ This could occur if the prepaid account issuer allows 
consumers to link their prepaid cards to credit card accounts offered 
by unrelated third-party card issuers.\99\ Where the two parties do not 
have a business arrangement or where the prepaid card cannot be used 
from time to time to draw, transfer, or authorize a draw or transfer of 
credit in the course of a transaction with the prepaid account, the 
separate credit feature is deemed a ``non-covered separate credit 
feature'' as set forth in Sec.  1026.61(a)(2)(ii) and does not trigger 
the Prepaid Accounts Rule's provisions governing hybrid prepaid-credit 
cards, although the separate credit feature generally will be subject 
to Regulation Z in its own right.
---------------------------------------------------------------------------

    \98\ See id. at 84252-53.
    \99\ The unaffiliated third-party card issuer might not realize 
that its credit feature is accessible by a prepaid card in the 
course of transaction, so that the card issuer would have no reason 
to think that the provisions in the Prepaid Accounts Rule tailored 
to hybrid prepaid-credit cards would apply to its product. The 
Bureau was concerned that card issuers might try to mitigate 
compliance risk in ways that would make it harder for prepaid 
account consumers to access credit. Id. at 84253.
---------------------------------------------------------------------------

    The 2016 Final Rule also set forth an exception in Sec.  
1026.61(a)(4) allowing prepaid account issuers to provide certain 
incidental forms of credit structured as a negative balance on the 
asset feature of prepaid accounts without triggering Regulation Z and 
the other protections for hybrid prepaid-credit cards. The Bureau 
created this exception to allow prepaid account issuers to provide 
certain forms of incidental credit to their customers, including 
situations where a negative balance results because a consumer 
completes transactions with his or her prepaid account while an 
incoming load of funds from an asset account is still being 
processed.\100\ However, to limit evasion, the exception only would 
have applied where (1) the prepaid card cannot access credit from a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card; (2) the prepaid account issuer has a general policy and practice 
of declining transactions that will take the account negative (at least 
outside of the situations involving incidental credit); and (3) the 
prepaid account issuer generally does not charge credit-related fees. 
If the conditions in Sec.  1026.61(a)(4) are not met, the prepaid card 
is a hybrid prepaid-credit card with respect to the negative balance 
under Sec.  1026.61(a)(3), and Sec.  1026.61(b) prohibits the card 
issuer from structuring the overdraft credit feature as a negative 
balance on the asset feature of the prepaid account. In that case, the 
card issuer must structure the overdraft credit feature as a separate 
credit feature, such as a credit account or credit subaccount to the 
prepaid account that is separate from the asset feature of the prepaid 
account. This separate credit feature is a ``covered separate credit 
feature'' under Sec.  1026.61(a)(2)(i) and is subject to the credit 
card rules in Regulation Z, as well as the targeted provisions in 
Regulations Z and E applicable to hybrid prepaid-credit cards. The 
Bureau believed that prohibiting negative balances on a prepaid account 
in the situations discussed above would promote transparency and 
compliance with the credit card requirements.\101\
---------------------------------------------------------------------------

    \100\ Under the 2016 Final Rule, this exception extended to 
three types of incidental credit so long as the prepaid account 
issuer generally did not charge credit-related fees for the credit 
and the prepaid card could not access any covered separate credit 
feature: (1) credit related to ``force pay'' transactions; (2) a de 
minimis $10 payment cushion; and (3) a ``delayed load cushion'' 
where credit is extended while a load of funds from an asset account 
is pending.
    \101\ 81 FR 83934, 84264-65 (Nov. 22, 2016).
---------------------------------------------------------------------------

Concerns Raised Related to Application of Credit Rules to Digital 
Wallets
    Since issuance of the 2016 Final Rule, the Bureau has received 
feedback indicating digital wallet providers were concerned that 
application of the substantive credit rules in certain circumstances 
would create a number of unique challenges for their products. Unlike a 
GPR card, which is generally designed to be used as a standalone 
product similar to a checking account, a digital wallet is a product 
that by its nature is generally intended to facilitate the consumer's 
use of multiple payment options in online and mobile transactions, 
similar to a physical wallet holding credit and debit cards as well as 
cash. As set forth in Regulation E Sec.  1005.2(b)(3) and comment 
2(b)(3)(i)-6, the term ``prepaid account'' includes digital wallets 
that are capable of being loaded with funds; those that simply hold 
payment credentials for other accounts but that are incapable of having 
funds stored in them are not covered. Even where a digital wallet 
provides the ability to store funds directly, consumers also may want 
to store credentials for their existing credit, debit, and prepaid 
cards and deposit accounts so that they have a range of payment options 
available. These digital wallet providers may actively encourage 
consumers to use both functions, either by direct marketing to 
consumers or through joint arrangements with card issuers.
    In response to the 2017 Effective Date Proposal, a digital wallet 
provider whose product can store funds (such that its digital wallet 
accounts are prepaid accounts under Regulation E Sec.  1005.2(b)(3)) 
submitted a comment letter. That digital wallet provider raised several 
concerns about the account number for a digital wallet account becoming 
a hybrid prepaid-credit card where a consumer links a digital wallet 
account to credit card accounts that are offered by companies with 
which the digital wallet provider has cross-marketing or other 
agreements that would create a business partner relationship under the 
2016 Final Rule's version of Sec.  1026.61(a)(5)(iii).
    This commenter especially was concerned about several targeted 
provisions of the Rule. First, the commenter pointed to a provision in 
Sec.  1026.61(c) that generally requires a card issuer to wait 30 days 
after a prepaid account has been registered before soliciting or 
opening new credit features or linking existing credit features to the 
prepaid account that would be accessible by a hybrid prepaid-credit 
card. The commenter

[[Page 6391]]

expressed concern that this requirement would delay a consumer's 
ability to link credit card accounts offered by its business partners 
to the digital wallet account, noting that where a digital wallet 
provider has a business partner relationship with Issuer A but not 
Issuer B, consumers could add Issuer B's credit card accounts to their 
digital wallet accounts immediately, but could not add Issuer A's 
credit card accounts until 30 days after the digital wallet accounts 
are registered because Issuer A is a business partner of the digital 
wallet provider. The commenter asserted that the policy concerns 
underlying the Bureau's decision to impose the 30-day waiting period 
are inapplicable to digital wallet accounts in these circumstances and 
that such a delay would likely lead to consumer confusion and reduced 
consumer choice.
    Second, the commenter asserted that additional consumer confusion 
is likely to arise from the long form pre-acquisition disclosure 
requirements set forth in Regulation E Sec.  1005.18(b)(4)(vii), which 
mandate that disclosures of key credit pricing terms set forth in Sec.  
1026.60(e)(1) be included on a prepaid account's long form disclosure 
if a covered separate credit feature accessible by a hybrid prepaid-
credit card may be offered to a consumer in connection with the prepaid 
account. The commenter indicated that these credit disclosures for each 
credit card product offered by each business partner would have to be 
provided to all new digital wallet account holders in the digital 
wallet account's long form disclosure even if many of the digital 
wallet account holders never hold, or apply for, credit card accounts 
offered by those business partners. The commenter indicated that such 
disclosures might be numerous depending on how many business partners 
the digital wallet provider has and how many credit card products are 
offered by each business partner and thus asserted that additional 
consumer confusion was likely to arise from the inclusion of those 
disclosures in the long form for its digital wallet accounts.
    Third, the commenter raised concerns about the exception in the 
2016 Final Rule's version of Sec.  1026.61(a)(4) allowing prepaid 
account issuers to provide certain incidental forms of credit as a 
negative balance on the asset feature of prepaid accounts without 
triggering Regulation Z and the other protections for hybrid prepaid-
credit cards. The commenter pointed out that it could not take 
advantage of this exception when a customer links a credit card account 
offered by one of its business partners. Rather, the 2016 Final Rule 
would prohibit a negative balance and instead would require that even 
incidental credit be obtained using a separate credit account or 
subaccount of the prepaid account that is subject to the full 
protections of Regulation Z. The commenter expressed concern that this 
could cause consumer confusion and increase the likelihood that 
consumers would be charged fees or interest because the incidental 
credit would be provided formally via the separate credit feature, 
rather than as a temporary negative balance on the asset account.
Overview of the Final Rule
    As discussed in more detail in the section-by-section analysis of 
Sec.  1026.61(a)(5)(iii) below, in the June 2017 Proposal, the Bureau 
proposed to create a limited exception from the definition of 
``business partner'' that would have excluded certain arrangements 
between card issuers and prepaid account issuers (including digital 
wallet providers) from the tailored provisions in the Prepaid Accounts 
Rule applicable to covered separate credit features accessible by 
hybrid prepaid-credit cards. As explained below, where the credit card 
accounts would already be subject to traditional credit card rules 
under Regulation Z and certain other safeguards are present, the Bureau 
believed that it might not be necessary to apply the Prepaid Accounts 
Rule's tailored provisions to such business arrangements. The Bureau is 
adopting this exception generally as proposed with some revisions as 
discussed in more detail in the section-by-section analyses of Sec.  
1026.61(a)(5)(iii) and (a)(5)(iii)(D)(2) and (5) below.
    Also, as discussed in more detail in the section-by-section 
analysis of Sec.  1026.61(a)(4) below, the Bureau is amending Sec.  
1026.61(a)(4) to allow a prepaid account issuer to provide certain 
forms of incidental credit structured as a negative balance on the 
asset feature of the prepaid account without triggering Regulation Z 
and the other protections for hybrid prepaid-credit cards in situations 
when a covered separate credit feature offered by a business partner is 
attached to the prepaid account, so long as the other conditions 
contained in Sec.  1026.61(a)(4) are satisfied. The Bureau also is 
making changes to certain other provisions in Regulation Z for 
consistency with the changes to Sec.  1026.61(a)(4). See final Sec.  
1026.61(a)(1)(iii) and (a)(3)(ii) and final comments 4(b)(11)-1.i and 
iii, 61(a)(3)(i)-1.ii, 61(a)(3)(ii)-1, and 61(a)(4)-1. The changes to 
these provisions are discussed in the section-by-section analysis of 
Sec.  1026.61(a)(4) below.
61(a)(4) Exception for Credit Extended Through a Negative Balance
The Bureau's Proposal
    As discussed in the section-by-section analysis of Sec.  1026.61(a) 
above, the Bureau adopted Sec.  1026.61(a)(4) in the 2016 Final Rule to 
allow prepaid account issuers to provide certain incidental forms of 
credit as a negative balance on the asset feature of prepaid accounts 
without triggering Regulation Z and the other protections for hybrid 
prepaid-credit cards. The exception only would have applied where (1) 
the prepaid card cannot access credit from a covered separate credit 
feature accessible by a hybrid prepaid-credit card; (2) the prepaid 
account issuer has a general policy and practice of declining 
transactions that will take the account negative (at least outside of 
the situations involving incidental credit); and (3) the prepaid 
account issuer generally does not charge credit-related fees. If the 
conditions of Sec.  1026.61(a)(4) were met, the prepaid card is not a 
hybrid prepaid-credit card and the incidental credit is not subject to 
Regulation Z and the other protections in Regulations Z and E for 
hybrid prepaid-credit cards. Instead, this credit is regulated under 
Regulation E as credit incidental to the prepaid card transaction.
    If the conditions of Sec.  1026.61(a)(4) were not met, the prepaid 
card would be a hybrid prepaid-credit card with respect to the negative 
balance under Sec.  1026.61(a)(3), and Sec.  1026.61(b) prohibits the 
card issuer from structuring the overdraft credit feature as a negative 
balance on the asset feature of the prepaid account. In that case, the 
card issuer must structure an overdraft credit feature in connection 
with a prepaid account as a separate credit feature, such as a credit 
account or credit subaccount to the prepaid account that is separate 
from the asset feature of the prepaid account. This separate credit 
feature is a ``covered separate credit feature'' under Sec.  
1026.61(a)(2)(i) and is subject to the credit card rules in Regulation 
Z, as well as the targeted provisions in Regulations Z and E applicable 
to hybrid prepaid-credit cards.
    As discussed in the section-by-section analysis of Sec.  1026.61(a) 
above, in response to the 2017 Effective Date Proposal, one digital 
wallet provider expressed concern that it could not take advantage of 
the exception in the 2016 Final Rule's version of Sec.  1026.61(a)(4)

[[Page 6392]]

permitting a negative balance on the asset feature of the prepaid 
account in situations in which a consumer links a credit card account 
offered by a business partner of the digital wallet provider. Rather, 
the 2016 Final Rule would prohibit negative balances and instead would 
require that even incidental credit be obtained using a separate credit 
account or subaccount of the prepaid account that is subject to the 
full protections of Regulation Z. The commenter expressed concern that 
this could cause consumer confusion and make it more likely that 
consumers would be charged fees or interest because the incidental 
credit would be provided formally via the separate credit feature, 
rather than as a temporary negative balance on the asset account.
    In the June 2017 Proposal, the Bureau did not propose changes to 
Sec.  1026.61(a)(4). The Bureau believed that the exception to the 
definition of ``business partner'' it proposed in Sec.  
1026.61(a)(5)(iii)(D) would address the commenter's concern by 
substantially narrowing the circumstances in which digital wallets 
would be likely to trigger these Regulation Z requirements. The Bureau 
also believed that when the exception in proposed Sec.  
1026.61(a)(5)(iii)(D) did not apply, the prepaid account issuer and the 
card issuer would have a substantial relationship such that the parties 
could avoid the concerns raised by the digital wallet provider by 
structuring the terms of the accounts to prevent consumers from being 
charged fees or interest when incidental credit was provided formally 
via the credit card account.\102\
---------------------------------------------------------------------------

    \102\ 82 FR 29630, 29650 (June 29, 2017).
---------------------------------------------------------------------------

    Nevertheless, the Bureau solicited comment on whether it should 
permit incidental credit to be provided via a negative balance on a 
prepaid account even when a covered separate credit feature is 
connected to the prepaid account, as requested by the digital wallet 
commenter. The Bureau also solicited comment on whether prepaid account 
issuers or card issuers are likely to incur any significant 
difficulties in structuring the accounts to prevent consumers from 
being charged fees or interest when the incidental credit is provided 
formally via the credit card account, such as any significant 
difficulties in identifying for the card issuer which transactions on 
the prepaid account relate to incidental credit.
Comments Received
    In response to the June 2017 Proposal, the digital wallet provider 
and an industry trade association requested that the Bureau revise 
Sec.  1026.61(a)(4) to permit negative balances on a prepaid account 
even if a covered separate credit feature is attached to the prepaid 
account so long as the other conditions set forth in Sec.  
1026.61(a)(4) are met. The digital wallet provider indicated that 
consumers are likely to become confused if the digital wallet provider 
opens a separate credit account or subaccount in its digital wallet to 
avoid a negative balance when a credit card account issued by a 
business partner is linked to the digital wallet. The commenter 
indicated that this consumer confusion is particularly likely to arise 
for consumers who previously incurred negative balances in their 
prepaid accounts for incidental credit when their digital wallets were 
linked only to credit card accounts issued by card issuers that are not 
business partners. The commenter indicated that consumers may not 
understand why the incidental credit is now being provided through a 
separate credit account or subaccount (as opposed to a negative 
balance) and why they are receiving Regulation Z disclosures, including 
monthly statements, for this separate credit account or subaccount. The 
commenter also indicated that building systems to comply with 
Regulation Z to hold otherwise permissible negative balances in 
separate credit accounts or subaccounts when business partner credit 
card accounts are linked (and converting the accounts back if consumers 
subsequently remove such credit card accounts from their digital wallet 
accounts) would be a major technological and financial undertaking.
    This commenter recognized that the rule did not prohibit a prepaid 
account issuer from charging incidental credit to the linked covered 
separate credit feature offered by the business partner. Nonetheless, 
this commenter indicated that such charges would not always be 
possible. For example, it said that the prepaid account issuer would 
not be able to charge the incidental credit to a linked credit card 
when doing so would cause the credit card account to exceed the credit 
limit set by the card issuer. Even when it is possible to charge the 
incidental credit to the linked covered separate credit feature, this 
commenter suggested that doing so likely would be financially 
detrimental to consumers. In particular, the commenter stated that 
incidental credit charged to the linked covered separate credit feature 
would likely be deemed a cash advance by the card issuer and thus is 
likely to subject the consumer to interest and fees. The commenter also 
indicated that it is not likely that card issuers would be willing to 
waive interest or fees when incidental credit (that would otherwise 
take the form of a negative balance in a digital wallet) is instead 
converted to an extension of credit through the linked covered separate 
credit feature. This commenter believed that it was much more likely 
that credit card issuers would impose interest and fees directly on the 
consumers for this credit or would expect digital wallet providers to 
incur those costs on behalf of their customers.
    The trade association also raised similar concerns as discussed 
above related to consumer confusion and implementation burdens for 
digital wallet providers.
The Final Rule
    For the reasons set forth herein, the Bureau is amending Sec.  
1026.61(a)(4) to allow a prepaid account issuer to take advantage of 
the exception permitting a negative balance on the asset feature of the 
prepaid account even if a covered separate credit feature offered by a 
business partner is attached, so long as the other conditions contained 
in Sec.  1026.61(a)(4) are satisfied. As discussed above, the 2016 
Final Rule's version of Sec.  1026.61(a)(4) provided that a prepaid 
card is not a hybrid prepaid-credit card and thus is not a credit card 
under Regulation Z if three conditions were met: (1) The prepaid card 
cannot access credit from a covered separate credit feature accessible 
by a hybrid prepaid-credit card; (2) the prepaid account issuer has a 
general policy and practice of declining transactions that will take 
the account negative (at least outside of the situations involving 
incidental credit); and (3) the prepaid account issuer generally does 
not charge credit-related fees.
    The Bureau is making several revisions to Sec.  1026.61(a)(4). 
First, the Bureau is revising the lead-in paragraph to Sec.  
1026.61(a)(4) to provide that a prepaid card is not a hybrid prepaid-
credit card with respect to credit extended through a negative balance 
on the asset feature of the prepaid account and is not a credit card 
for purposes of Regulation Z with respect to that credit if the 
conditions of Sec.  1026.61(a)(4) are met. Second, the Bureau is 
adjusting the first condition in Sec.  1026.61(a)(4)(i) to provide that 
the prepaid card cannot access credit from a covered separate credit 
feature, as described Sec.  1026.61(a)(2)(i), that is offered by a 
prepaid account issuer or its affiliate. Third, the Bureau is modifying 
the heading for Sec.  1026.61(a)(4) to make clear that this exception 
relates to credit extended through a negative balance on

[[Page 6393]]

the asset feature of the prepaid account. With these revisions, under 
final Sec.  1026.61(a)(4), a prepaid card is not a hybrid prepaid-
credit card with respect to credit extended through a negative balance 
on the asset feature of the prepaid account and is not a credit card 
for purposes of Regulation Z with respect to that credit, even if a 
covered separate credit feature offered by a business partner is 
attached to the prepaid account, so long as the other conditions 
contained in Sec.  1026.61(a)(4) are satisfied. If the conditions in 
Sec.  1026.61(a)(4) are met, the incidental credit extended through the 
negative balance is not subject to Regulation Z and the other 
protections in Regulations Z and E for hybrid prepaid-credit cards. See 
final comment 61(a)(4)-1.v. Instead, this credit is regulated under 
Regulation E as credit incidental to the prepaid card transaction.
    If the conditions of final Sec.  1026.61(a)(4) are not met, such as 
where the prepaid card can access a covered separate credit feature 
offered by the prepaid account issuer or its affiliate, the prepaid 
card is a hybrid prepaid-credit card under Sec.  1026.61(a)(3) with 
respect to credit extended through the negative balance on the asset 
feature of the prepaid account. As a result, Sec.  1026.61(b) prohibits 
the card issuer from structuring the overdraft credit feature as a 
negative balance on the asset feature of the prepaid account. In that 
case, the card issuer must structure the overdraft credit feature as a 
separate credit feature, such as a credit account or subaccount to the 
prepaid account that is separate from the asset feature of the prepaid 
account. This separate credit feature is a ``covered separate credit 
feature'' under Sec.  1026.61(a)(2)(i) and is subject to the credit 
card rules in Regulation Z, as well as the targeted provisions in 
Regulations Z and E applicable to hybrid prepaid-credit cards.
    The Bureau notes that the exception in final Sec.  1026.61(a)(4) 
only applies to credit extended through the negative balance on the 
prepaid account's asset feature in compliance with that provision. 
However, if the prepaid card is also attached to a covered separate 
credit feature that is offered by a business partner, the prepaid card 
is a hybrid prepaid-credit card with respect to that covered separate 
credit feature pursuant to Sec.  1026.61(a)(2)(i). In contrast, where a 
prepaid card is not attached to any type of covered separate credit 
feature, the prepaid card is not a hybrid prepaid-credit card in any 
respect. See final comment 61(a)(4)-1.ii.
    The Bureau also is amending comment 61(a)(4)-1 and several other 
provisions in Regulation Z to reflect the revised exception in final 
Sec.  1026.61(a)(4) and to make other clarifications consistent with 
final Sec.  1026.61(a)(4). See final Sec.  1026.61(a)(1)(iii) and 
(a)(3)(ii) and final comments 4(b)(11)-1.i and iii, 61(a)(3)(i)-1.ii, 
61(a)(3)(ii)-1, and 61(a)(4)-1. The revisions to comment 61(a)(4)-1 are 
discussed in more detail below.\103\
---------------------------------------------------------------------------

    \103\ In addition to revisions to comment 61(a)(4)-1, the Bureau 
is making conforming changes to the following provisions for 
consistency with final Sec.  1026.61(a)(4). As revised:
    (1) Section 1026.61(a)(1)(iii) provides that with respect to a 
credit feature structured as a negative balance on the asset feature 
of the prepaid account as described in Sec.  1026.61(a)(3), a 
prepaid card is not a hybrid prepaid-credit card or a credit card 
for purposes of Regulation Z if the conditions set forth in Sec.  
1026.61(a)(4) are met;
    (2) Section 1026.61(a)(3)(ii) provides that a prepaid account 
issuer can use a negative asset balance structure to extend credit 
on an asset feature of a prepaid account only if the prepaid card is 
not a hybrid prepaid-credit card with respect to that credit as 
described in Sec.  1026.61(a)(4);
    (3) Comment 4(b)(11)-1.i provides that the rules for 
classification of fees or charges as finance charges with respect to 
a covered separate credit feature are specified in Sec.  
1026.4(b)(11) and related commentary;
    (4) Comment 4(b)(11)-1.iii provides that if the prepaid card is 
not a hybrid prepaid-credit card with respect to credit extended 
through a negative balance on the asset feature of the prepaid 
account pursuant to Sec.  1026.61(a)(4), with regard to that credit, 
fees charged on the asset feature of the prepaid account in 
accordance with Sec.  1026.61(a)(4)(ii)(B) are not finance charges;
    (5) Comment 61(a)(3)(i)-1.ii provides that unless the credit 
extended through a negative balance on the asset feature of the 
prepaid account meets the requirements of Sec.  1026.61(a)(4), such 
a product structure would violate the rules under Sec.  1026.61(b); 
and
    (6) Comment 61(a)(3)(ii)-1 provides that unless Sec.  
1026.61(a)(4) applies, a card issuer would violate Sec.  1026.61(b) 
if it structures a credit feature as a negative balance on the asset 
feature of the prepaid account and provides that a prepaid account 
issuer can use a negative asset balance structure to extend credit 
on a prepaid account if the prepaid card is not a hybrid prepaid-
credit card with respect to that credit as described in Sec.  
1026.61(a)(4).
---------------------------------------------------------------------------

    To facilitate compliance with TILA, the Bureau believes it is 
necessary and proper to exercise its exception authority under TILA 
section 105(a) so that a prepaid card that accesses credit structured 
as a negative balance on the prepaid account is excluded from the 
definition of ``credit card'' under TILA section 103(l) \104\ and 
Regulation Z Sec.  1026.2(a)(15)(i) (as amended by the 2016 Final 
Rule), even if a covered separate credit feature offered by a business 
partner is attached to the prepaid account, so long as the other 
conditions set forth in Sec.  1026.61(a)(4) are met. For the reasons 
discussed below, the Bureau is therefore making this exception to Sec.  
1026.61(a)(4).
---------------------------------------------------------------------------

    \104\ 15 U.S.C. 1602(l).
---------------------------------------------------------------------------

    The Bureau recognizes that when a covered separate credit feature 
offered by a business partner is attached to a prepaid account, it may 
not always be possible to charge incidental credit to the linked 
covered separate credit feature when doing so would cause the account 
to exceed the credit limit set by the card issuer. In addition, even 
when it is possible to charge the incidental credit to the linked 
covered separate credit feature, the card issuer may not be willing to 
waive interest and fees on that credit. To avoid having a negative 
balance in the asset feature of the prepaid account and thus violating 
Sec.  1026.61(b), the prepaid account issuer could open a separate 
credit account or subaccount in the digital wallet in those cases where 
a covered separate credit feature issued by a business partner is 
linked.
    The Bureau also agrees with the industry commenters that, absent 
its exception to Sec.  1026.61(a)(4), this aspect of the Prepaid 
Accounts Rule likely would create significant operational burdens for 
prepaid account issuers. A prepaid account issuer would need to build 
Regulation Z-compliant systems to hold otherwise permissible negative 
balances in separate accounts or subaccounts when consumers link 
business partner credit card accounts (and, the Bureau presumes, 
convert the account back when such accounts are removed). The Bureau 
also is persuaded that this approach could be confusing to consumers, 
especially in the context of digital wallets and how consumers have 
historically used them.
    When discussing their concerns about Sec.  1026.61(a)(4), the 
industry commenters generally focused on situations that arise when a 
covered separate credit feature offered by a business partner is linked 
to a prepaid account. The Bureau does not believe that these same 
concerns arise when a covered separate credit feature is offered by the 
prepaid account issuer or its affiliate (as opposed to a business 
partner) and thus is not amending Sec.  1026.61(a)(4) to allow a 
negative balance on the prepaid account when a covered separate credit 
feature offered by the prepaid account issuer or its affiliate is 
attached to the prepaid account. Among other things, the prepaid 
account issuer or its affiliate, in these cases, would already offer 
Regulation Z-compliant covered separate credit features. The Bureau 
believes when the prepaid account issuer itself or an affiliated party 
offer both the prepaid account and the covered separate credit feature, 
it will

[[Page 6394]]

encounter fewer difficulties in charging the incidental credit to the 
covered separate credit feature, or waiving interest and fees on the 
incidental credit when it is charged to the covered separate credit 
feature if desired.
    Revisions to comment 61(a)(4)-1. The Bureau is making several 
revisions to comment 61(a)(4)-1 for consistency with the changes noted 
above to Sec.  1026.61(a)(4). Specifically, the Bureau is amending 
comment 61(a)(4)-1.i to explain that a prepaid card is not a hybrid 
prepaid-credit card with respect to credit extended through a negative 
balance on the asset feature of the prepaid account if: (1) The card 
cannot access credit from a covered separate credit feature under Sec.  
1026.61(a)(2)(i) that is offered by the prepaid account issuer or its 
affiliate, though it is permissible for it to access credit from a 
covered separate credit feature offered by a business partner or from a 
non-covered separate credit feature as described under Sec.  
1026.61(a)(2)(ii); and (2) the card can only access credit extended 
through a negative balance on the asset feature of the prepaid account 
in accordance with both the conditions set forth in Sec.  
1026.61(a)(4)(ii)(A) and (B).
    The Bureau also is adding a new comment 61(a)(4)-1.ii to provide 
additional guidance on circumstances when a prepaid card accesses both 
a negative balance on the asset feature of the prepaid account that 
meets the conditions of Sec.  1026.61(a)(4) and other credit features. 
Specifically, consistent with final Sec.  1026.61(a)(4), new comment 
61(a)(4)-1.ii explains that if the conditions of Sec.  1026.61(a)(4) 
are met and the prepaid card can access credit from a covered separate 
credit feature, as defined in Sec.  1026.61(a)(2)(i), that is offered 
by a business partner, the prepaid card is a hybrid prepaid-credit card 
with respect to the covered separate credit feature pursuant to Sec.  
1026.61(a)(2)(i) but it is not a hybrid prepaid-credit card with 
respect to credit extended by a prepaid account issuer through a 
negative balance on the asset feature of the prepaid account that meets 
the conditions of Sec.  1026.61(a)(4) or with respect to any non-
covered separate credit feature pursuant to Sec.  1026.61(a)(2)(ii). 
New comment 61(a)(4)-1.ii also explains that, if the conditions of 
Sec.  1026.61(a)(4) are met and the prepaid card cannot access credit 
from any covered separate credit feature, as defined in Sec.  
1026.61(a)(2)(i), the prepaid card is not a hybrid prepaid-credit card 
with respect to credit extended by a prepaid account issuer through a 
negative balance on the asset feature of the prepaid account that meets 
the conditions of Sec.  1026.61(a)(4) or with respect to any non-
covered separate credit feature pursuant to Sec.  1026.61(a)(2)(ii).
    The 2016 Final Rule's version of comment 61(a)(4)-1.ii provided an 
example of when a prepaid card was not a hybrid prepaid-credit card 
because the conditions in Sec.  1026.61(a)(4) had been met. The Bureau 
is renumbering this comment as final comment 61(a)(4)-1.iii and is 
revising it to be consistent with final Sec.  1026.61(a)(4). 
Specifically, final comment 61(a)(4)-1.iii explains that a prepaid card 
is not a hybrid prepaid-credit card with respect to credit extended 
through a negative balance on the asset feature of the prepaid account 
in the following circumstances because the conditions set forth in 
Sec.  1026.61(a)(4) have been met: (1) The prepaid card can only access 
credit extended through a negative balance on the asset feature of the 
prepaid account in accordance with both the conditions set forth in 
Sec.  1026.61(a)(4)(ii)(A) and (B); and (2) the card can access credit 
from a non-covered separate credit feature as defined in Sec.  
1026.61(a)(2)(ii) and from a covered separate credit feature as defined 
in Sec.  1026.61(a)(2)(i) offered by a business partner, but cannot 
access credit for a covered separate credit feature that is offered by 
a prepaid account issuer or its affiliate.
    The 2016 Final Rule's version of comment 61(a)(4)-1.iii provided an 
example of when a prepaid card was a hybrid prepaid-credit card because 
the conditions of Sec.  1026.61(a)(4) had not been met. The Bureau is 
renumbering this comment as final comment 61(a)(4)-1.iv and is revising 
it for consistency with the changes made to Sec.  1026.61(a)(4). 
Specifically, final comment 61(a)(4)-1.iv makes clear that a prepaid 
account issuer does not qualify for the exception in Sec.  
1026.61(a)(4) if the prepaid account issuer structures the arrangement 
such that, when there are insufficient or unavailable funds in the 
asset feature of the prepaid account at the time a transaction is 
initiated, the card can be used to draw, transfer, or authorize the 
draw or transfer of credit from a covered separate credit feature 
offered by the prepaid account issuer or its affiliate during the 
authorization phase to complete the transaction so that credit is not 
extended on the asset feature of the prepaid account. In this case, the 
exception in final Sec.  1026.61(a)(4) does not apply because the 
prepaid card can be used to draw, transfer, or authorize the draw or 
transfer of credit from a covered separate credit feature defined in 
Sec.  1026.61(a)(2)(i) that is offered by the prepaid account issuer or 
its affiliate. Final comment 61(a)(4)-1.iv also explains that, in this 
example, the card is a hybrid prepaid-credit card with respect to 
credit extended through a negative balance on the asset feature of the 
prepaid account pursuant to Sec.  1026.61(a)(3) and with respect to the 
covered separate credit feature pursuant to Sec.  1026.61(a)(2)(i). In 
that case, a card issuer has violated Sec.  1026.61(b) because it has 
structured the credit feature as a negative balance on the asset 
feature of the prepaid account. See Sec.  1026.61(a)(3)(ii) and (b).
    The 2016 Final Rule's version of comment 61(a)(4)-1.iv provided 
guidance on how the regulation applied in cases where the prepaid card 
was not a hybrid prepaid-credit card. The Bureau is renumbering this 
comment as final comment 61(a)(4)-1.v and revising it for consistency 
with final Sec.  1026.61(a)(4). Specifically, final comment 61(a)(4)-
1.v provides that, in the case where a prepaid card is not a hybrid 
prepaid-credit card with respect to credit extended through a negative 
balance on the asset feature of the prepaid account because the 
conditions in Sec.  1026.61(a)(4) are met, the prepaid account issuer 
is not a card issuer under Sec.  1026.2(a)(7) with respect to the 
prepaid card when it accesses credit extended through the negative 
balance on the asset feature of the prepaid account. The prepaid 
account issuer also is not a creditor under Sec.  1026.17(a)(iii) or 
(iv) because it is not a card issuer under Sec.  1026.2(a)(7) with 
respect to the prepaid card when it accesses credit extended through 
the negative balance on the asset feature of the prepaid account. The 
prepaid account issuer also is not a creditor under Sec.  
1026.2(a)(17)(i) with respect to credit extended through the negative 
balance on the asset feature of the prepaid account as a result of 
imposing fees on the prepaid account because those fees are not finance 
charges with respect to that credit, as described in final comment 
4(b)(11)-1.iii.
61(a)(5) Definitions
61(a)(5)(iii)
The Bureau's Proposal
    As discussed in the section-by-section analysis of Sec.  1026.61(a) 
above, overdraft credit features accessible by hybrid prepaid-credit 
cards are referred to as ``covered separate credit features'' in the 
Prepaid Accounts Rule, as set forth in Sec.  1026.61(a)(2)(i). These 
covered separate credit features are subject to the traditional credit 
card rules in Regulation Z, as well as other tailored provisions 
established by the 2016 Final Rule in both Regulations Z and E. The 
rules for covered separate credit features

[[Page 6395]]

accessible by hybrid prepaid-credit cards apply regardless of whether 
the credit is offered by the prepaid account issuer itself, its 
affiliate, or its business partner. Specifically, the 2016 Final Rule's 
version of Sec.  1026.61(a)(5)(iii) defined the term ``business 
partner'' as a person (other than the prepaid account issuer or its 
affiliate) that can extend credit through a separate credit feature 
where the person or its affiliate has an arrangement with the prepaid 
account issuer or its affiliate. Comment 61(a)(5)(iii)-1 explained that 
there were two types of arrangements that create a business partner 
relationship for purposes of Sec.  1026.61(a)(5)(iii): (1) An agreement 
between the parties under which a prepaid card can from time to time 
draw, transfer, or authorize a draw or transfer of credit in the course 
of authorizing, settling, or otherwise completing transactions 
conducted with the prepaid card to obtain goods or services, obtain 
cash, or conduct P2P transfers; and (2) a cross-marketing or other 
similar agreement between the parties to cross-market the credit 
feature or the prepaid account, where the prepaid card from time to 
time can draw, transfer, or authorize the draw or transfer of credit 
from the credit feature in the course of transactions conducted with 
the prepaid card to obtain goods or services, obtain cash, or conduct 
P2P transfers.
    As discussed above, a digital wallet provider raised several 
concerns in its comment letter on the 2017 Effective Date Proposal 
about the account number for the digital wallet account becoming a 
hybrid prepaid-credit card when consumers link their digital wallet 
accounts to credit card accounts that are offered by companies with 
which the digital wallet provider has cross-marketing or other 
agreements that would create a business partner relationship under the 
2016 Final Rule's version of Sec.  1026.61(a)(5)(iii).
    This commenter especially was concerned about several targeted 
provisions of the Prepaid Accounts Rule, as discussed above in detail 
in the section-by-section analysis of Sec.  1026.61(a). In particular, 
it indicated that consumers would likely be confused if they had to 
wait 30 days after registering a prepaid account that is a digital 
wallet before linking a credit card account offered by a business 
partner to the digital wallet, but they could add a credit card account 
immediately after opening the digital wallet account if there was no 
business partner arrangement. The commenter expressed concern that 
additional consumer confusion would likely arise from the long form 
pre-acquisition disclosure requirements set forth in Regulation E Sec.  
1005.18(b)(4)(vii), which mandate that disclosures of key credit 
pricing terms set forth in Sec.  1026.60(e)(1) be included on a prepaid 
account's long form disclosure if a covered separate credit feature 
accessible by a hybrid prepaid-credit card may be offered to a consumer 
in connection with the prepaid account. The commenter indicated that 
these credit disclosures for each credit card product offered by each 
business partner, which could be numerous, would have to be provided to 
all new digital wallet account holders in the digital wallet account's 
long form disclosure even though many of the digital wallet account 
holders may never hold, or apply for, credit card accounts offered by 
those business partners.
    In an effort to address these concerns, the Bureau proposed to 
narrow the definition of ``business partner'' in Sec.  
1026.61(a)(5)(iii) to exclude certain arrangements between prepaid 
account issuers and companies that offer products already subject to 
traditional credit card rules, provided that certain additional 
safeguards are in place. Under the proposed exception, the prepaid 
account issuer and the card issuer would not have been ``business 
partners'' under proposed Sec.  1026.61(a)(5)(iii), and thus the 
prepaid card would not have been a hybrid prepaid-credit card under 
Sec.  1026.61(a)(2)(i) with respect to the credit card account if 
certain conditions were met.
    To effectuate this potential exception, the Bureau proposed several 
revisions to the definition of ``business partner'' in Sec.  
1026.61(a)(5)(iii). First, the Bureau proposed to move certain guidance 
on when there is an arrangement between business partners from comment 
61(a)(5)(iii)-1 to the regulatory text itself in proposed Sec.  
1026.61(a)(5)(iii)(A) through (C), and to revise this language for 
clarity, as discussed in more detail below. In particular, this 
proposed change would have included moving the descriptions of the two 
types of arrangements that trigger coverage as business partners, as 
discussed above, to proposed Sec.  1026.61(a)(5)(iii)(B) and (C).
    Second, in response to concerns raised by the digital wallet 
provider, the Bureau proposed to add an exception, in Sec.  
1026.61(a)(5)(iii)(D), to the definition of business partner. 
Specifically, proposed Sec.  1026.61(a)(5)(iii)(D) would have provided 
that a person that can extend credit through a credit card account is 
not a business partner of a prepaid account issuer with which it has an 
arrangement, as defined in proposed Sec.  1026.61(a)(5)(iii)(A) through 
(C), with regard to such credit card account if all of the following 
conditions are met:
    (1) The credit card account is a credit card account under an open-
end (not home-secured) consumer credit plan that a consumer can access 
through a traditional credit card.
    (2) The prepaid account issuer and the card issuer will not allow 
the prepaid card to draw, transfer, or authorize the draw or transfer 
of credit from the credit card account from time to time in the course 
of authorizing, settling, or otherwise completing transactions 
conducted with the card to obtain goods or services, obtain cash, or 
conduct P2P transfers, except where the prepaid account issuer or the 
card issuer has received from the consumer a written request that is 
separately signed or initialized to authorize the prepaid card to 
access the credit card account, as described above.
    (3) The prepaid account issuer and the card issuer do not condition 
the acquisition or retention of the prepaid account or the credit card 
account on whether a consumer authorizes the prepaid card to access the 
credit card account, as described above in proposed Sec.  
1026.61(a)(5)(iii)(D)(2).
    (4) The prepaid account issuer applies the same terms, conditions, 
or features to the prepaid account when a consumer authorizes linking 
the prepaid card to the credit card account, as described above, in 
proposed Sec.  1026.61(a)(5)(iii)(D)(2) as it applies to the consumer's 
prepaid account when the consumer does not authorize such a linkage. In 
addition, the prepaid account issuer applies the same fees to load 
funds from a credit card account that is linked to the prepaid account, 
as described above, as it charges for a comparable load on the 
consumer's prepaid account to access a credit feature offered by a 
person that is not the prepaid account issuer, its affiliate, or a 
person with which the prepaid account issuer has an arrangement.
    (5) The card issuer applies the same specified terms and conditions 
to the credit card account when a consumer authorizes linking the 
prepaid card to the credit card account as described above in proposed 
Sec.  1026.61(a)(5)(iii)(D)(2) as it applies to the consumer's credit 
card account when the consumer does not authorize such a linkage. In 
addition, the card issuer applies the same specified terms and 
conditions to extensions of credit from the credit card account made 
with the prepaid card as with the traditional credit card.
    Each of these conditions is discussed in more detail in the 
section-by-section

[[Page 6396]]

analyses of Sec.  1026.61(a)(5)(iii)(D)(1), (2), (3), (4), and (5) 
below, respectively.
    Under proposed Sec.  1026.61(a)(5)(iii)(D), a person that can 
extend credit through a credit card account that can be linked to a 
prepaid account would not be a business partner of the prepaid account 
issuer with which it has an arrangement, as defined in proposed Sec.  
1026.61(a)(5)(iii)(A) through (C), with respect to the credit card 
account. The credit feature would be subject to traditional credit card 
rules in its own right because one of the conditions for the proposed 
exception (proposed Sec.  1026.61(a)(5)(iii)(D)(1)) is that the credit 
feature must be a credit card account under an open-end (not home-
secured) consumer credit plan. The prepaid card that is linked to the 
credit card account, as described in proposed Sec.  
1026.61(a)(5)(iii)(D)(2), would not be a hybrid prepaid-credit card 
with respect to that credit card account, and thus the Prepaid Accounts 
Rule's tailored provisions applicable in connection with covered 
separate credit features accessible by hybrid prepaid-credit cards 
would not apply, such as the 30-day waiting period in Sec.  1026.61(c) 
and the long form pre-acquisition disclosure requirements set forth in 
Regulation E Sec.  1005.18(b)(4)(vii).\105\ In addition, when the 
exception in proposed Sec.  1026.61(a)(5)(iii)(D) were to apply, the 
fact that the prepaid card can access the credit card account would not 
prevent the prepaid account issuer from providing incidental credit 
through a negative balance on the linked prepaid account if the 
conditions of Sec.  1026.61(a)(4) were met.
---------------------------------------------------------------------------

    \105\ Other provisions in Regulations Z and E setting forth 
additional protections that only apply to covered separate credit 
features accessible by hybrid prepaid-credit cards or to prepaid 
accounts that are connected to such credit features include:
    (1) Restrictions in Regulation E Sec.  1005.18(g) on account 
terms, conditions, and features imposed on the asset feature of the 
prepaid account and applicability of the fee restriction in Sec.  
1026.52(a) to certain fees imposed on the asset feature of the 
prepaid account;
    (2) Repayment-related provisions applicable to covered separate 
credit features in Sec. Sec.  1026.5(b)(2)(ii)(A), 1026.7(b)(11), 
1026.12(d)(2) and (3), and Regulation E Sec.  1005.10(e)(1);
    (3) Applicability of the claims and defenses provision in Sec.  
1026.12(c); and
    (4) Applicability of limits on liability for unauthorized use 
and error resolution provisions in Sec. Sec.  1026.12(b) and 1026.13 
and Regulation E Sec.  1005.12(a).
---------------------------------------------------------------------------

    The Bureau did not propose to specifically tailor the proposed 
exception to digital wallet accounts because the Bureau believed that 
it may be difficult to distinguish these digital wallet accounts from 
other types of prepaid accounts, particularly those that operate 
without a physical access device. Nonetheless, the Bureau believed that 
the proposed exception would address most of the concerns raised by the 
digital wallet provider, as discussed above. While prepaid account 
issuers do not generally permit card-based prepaid accounts to be 
linked to credit card accounts in order to back up transactions where 
the prepaid account lacks sufficient funds, the Bureau believed that 
the potential risk to consumers if issuers were to do so would be 
minimal if the conditions in proposed Sec.  1026.61(a)(5)(iii)(D) were 
met.
    The Bureau did not propose to extend the exception to situations 
where the prepaid account issuer or its affiliate was the party 
offering the credit card account. The Bureau believed that ensuring 
separation and independence is more complicated when both accounts are 
issued by the same entity or entities under common control, 
particularly given that offset, security interests, and other types of 
linkages may be present. Therefore, the Bureau believed that the 
Prepaid Accounts Rule's tailored protections, including the 30-day 
waiting period, were warranted in such cases.
Comments Received
    Industry commenters that provided specific feedback on the proposed 
exception to the definition of ``business partner'' generally supported 
the exception with some suggested modifications. For example, several 
industry commenters, including trade associations, program managers, 
and a prepaid issuer, requested that the Bureau expand the proposed 
exception in Sec.  1026.61(a)(5)(iii)(D) to apply to credit card 
accounts that are offered by the prepaid account issuer or its 
affiliate, so long as the same conditions set forth in the proposed 
exception were met. These commenters asserted that such an approach 
would avoid what they called an unfair and differential impact to 
prepaid account issuers that also issue credit cards, and that a 
broader exception should not introduce new risks to the consumer nor 
undermine the important policy goals of the Bureau.
    In addition, the digital wallet provider commenter discussed above 
suggested that the Bureau not adopt the proposed conditions that the 
parties do not vary certain terms and conditions based on whether the 
two accounts are linked as set forth in proposed Sec.  
1026.61(a)(5)(iii)(D)(4) and (5) to qualify for the exception, at least 
with respect to digital wallets. This commenter indicated that such 
conditions were likely to chill innovation and would limit digital 
wallet providers' and credit card issuers' abilities to offer consumer 
benefits that take advantage of synergies created by linked offerings. 
On the other hand, a group of consumer advocates commented in support 
of the proposed conditions. These commenters indicated that if a 
consumer can only get advantageous terms by linking accounts, the 
linkage is not voluntary.
    The group of consumer advocates also requested that the Bureau 
require an additional condition to qualify for the exception. 
Specifically, they suggested that any credit card account arrangement 
that is excepted from the definition of hybrid prepaid-credit card 
under Sec.  1026.61(a)(5)(iii)(D) should be required to comply with 
Sec.  1026.12(d)(3)(ii), which permits a written plan authorizing 
periodic deductions from the prepaid account only if the deductions are 
no more frequent than once per calendar month, such as on the date 
disclosed on the credit card statement. They were concerned that the 
credit card accounts might only be marketed to prepaid account holders, 
and these consumers could be led easily to believe that linking the two 
accounts is required and to agree to automatic payments on a daily or 
weekly basis.
    A prepaid issuer requested that the Bureau ensure that the language 
of the exception, including the commentary, is drafted to clearly apply 
to all types of prepaid accounts, rather than limiting its purported 
applicability and underlying rationale to digital wallets.
    With respect to the condition contained in proposed Sec.  
1026.61(a)(5)(iii)(D)(2), several industry commenters, including 
program managers and a trade association, requested that the condition 
to obtain a written authorization not apply where the two accounts were 
linked prior to the effective date of the Prepaid Accounts Rule. They 
argued that requiring prepaid account issuers or card issuers to obtain 
a ``written request'' from consumers for accounts that are already 
linked prior to the effective date would likely prove to be an 
extremely expensive and burdensome condition for providers and 
consumers who have previously agreed to the linkage. The Bureau also 
received several other comments related to the specific conditions of 
the proposed exception, which are discussed in the section-by-section 
analyses of Sec.  1026.61(a)(5)(iii)(D)(1), (2), and (5) below.
    Several industry commenters, including trade associations, program

[[Page 6397]]

managers, and an issuing bank, requested that the Bureau generally 
reconsider the 2016 Final Rule's extension of provisions of TILA and 
Regulation Z to overdraft services on prepaid accounts and instead 
apply those protections currently afforded consumers of deposit 
accounts under Regulation E, largely for reasons that the Bureau 
previously addressed in the 2016 Final Rule. In addition, another 
issuing bank requested that the Bureau evaluate and consider the need 
for further revisions to the Prepaid Accounts Rule's credit-related 
provisions that apply to digital wallets linked to traditional credit 
cards. This commenter indicated that the Prepaid Accounts Rule's credit 
related provisions, as applied to digital wallets, should be 
appropriately tailored to the unique functionality of digital wallets.
The Final Rule
    For the reasons set forth herein, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(A) through (C) as proposed and is adopting the 
exception in Sec.  1026.61(a)(5)(iii)(D) generally as proposed with 
certain revisions. Specifically, final Sec.  1026.61(a)(5)(iii)(D)(2) 
provides guidance on how this condition applies as of April 1, 2019 
(the new effective date of the Prepaid Accounts Rule, as discussed in 
part VI below), if the prepaid account is linked to the credit card 
account prior to that date, or prior to an arrangement between the 
prepaid account issuer and the card issuer as described in final Sec.  
1026.61(a)(5)(iii)(A) through (C), as discussed in more detail below. 
Final Sec.  1026.61(a)(5)(iii)(D)(3) also provides guidance on how this 
condition applies as of April 1, 2019, if the prepaid account is linked 
to the credit card account prior to that date, as discussed in more 
detail below. The Bureau also is adopting Sec.  
1026.61(a)(5)(iii)(D)(5) and related commentary with modifications to 
clarify the intent of those provisions, as discussed in the section-by-
section analysis of that provision below.
    For the reasons discussed below, to facilitate compliance with 
TILA, the Bureau believes it is necessary and proper to exercise its 
exception authority under TILA section 105(a) so that a prepaid card 
that is linked to a credit card account meeting the conditions in final 
Sec.  1026.61(a)(5)(iii)(D) is excluded from the definition of ``credit 
card'' under TILA section 103(l) \106\ and Regulation Z Sec.  
1026.2(a)(15)(i) (as amended by the 2016 Final Rule).\107\ The 
exception facilitates compliance by allowing the card issuer to comply 
with the rules in Regulation Z that already apply to the credit card 
account without also requiring the card issuer or the prepaid account 
issuer to comply with the tailored provisions in Regulations Z and E 
that were adopted in the 2016 Final Rule.
---------------------------------------------------------------------------

    \106\ 15 U.S.C. 1602(l).
    \107\ For the same reasons, the Bureau declines to extend the 
additional tailored provisions of the Prepaid Accounts Rule 
authorized under TILA section 105(a), section 1032(a) of the Dodd-
Frank Act, and EFTA section 904(c) to these cards that are excluded 
from coverage as hybrid prepaid-credit cards.
---------------------------------------------------------------------------

    The Bureau believes that is appropriate and proper to use its 
exception authority under TILA section 105(a) for several reasons. 
First, the credit card account, even if not subject to the specific 
rules for hybrid prepaid-credit cards, is subject to the credit card 
rules in Regulation Z in its own right because it is a credit card 
account under an open-end (not home-secured) consumer credit plan that 
the consumer can access with a traditional credit card, pursuant to 
final Sec.  1026.61(a)(5)(iii)(D)(1). Thus, the linked credit feature 
will still receive the protections in Regulation Z that generally apply 
to a credit card account under an open-end (not home-secured) consumer 
credit plan.
    Second, the Bureau believes that the conditions a prepaid account 
issuer and a card issuer must satisfy to qualify for the exception 
create substantial safeguards to protect against the prepaid account 
and the credit card account being connected in a way that would pose 
the kinds of risks to consumers that motivated the Bureau's approach to 
the general rules for covered separate credit features accessible by 
hybrid prepaid-credit cards. For example, the 30-day waiting period in 
Sec.  1026.61(c) was designed to ensure that consumers do not feel 
undue pressure to decide at the time that they purchase or register a 
prepaid account whether to link a covered separate credit feature to 
such account without having the opportunity to fully consider the terms 
of the prepaid account, the separate credit feature, and the 
consequences of linking the two.\108\ The Bureau also carefully crafted 
rules to govern the pricing for prepaid accounts and covered separate 
credit features upon linkage via a hybrid prepaid-credit card, and the 
disclosure thereof, to better ensure that the consumer could understand 
the cost and consequences of linking credit to a prepaid account. The 
Bureau believes that these requirements are not necessary when the 
safeguards of the exception are met because those safeguards will help 
make consumers' decisions about account acquisition, retention, and 
link authorization simpler and less prone to undue pressure. In 
particular, the Bureau has tailored this exception to ensure that it is 
limited to traditional credit card accounts already covered by 
Regulation Z's open-end credit card rules and that the consumer could 
not be required to link the prepaid account and the credit card account 
to obtain or retain either account. In addition, to qualify for the 
exception, certain terms and conditions that apply to the credit card 
account and the prepaid account must be the same regardless of whether 
the two accounts are linked. Thus, the consequences to the consumer of 
linking the two accounts are less complex. As discussed in more detail 
below, the Bureau believes that when the conditions of the exception 
are met, it is not necessary to apply the 30-day waiting period in 
Sec.  1026.61(c) or the other additional protections in Regulations Z 
and E that are applicable only to covered separate credit features or 
to prepaid accounts that are connected to covered separate credit 
features.
---------------------------------------------------------------------------

    \108\ 81 FR 83934, 84268 (Nov. 22, 2016).
---------------------------------------------------------------------------

    Additional guidance for accounts linked prior to April 1, 2019 or 
prior to an arrangement described in final Sec.  1026.61(a)(5)(iii)(A) 
through (C). Based on comments received and its own analysis, the 
Bureau is adopting Sec.  1026.61(a)(5)(iii)(D)(2) generally as 
proposed, with modifications to provide guidance on how this condition 
applies as of April 1, 2019 (the new effective date of the Prepaid 
Accounts Rule), if a prepaid account is linked to a credit card account 
prior to that date, or prior to an arrangement between the prepaid 
account issuer and the card issuer as described in final Sec.  
1026.61(a)(5)(iii)(A) through (C). Final Sec.  1026.61(a)(5)(iii)(D)(3) 
also provides guidance on how this condition applies as of April 1, 
2019 if the prepaid account is linked to the credit card account prior 
to that date.
    Specifically, final Sec.  1026.61(a)(5)(iii)(D)(2) states that if 
the credit card account is linked to the prepaid account prior to April 
1, 2019 or prior to the arrangement between the prepaid account issuer 
and the card issuer as described in final Sec.  1026.61(a)(5)(iii)(A) 
through (C), the prepaid account issuer and the card issuer will be 
deemed to have satisfied this condition even if they have not received 
from the consumer a written request as described in final Sec.  
1026.61(a)(5)(iii)(D)(2). The Bureau agrees with industry commenters 
that

[[Page 6398]]

requiring a prepaid account issuer or the card issuer to obtain a 
consumer's written request to link the two accounts in order to take 
advantage of the exception where the linkage occurred prior to the 
effective date of the Prepaid Accounts Rule could prove to be an 
extremely expensive and burdensome condition for digital wallet 
providers and consumers who have previously agreed to the linkage. The 
Bureau also recognizes that a linkage of the two accounts may occur 
after the effective date of the Prepaid Accounts Rule but prior to an 
arrangement between the prepaid account issuer and the card issuer as 
described in final Sec.  1026.61(a)(5)(iii)(A) through (C). In this 
case, the Bureau believes that it may be burdensome for digital wallet 
providers to obtain a consumer's written request to link the two 
accounts in order to take advantage of the exception where the linkage 
occurred prior to the arrangement between the two parties as described 
in final Sec.  1026.61(a)(5)(iii)(A) through (C). The Bureau believes 
that digital wallet providers currently receive a consumer's consent to 
link a credit card account to a digital wallet, and thus it is not 
necessary to require digital wallet providers to obtain a consumer's 
written request in accordance with final Sec.  1026.61(a)(5)(iii)(D)(2) 
for accounts linked prior to the effective date of the Prepaid Accounts 
Rule or prior to the arrangement between the prepaid account issuer and 
card issuer as described in final Sec.  1026.61(a)(5)(iii)(A) through 
(C).
    In addition, the conditions in final Sec.  1026.61(a)(5)(iii)(D)(3) 
through (5) specifically reference the condition in final Sec.  
1026.61(a)(5)(iii)(D)(2) that a consumer authorizes the prepaid card to 
access the credit card account as described in final Sec.  
1026.61(a)(5)(iii)(D)(2). Consistent with final Sec.  
1026.61(a)(5)(iii)(D)(2), for purposes of the conditions in final Sec.  
1026.61(a)(5)(iii)(D)(3) through (5), if the credit card account is 
linked to the prepaid account prior to April 1, 2019 or prior to the 
arrangement between the prepaid account issuer and the card issuer as 
described in final Sec.  1026.61(a)(5)(iii)(A) through (C), a consumer 
will be considered to have authorized linking the prepaid card to the 
credit card account as described in final Sec.  
1026.61(a)(5)(iii)(D)(2), even if the consumer has not provided a 
written request that is separately signed or initialized to authorize 
the prepaid card to access the credit card account as described in 
final Sec.  1026.61(a)(5)(iii)(D)(2).
    The Bureau also believes that additional guidance is needed 
regarding how the condition in final Sec.  1026.61(a)(5)(iii)(D)(3) 
applies as of April 1, 2019 if the prepaid account is linked to the 
credit card account prior to that date. Thus, final Sec.  
1026.61(a)(5)(iii)(D)(3) states that if the credit card account is 
linked to the prepaid account prior to April 1, 2019, this condition 
only applies to the retention of the prepaid account and the credit 
card account on or after April 1, 2019. This revision allows the 
prepaid account issuer and the card issuer to satisfy this condition as 
of the effective date of the Prepaid Accounts Rule even if the two 
accounts were linked prior to that date and the acquisition of the 
prepaid account or credit account was conditioned on the link, so long 
as the retention of the prepaid account and the credit card account are 
not conditioned on the link beginning on April 1, 2019.
    The Bureau does not believe that similar guidance is needed with 
respect to how the conditions in final Sec.  1026.61(a)(5)(iii)(D)(1), 
(4), and (5) apply as of April 1, 2019 if the two accounts are linked 
prior to that date. In order to qualify for the exception in final 
Sec.  1026.61(a)(5)(iii)(D), the prepaid account issuer or the card 
issuer, as applicable, must meet the conditions of Sec.  
1026.61(a)(5)(iii)(D)(1), (4), and (5) as of April 1, 2019 with respect 
to the prepaid account or credit card account as applicable, even for 
accounts linked prior to that date.
Responses to Comments Received
    The Bureau is not making additional revisions to the exception in 
final Sec.  1026.61(a)(5)(iii)(D) as requested by some commenters 
(summarized in detail above), for the reasons discussed below.
    Extend the exception to apply to credit card accounts offered by 
the prepaid account issuer or its affiliate. The Bureau is not 
extending the exception in final Sec.  1026.61(a)(5)(iii)(D) to credit 
card accounts that are offered by the prepaid account issuer or its 
affiliate, even if the conditions in the exception are met, as 
requested by several industry commenters. The Bureau continues to 
believe that ensuring separation and independence is more complicated 
when both accounts are issued by entities under common control, 
particularly given that offset, security interests, and other types of 
linkages may be present. In addition, consumers' expectations that that 
these accounts must be linked in order to obtain or retain either 
account may be stronger if both accounts are issued by the same entity 
or entities under common control. Thus, the 30-day waiting period in 
Sec.  1026.61(c) and other targeted protections may be more needed in 
that context to promote deliberative decision making without undue 
pressure.
    Remove conditions in proposed Sec.  1026.61(a)(5)(iii)(D)(4) and 
(5). The Bureau is not removing the conditions that the parties do not 
vary certain terms and conditions based on whether the two accounts are 
linked that were set forth in proposed Sec.  1026.61(a)(5)(iii)(D)(4) 
and (5), as requested by one industry commenter. As discussed above, 
the Bureau believes that these conditions are critically important to 
ensuring that the targeted provisions in the 2016 Final Rule are not 
needed with respect to these credit card accounts. These conditions, 
along with the other conditions of the exception, provide important 
safeguards to help ensure that consumers' decisions about account 
acquisition, retention, and link authorization are simpler and less 
prone to undue pressure, such that it is not necessary to apply the 30-
day waiting period in Sec.  1026.61(c) or the other additional 
protections in Regulations Z and E that are applicable only to covered 
separate credit features or to prepaid accounts that are connected to 
covered separate credit features. In particular, these conditions help 
ensure that consequences to the consumer of linking the two accounts 
are less complex. The Bureau notes that card issuers generally are not 
prohibited from providing more favorable specified terms and conditions 
on the credit card account if the two accounts are linked. Nonetheless, 
in that case, the exception in final Sec.  1026.61(a)(5)(iii)(D) does 
not apply and the prepaid card is a hybrid prepaid-credit card with 
respect to the credit card account.\109\
---------------------------------------------------------------------------

    \109\ A prepaid account issuer, however, cannot provide more 
favorable terms and conditions on the prepaid account if a covered 
separate credit feature is attached. Specifically, under Regulation 
E Sec.  1005.18(g), a financial institution generally must provide 
to any prepaid account without a covered separate credit feature the 
same account terms, conditions, and features that it provides on 
prepaid accounts in the same prepaid account program that have such 
a credit feature, except the financial institution is permitted to 
charge higher fees on the asset feature of a prepaid account with a 
covered separate credit feature accessible by a hybrid prepaid-
credit card than the amount of a comparable fee it charges on 
prepaid accounts in the same prepaid account program without such a 
credit feature.
---------------------------------------------------------------------------

    Add a condition related to repayment. At this time, the Bureau is 
not including an additional condition to qualify for the exception, as 
requested by the group of consumer advocates, that card issuers would 
need to comply with Sec.  1026.12(d)(3)(ii), which permits a

[[Page 6399]]

written plan authorizing periodic deductions from the prepaid account 
only if the deductions are no more frequent than once per calendar 
month. The Bureau believes that the condition in final Sec.  
1026.61(a)(5)(iii)(D)(5) provides sufficient protections to consumers 
to prevent card issuers from manipulating repayment terms on the credit 
card account when the two accounts are linked. The condition in final 
Sec.  1026.61(a)(5)(iii)(D)(5) prevents the card issuer from varying 
the repayment terms of the credit card account depending on whether the 
consumer has authorized linking the prepaid card to the credit card 
account, or depending on whether a particular credit extension from the 
credit card account is accessed by the prepaid card or by the 
traditional credit card. In addition, if the Bureau were to adopt this 
additional condition, in order to qualify for the exception in final 
Sec.  1026.61(a)(5)(iii)(D), a card issuer that has an arrangement with 
the prepaid account issuer as described in final Sec.  
1026.61(a)(5)(iii)(A) through (C) would need to restrict automatic 
payments to once per calendar month on all its credit card accounts 
regardless of whether the prepaid account and credit card account are 
linked, given that the condition in final Sec.  
1026.61(a)(5)(iii)(D)(5) would restrict the card issuer from varying 
the repayment terms of the credit card account depending on whether the 
consumer has authorized linking the prepaid card to the credit card 
account. The Bureau does not believe that such a restriction on the 
ability of consumers to agree to automatic payments more frequent than 
once per month is needed to prevent evasion at this time. Nonetheless, 
the Bureau will continue to monitor the use of automatic payment plans 
in relation to the exception in final Sec.  1026.61(a)(5)(iii)(D) to 
ensure that consumers retain control over the funds in their prepaid 
accounts even when credit card accounts that satisfy the conditions of 
the exception in final Sec.  1026.61(a)(5)(iii)(D) are linked.
    Clarify that the exception applies to prepaid accounts generally 
and not just digital wallets. The Bureau does not believe that it is 
necessary to modify the language of Sec.  1026.61(a)(5)(iii)(D) or its 
associated commentary to clarify that the exception applies to all 
types of prepaid accounts, rather than just applying to digital 
wallets, as suggested by one industry commenter. The Bureau believes 
that the regulatory language of final Sec.  1026.61(a)(5)(iii)(D) and 
its associated commentary is clear that the exception applies to all 
prepaid accounts that meet the conditions set forth in the provision, 
not just digital wallets. Those provisions use the term ``prepaid 
account'' and do not limit this exception to prepaid accounts that are 
digital wallets.
    Reconsider applying TILA and Regulation Z to overdraft services. 
The Bureau believes that it is not appropriate at this time to 
generally reconsider the extension of provisions of TILA and Regulation 
Z to overdraft services on prepaid accounts, as requested by several 
industry commenters. This request is outside the scope of the proposed 
amendments in the June 2017 Proposal. In addition, for the reasons set 
forth in the section-by-section analysis of Sec.  1026.61(a) above and 
in the 2016 Final Rule, the Bureau continues to believe that it is 
appropriate to apply traditional credit card rules to overdraft credit 
features accessible by hybrid prepaid-credit cards, as well as the 
tailored provisions established by the 2016 Final Rule.\110\
---------------------------------------------------------------------------

    \110\ 81 FR 83934, 84158-61 (Nov. 22, 2016).
---------------------------------------------------------------------------

    Add guidance for digital wallets. At this time, the Bureau is not 
including additional guidance related to how the 2016 Final Rule's 
credit-related provisions relate to digital wallets, as requested by 
one industry commenter. This commenter did not specify particular 
guidance that would be helpful. Nonetheless, the Bureau will continue 
to monitor whether additional guidance is needed with respect to the 
application of the 2016 Final Rule's credit-related provision to 
digital wallets.
61(a)(5)(iii)(A) Through (C)
    The 2016 Final Rule's version of Sec.  1026.61(a)(5)(iii) defined 
the term ``business partner'' for purposes of Sec.  1026.61 and other 
provisions in Regulation Z related to hybrid prepaid-credit cards 
generally to mean a person (other than the prepaid account issuer or 
its affiliate) that can extend credit through a separate credit feature 
where the person or its affiliate has an arrangement with a prepaid 
account issuer or its affiliate. The Bureau proposed generally to 
retain this language in proposed Sec.  1026.61(a)(5)(iii) with a 
revision to reference the proposed exception in Sec.  
1026.61(a)(5)(iii)(D).
    The 2016 Final Rule's version of comment 61(a)(5)(iii)-1 described 
the two types of business arrangements that created a business 
partnership for purposes of the rule, separately provided in paragraphs 
i and ii. The Bureau proposed to move most of this language into the 
regulatory text, with introductory language in proposed Sec.  
1026.61(a)(5)(iii)(A) and the two types of business arrangements 
described in proposed Sec.  1026.61(a)(5)(iii)(B) and (C), 
respectively, with small revisions for clarity. The Bureau also 
proposed to consolidate the language regarding membership in card 
networks or payment networks that appeared in comments 61(a)(5)(iii)-
1.i and ii as new proposed comment 61(a)(5)(iii)-1, which would have 
explained that a draw, transfer, or authorization of the draw or 
transfer from a credit feature may be effectuated through a card 
network or a payment network, but would have emphasized that for the 
purposes of proposed Sec.  1026.61(a)(5)(iii), agreements to 
participate in a card network or payment network themselves do not 
constitute an ``agreement'' or a ``business, marketing, or promotional 
agreement or other arrangement'' described in proposed Sec.  
1026.61(a)(5)(iii)(B) or (C), respectively. The Bureau did not propose 
any changes to comment 61(a)(5)(iii)-2.
    The Bureau did not receive any specific comments on this aspect of 
the proposal. The Bureau is adopting Sec.  1026.61(a)(5)(iii)(A) 
through (C) and new comment 61(a)(5)(iii)-1 as proposed.
61(a)(5)(iii)(D)
The Bureau's Proposal
    For the reasons explained above in the section-by-section analyses 
of Sec.  1026.61(a) and (a)(5)(iii) above, the Bureau proposed to add 
an exception in proposed Sec.  1026.61(a)(5)(iii)(D) to the definition 
of ``business partner.'' Specifically, proposed Sec.  
1026.61(a)(5)(iii)(D) would have provided that a person that can extend 
credit through a credit card account is not a business partner of a 
prepaid account issuer with which it has an arrangement as defined in 
proposed Sec.  1026.61(a)(5)(iii)(A) through (C) with regard to such 
credit card account if certain conditions were met. The conditions were 
broadly designed to ensure that the credit card account would be 
subject to Regulation Z credit card requirements in its own right and 
that the acquisition, retention, and pricing terms of the prepaid 
account and credit card account would not depend on whether a consumer 
authorizes the linking of the two accounts to allow the prepaid card to 
access credit from time to time in the course of authorizing, settling, 
or otherwise completing transactions conducted with the card to obtain 
goods or services, obtain cash, or conduct P2P

[[Page 6400]]

transfers. Each of the proposed conditions is discussed in more detail 
in the section-by-section analyses of Sec.  1026.61(a)(5)(iii)(D)(1), 
(2), (3), (4) and (5) below, respectively.
    Proposed comment 61(a)(5)(iii)(D)-1 would have provided that if the 
exception in proposed Sec.  1026.61(a)(5)(iii)(D) were to apply, a 
person that can extend credit through the credit card account would not 
be a business partner of a prepaid account issuer with which it has an 
arrangement as defined in proposed Sec.  1026.61(a)(5)(iii)(A) through 
(C). Accordingly, in those cases where a consumer has authorized his or 
her prepaid card in accordance with proposed Sec.  
1026.61(a)(5)(iii)(D) to be linked to the credit card account in such a 
way as to allow the prepaid card to access the credit card account as 
described in proposed Sec.  1026.61(a)(5)(iii)(D)(2), the linked 
prepaid card would not be a hybrid prepaid-credit card with respect to 
the linked credit card account. Rather, the linked credit card account 
would be a non-covered separate credit feature, as discussed in Sec.  
1026.61(a)(2)(ii). The proposed comment would have further noted that 
in this case, by definition, the linked credit card account would be 
subject to the credit card rules in Regulation Z in its own right 
because it would be a credit card account under an open-end (not home-
secured) consumer credit plan, pursuant to the condition set forth in 
proposed Sec.  1026.61(a)(5)(iii)(D)(1).
Comments Received
    The Bureau received several comments on the proposed exception 
generally, which are discussed in the section-by-section analysis of 
Sec.  1026.61(a)(5)(iii) above. In addition, the Bureau also received 
some comments related to specific proposed conditions, which are 
discussed in the section-by-section analyses of Sec.  
1026.61(a)(5)(iii)(D)(1), (2), (3), (4), and (5). The Bureau did not 
receive any specific comments on proposed comment 61(a)(5)(iii)(D)-1.
The Final Rule
    For the reasons set forth in the section-by-section analysis of 
Sec.  1026.61(a)(5)(iii) above, the Bureau is adopting the exception in 
Sec.  1026.61(a)(5)(iii)(D) generally as proposed with several 
modifications as described in the section-by-section analyses of Sec.  
1026.61(a)(5)(iii) above and Sec.  1026.61(a)(5)(iii)(D)(2) and (5) 
below. The Bureau is adopting comment 61(a)(5)(iii)(D)-1 as proposed.
61(a)(5)(iii)(D)(1)
The Bureau's Proposal
    To satisfy the exception in proposed Sec.  1026.61(a)(5)(iii)(D), 
under proposed Sec.  1026.61(a)(5)(iii)(D)(1), the credit card account 
at issue would have to have been a credit card account under an open-
end (not home-secured) consumer credit plan that a consumer can access 
through a traditional credit card. Proposed comment 
61(a)(5)(iii)(D)(1)-1 would have explained that, for purposes of the 
proposed exception, the term ``traditional credit card'' would have 
meant a credit card that is not a hybrid prepaid-credit card. Thus, the 
condition in proposed Sec.  1026.61(a)(5)(iii)(D)(1) would not have 
been satisfied if the only credit card that a consumer could use to 
access the credit card account under an open-end (not home-secured) 
consumer credit plan was a hybrid prepaid-credit card.
    This proposed condition would have ensured that the exception only 
applies to credit features subject to the full protections of the 
credit card rules in Regulation Z that are applicable to credit card 
accounts under an open-end (not home-secured) consumer credit plan. As 
discussed in the 2016 Final Rule, these protections include a range of 
requirements governing pricing, restrictions on repayment terms, limits 
on liability for unauthorized use, and requirements that card issuers 
must assess the consumer's ability to pay the credit before opening the 
account. The pricing protections include restrictions on the fees that 
an issuer can charge during the first year after an account is opened, 
and limits on the amount of fees that issuers can charge when a 
consumer makes a late payment or exceeds his or her credit limit. The 
protections also restrict the circumstances under which issuers can 
increase interest rates on credit card accounts and establish 
procedures for doing so. As explained in the 2016 Final Rule, the 
Bureau believed that applying these protections to overdraft features 
in connection with prepaid accounts would promote transparent pricing 
for prepaid accountholders.\111\
---------------------------------------------------------------------------

    \111\ Id. at 84161.
---------------------------------------------------------------------------

Comments Received
    A group of consumer advocate commenters requested that the Bureau 
revise the definition of ``traditional credit card'' contained in 
proposed comment 61(a)(5)(iii)(D)(1)-1. These commenters suggested that 
this definition was circular in that a card is not a hybrid prepaid-
credit card if it is a traditional credit card, and it is a traditional 
credit card if it is not a hybrid prepaid-credit card. These commenters 
also stated that Regulation Z's definition of credit card is quite 
vague and could arguably apply to accounts that bear no resemblance to 
traditional credit cards. These commenters suggested that the Bureau 
define ``traditional credit card'' to mean a card, plate, or other 
single credit device that may be used from time to time to obtain 
consumer credit under an open-end credit plan and that is either: (a) 
Accepted by every merchant that participates in a widely accepted 
payment card network and is accepted upon presentation at multiple, 
unaffiliated merchants for goods or services, or (b) accepted solely 
for the bona fide purchase of goods or services at a particular retail 
merchant or group of merchants and not to access cash; and that the 
term ``traditional credit card'' does not include an overdraft line of 
credit that is accessed by a debit or prepaid card or an account 
number.
The Final Rule
    For the reasons set forth herein, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(D)(1) and comment 61(a)(5)(iii)(D)(1)-1 as proposed. 
The Bureau does not believe that the definition of ``traditional credit 
card'' set forth in final comment 61(a)(5)(iii)(D)(1)-1 is circular, as 
suggested by the group of consumer advocates. A prepaid card cannot be 
a ``traditional credit card'' because it is either a hybrid prepaid-
credit card or not a credit card at all, and thus can never be a 
traditional credit card. See comment 2(a)(15)-2.ii.D, which provides 
that a prepaid card is not a credit card if it is not a hybrid prepaid-
credit card. Thus, the prepaid card described in final Sec.  
1026.61(a)(5)(iii)(D) will not be a traditional credit card. To satisfy 
final Sec.  1026.61(a)(5)(iii)(D)(1), the credit card account must be 
accessed by another access device (other than the prepaid card) and 
that access device must be a traditional credit card.
    The Bureau also does not believe that it is necessary to narrow the 
definition of ``traditional credit card,'' as suggested by the group of 
consumer advocate commenters, to prevent evasion. The Bureau believes 
that introducing additional concepts into the definition of 
``traditional credit card'' like the fact that the credit card must be 
accepted at ``every'' merchant that participates in a widely accepted 
payment card network, or that the credit card must be accepted only for 
``bona fide'' purchases of goods or services at a particular retail 
merchant or group of merchants, could complicate the definition and add 
to

[[Page 6401]]

compliance burden. The Bureau does not believe that adding these 
concepts is warranted at this time, particularly without the benefit of 
additional public comment, but will monitor market developments for 
risk of evasion.
61(a)(5)(iii)(D)(2)
The Bureau's Proposal
    To satisfy the exception in proposed Sec.  1026.61(a)(5)(iii)(D), 
under proposed Sec.  1026.61(a)(5)(iii)(D)(2), the prepaid account 
issuer and the card issuer would have been prohibited from allowing the 
prepaid card to draw, transfer, or authorize the draw or transfer of 
credit from the credit card account from time to time in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the card to obtain goods or services, obtain cash, or conduct P2P 
transfers, except where the prepaid account issuer or the card issuer 
has received from the consumer a written request that is separately 
signed or initialized to authorize the prepaid card to access the 
credit card account, as described above. To aid compliance with the 
proposed exception, proposed comment 61(a)(5)(iii)(D)(2)-1 would have 
explained that any accountholder on either the prepaid account or the 
credit feature may make the written request.
Comments Received
    Several industry commenters, including program managers and a trade 
association, requested that the condition to obtain a written 
authorization not apply where the two accounts were linked prior to the 
effective date of the Prepaid Accounts Rule. They argued that requiring 
prepaid account issuers or card issuers to obtain a ``written request'' 
from consumers for accounts linked prior to the effective date would 
likely prove to be an extremely expensive and burdensome condition for 
providers and consumers who have previously agreed to the linkage. 
These comments are discussed in more detail in the section-by-section 
analysis of Sec.  1026.61(a)(5)(iii) above.
    In addition, several industry commenters, including program 
managers and a trade association, stated that section 101(a) of the E-
Sign Act would apply to enable a signature or agreement obtained 
electronically to have the same effect if it were obtained in writing, 
and requested that the Bureau confirm this point in regulatory text or 
commentary. A group of consumer advocates requested that the written 
request should be required to be ``clear and readily understandable,'' 
just as written authorizations for preauthorized electronic fund 
transfers must be under Regulation E (see Regulation E Sec.  1005.10(b) 
and comment 10(b)-6).
The Final Rule
    For the reasons set forth herein, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(D)(2) as proposed with two modifications and is 
adopting comment 61(a)(5)(iii)(D)(2)-1 as proposed. First, the Bureau 
is modifying Sec.  1026.61(a)(5)(iii)(D)(2) to provide guidance on how 
this condition applies as of April 1, 2019 (the new effective date of 
the Prepaid Accounts Rule) when the two accounts are linked prior to 
that date, or prior to an arrangement between the prepaid account 
issuer and the card issuer as described in Sec.  1026.61(a)(5)(iii)(A) 
through (C). This revision is discussed in more detail in the section-
by-section analysis of Sec.  1026.61(a)(5)(iii) above. Second, as a 
technical modification, the Bureau is replacing the phrase ``will not'' 
in the first sentence of Sec.  1026.61(a)(5)(iii)(D)(2) with the phrase 
``do not'' for consistency with the phrase ``do not'' used in Sec.  
1026.61(a)(5)(iii)(D)(3).
    In response to industry commenters' requests regarding the 
applicability of the E-Sign Act, the Bureau notes that the writing and 
signature conditions of final Sec.  1026.61(a)(5)(iii)(D)(2) may be 
satisfied electronically if in accordance with the E-Sign Act. The 
Bureau does not believe that it is necessary to include this point in 
the regulation or commentary because the E-Sign Act is self-
effectuating.
    In response to the group of consumer advocate commenters' request 
to require that the written request be ``clear and readily 
understandable,'' the Bureau does not believe that it is necessary to 
specifically require this in the regulatory text or commentary at this 
time. The Bureau expects that, if a prepaid account issuer or card 
issuer provides language to consumers to sign or initialize to 
authorize the two accounts to be linked, the prepaid account issuer or 
card issuer will use language that is understandable to consumers so 
that the consumers are aware that they are making a request to link the 
two accounts. The Bureau will monitor the processes that prepaid 
account issuers or card issuers use to gain authorization to link the 
two accounts to ensure that the processes are understandable to 
consumers.
    In adopting final Sec.  1026.61(a)(5)(iii)(D)(2), the Bureau 
believes that this condition, in combination with others described 
further below, helps to ensure that consumers are not unduly pressured 
into linking the prepaid account and the credit card account so as to 
access credit from time to time in the course of transactions conducted 
with the prepaid card. In particular, it helps to underscore to 
consumers that the prepaid account and credit card account are not 
required to be linked in order for the consumer to obtain or retain the 
two accounts, and to ensure that consumers have made a deliberate, 
affirmative decision before authorizing such a link. Two of the 
tailored provisions adopted in the 2016 Final Rule--the 30-day waiting 
period in Sec.  1026.61(c), and the requirement in Regulation E Sec.  
1005.18(b)(4)(vii) to provide certain credit disclosures in the prepaid 
long form disclosure--were similarly designed to promote deliberative 
decision making without undue pressure. The Bureau believes that it is 
not necessary to apply these tailored provisions to a credit card 
account when the conditions of the exception are met, given that 
detailed application and solicitation disclosures for the credit card 
account still are required under Sec.  1026.60. In addition, the other 
conditions in final Sec.  1026.61(a)(5)(iii)(D) make consumers' 
decisions about account acquisition, retention, and link authorization 
simpler and less prone to undue pressure and make the consequences of 
linking the two accounts less complex. Specifically, as described 
below, to satisfy the condition in final Sec.  
1026.61(a)(5)(iii)(D)(3), a prepaid account issuer and a card issuer 
could not condition the acquisition or retention of either account upon 
whether a consumer authorized linking the two accounts together, and 
final Sec.  1026.61(a)(5)(iii)(D)(4) and (5) are designed to ensure 
that certain terms and conditions (including pricing) that apply to the 
two accounts are not dependent on whether they are linked.
61(a)(5)(iii)(D)(3)
The Bureau's Proposal
    To satisfy the exception in proposed Sec.  1026.61(a)(5)(iii)(D), 
under proposed Sec.  1026.61(a)(5)(iii)(D)(3), the prepaid account 
issuer and the card issuer would not have been permitted to condition 
the acquisition or retention of the prepaid account or the credit card 
account on whether a consumer authorizes the prepaid card to access the 
credit card account, as described in proposed Sec.  
1026.61(a)(5)(iii)(D)(2).
Comments Received and the Final Rule
    The Bureau did not receive any specific comments on this aspect of 
the proposal. For the reasons set forth herein, the Bureau is adopting

[[Page 6402]]

Sec.  1026.61(a)(5)(iii)(D)(3) generally as proposed with one revision 
to provide guidance on how this condition applies when the two accounts 
are linked prior to April 1, 2019 (the new effective date of the 
Prepaid Accounts Rule). This revision is discussed in more detail in 
the section-by-section analysis of Sec.  1026.61(a)(5)(iii) above.
    For the same reasons described above in connection with final Sec.  
1026.61(a)(5)(iii)(D)(2), the Bureau believes that the condition in 
final Sec.  1026.61(a)(5)(iii)(D)(3) helps to ensure that consumers are 
not unduly pressured into linking the prepaid account and the credit 
card account. As described above, the Bureau believes that the 
prohibition on conditioning the acquisition or retention of the two 
accounts, in combination with the other conditions discussed above in 
connection with final Sec.  1026.61(a)(5)(iii)(D)(2), helps to obviate 
the need for the tailored protections adopted in the 2016 Final Rule, 
including both the 30-day waiting period in Sec.  1026.61(c) for 
linking a prepaid account to a covered separate credit feature, and the 
credit disclosures under Regulation E Sec.  1005.18(b)(4)(vii).
61(a)(5)(iii)(D)(4)
The Bureau's Proposal
    To satisfy the exception in proposed Sec.  1026.61(a)(5)(iii)(D), 
under proposed Sec.  1026.61(a)(5)(iii)(D)(4), the prepaid account 
issuer would have been required to apply the same terms, conditions, or 
features to the prepaid account when a consumer authorizes linking the 
prepaid card to the credit card account, as described in proposed Sec.  
1026.61(a)(5)(iii)(D)(2), as it applies to the consumer's prepaid 
account when the consumer does not authorize such a linkage. In 
addition, the prepaid account issuer would have needed to apply the 
same fees to load funds from a credit card account that is linked to 
the prepaid account, as described above, as it charges for a comparable 
load on the consumer's prepaid account to access a credit feature 
offered by a person that is not the prepaid account issuer, its 
affiliate, or a person with which the prepaid account issuer has an 
arrangement, as described in proposed Sec.  1026.61(a)(5)(iii)(A) 
through (C). Each of these proposed conditions is discussed in more 
detail below.
    Proposed comment 61(a)(5)(iii)(D)(4)-1 would have provided examples 
of the types of account terms, conditions, and features that would be 
subject to the conditions set forth in proposed Sec.  
1026.61(a)(5)(iii)(D)(4), underscoring that it would have applied both 
to pricing and to such items as account access devices, minimum balance 
requirements, and account features such as online bill payment 
services.
    Same terms, conditions, and features on the prepaid account 
regardless of whether the prepaid account is linked to the credit card 
account. With respect to the first condition set forth in proposed 
Sec.  1026.61(a)(5)(iii)(D)(4), proposed comment 61(a)(5)(iii)(D)(4)-2 
would have provided an example of impermissible variations in account 
terms under this condition in proposed Sec.  1026.61(a)(5)(iii)(D)(4). 
For example, a prepaid account issuer would not satisfy this proposed 
condition if it provides on a consumer's prepaid account reward points 
or cash back on purchases with the prepaid card where the consumer has 
authorized a link to the credit card account, as described in proposed 
Sec.  1026.61(a)(5)(iii)(D)(2), while not providing such reward points 
or cash back on the consumer's account if the consumer has not 
authorized such a linkage.
    Same load fees. Proposed Sec.  1026.61(a)(5)(iii)(D)(4) also would 
have provided a standard for comparing load fees for credit extensions 
from the credit card account that is linked to the prepaid account, as 
described in proposed Sec.  1026.61(a)(5)(iii)(D)(2). For these fees, 
to satisfy the conditions of proposed Sec.  1026.61(a)(5)(iii)(D)(4), 
the prepaid account issuer must apply the same fees to load funds from 
the credit card account that is linked to the prepaid account, as 
described above, as it charges for a comparable load on the consumer's 
prepaid account to access a credit feature offered by a person that is 
not the prepaid account issuer, its affiliate, or a person with which 
the prepaid account issuer has an arrangement, as described in proposed 
Sec.  1026.61(a)(5)(iii)(A) through (C). Proposed comment 
61(a)(5)(iii)(D)(4)-3 would have provided an example to illustrate this 
proposed condition. Specifically, the proposed comment would have 
provided that a prepaid account issuer would not satisfy this condition 
if it charges on the consumer's prepaid account $0.50 to load funds in 
the course of a transaction from the credit card account offered by a 
card issuer with which the prepaid account issuer has an arrangement as 
discussed in proposed Sec.  1026.61(a)(5)(iii)(A) through (C), but 
$1.00 to load funds in the course of a transaction from a credit card 
account offered by a card issuer with which it does not have such an 
arrangement.
Comments Received and the Final Rule
    For the reasons set forth herein, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(D)(4) and comments 61(a)(5)(iii)(D)(4)-1 and 3 as 
proposed. The Bureau is adopting comment 61(a)(5)(iii)(D)(4)-2 as 
proposed with technical revisions to refer to ``rewards points'' 
instead of ``reward points.'' As discussed in the section-by-section 
analysis of Sec.  1026.61(a)(5)(iii) above, a digital wallet provider 
commenter requested that the Bureau remove the condition in proposed 
Sec.  1026.61(a)(5)(iii)(D)(4), while a group of consumer advocate 
commenters specifically requested that the Bureau retain this proposed 
condition. The Bureau is not removing this condition for the reasons 
discussed in the section-by-section analysis of Sec.  
1026.61(a)(5)(iii) above.
    The Bureau believes that ensuring that the terms, conditions, and 
features of the consumer's prepaid account do not depend on whether the 
consumer authorizes a link with the credit card account, as provided 
for in final Sec.  1026.61(a)(5)(iii)(D)(2), is important to address a 
number of policy concerns. First, as discussed in the section-by-
section analysis of Sec.  1026.61(a)(5)(iii)(D)(2) above, the fact that 
the prepaid account terms, conditions, and features cannot vary based 
on whether the consumer authorizes a linkage makes consumers' decisions 
about account acquisition, retention, and link authorization simpler 
and less prone to undue pressure and the consequences of linking the 
two accounts less complex, and thus, along with the other conditions, 
obviates the need for applying the 30-day waiting period in Sec.  
1026.61(c) and the long form pre-acquisition disclosure requirements in 
Regulation E Sec.  1005.18(b)(4)(vii). Second, the condition helps to 
ensure that certain terms and conditions of the prepaid account and the 
credit card account operate independently of whether the two accounts 
are linked and restrict the kind of price restructuring that the Bureau 
observed with regard to overdraft service programs on checking accounts 
and that various provisions adopted in the 2016 Final Rule were 
designed to address.\112\
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    \112\ With the 2016 Final Rule, the Bureau was concerned that 
prepaid account issuers might inflate fees imposed on prepaid 
accounts as a backdoor way to impose finance charges on draws from 
the covered separate credit feature without triggering certain 
restrictions on fees applicable to credit card accounts. 81 FR 
83934, 84222-23 (Nov. 22, 2016). To prevent this, the 2016 Final 
Rule included in Regulation Z several provisions to ensure that 
where a fee imposed on the prepaid account with a covered separate 
credit feature is higher than a comparable fee on a prepaid account 
without such a credit feature, the excess amount of the fee is 
subject to certain fee restrictions applicable to credit card 
accounts. See, e.g., Sec.  1026.52(a) and comments 6(b)(3)(iii)(D)-1 
and 52(a)(2)-2. Final Sec.  1026.61(a)(5)(iii)(D)(4) ensures that 
this type of activity does not occur when the exception applies.

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[[Page 6403]]

    Same terms, conditions, and features on the prepaid account 
regardless of whether the prepaid account is linked to the credit card 
account. To satisfy the exception in final Sec.  1026.61(a)(5)(iii)(D), 
under final Sec.  1026.61(a)(5)(iii)(D)(4), the prepaid account issuer 
must apply the same terms, conditions, or features to the prepaid 
account when a consumer authorizes linking the prepaid card to the 
credit card account as described in final Sec.  
1026.61(a)(5)(iii)(D)(2), as it applies to the consumer's prepaid 
account when the consumer does not authorize such a linkage. The Bureau 
believes that an appropriate comparison for purposes of final Sec.  
1026.61(a)(5)(iii)(D)(4) is between the terms of the consumer's prepaid 
account when the consumer has authorized a linkage between the two 
accounts and the terms of the consumer's prepaid account when the two 
accounts are not linked. This approach will ensure that the pre-
acquisition disclosures for the prepaid account provided to the 
consumer reflect the same terms, conditions, and features regardless of 
whether the consumer decides to link the two accounts, which will make 
consumers' decisions about account acquisition, retention, and link 
authorization simpler and less prone to undue pressure and the 
consequences of linking the two accounts less complex. This standard 
also is consistent with the comparison standard adopted under final 
Sec.  1026.61(a)(5)(iii)(D)(5), where the card issuer will compare the 
specified terms and conditions on the consumer's credit card account if 
there is a link to the prepaid account with the specified terms and 
conditions that apply to the consumer's account if there is no such 
link. The Bureau believes that this approach for the comparison of 
terms, conditions, and features on the consumer's prepaid account will 
aid compliance by ensuring that a consistent comparison approach can be 
used for both the prepaid account and the credit card account (which is 
addressed in final Sec.  1026.61(a)(5)(iii)(D)(5), discussed 
below).\113\
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    \113\ This approach for comparison of the terms, conditions, and 
features on the prepaid account differs from the approach used in 
the 2016 Final Rule for comparing the terms, conditions, and 
features of the prepaid account when a covered separate credit 
feature is connected with the prepaid account. See Sec.  
1026.4(b)(11) and Regulation E Sec.  1005.18(g). For those 
provisions, the approach used is to compare the terms, conditions, 
and features of prepaid accounts held by different consumers in the 
same prepaid program. While these two approaches might yield similar 
results in comparing the terms, conditions, and features on the 
prepaid account, the Bureau believes that the approach set forth in 
the 2016 Final Rule would not be appropriate with respect to 
comparing specified terms and conditions on the credit card account 
because risk-based pricing might cause one consumer's pricing to 
differ from another consumer's pricing based on the consumers' 
creditworthiness. Thus, the Bureau is adopting an approach for 
comparing the terms, conditions, and features of the prepaid account 
that is consistent with the one adopted in final Sec.  
1026.61(a)(5)(iii)(D)(5) for comparing specified terms and 
conditions imposed on the credit card account. See the section-by-
section analysis of Sec.  1026.61(a)(5)(iii)(D)(5) below for a more 
detailed discussion on the approach for comparing specified terms 
and conditions imposed on the credit card account.
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    Same load fees. Final Sec.  1026.61(a)(5)(iii)(D)(4) also provides 
a standard for comparing load fees for credit extensions from the 
credit card account that is linked to the prepaid account, as described 
in final Sec.  1026.61(a)(5)(iii)(D)(2). For these fees, to satisfy the 
conditions of final Sec.  1026.61(a)(5)(iii)(D)(4), the prepaid account 
issuer must apply the same fees to load funds from the credit card 
account that is linked to the prepaid account (as described above) as 
it charges for a comparable load on the consumer's prepaid account to 
access a credit feature offered by a person that is not the prepaid 
account issuer, its affiliate, or a person with which the prepaid 
account issuer has an arrangement as described in final Sec.  
1026.61(a)(5)(iii)(A) through (C).
    The Bureau believes that this standard provides an appropriate test 
with regard to comparing load fees by focusing specifically on what 
fees are charged on the consumer's prepaid account in a comparable load 
from a separate credit feature offered by a person that is not the 
prepaid account issuer, its affiliate, or a person with which the 
prepaid account issuer has an arrangement as described in final Sec.  
1026.61(a)(5)(iii)(A) through (C). The Bureau believes that this 
approach will facilitate compliance and is appropriate given that the 
Bureau expects that the exception in final Sec.  1026.61(a)(5)(iii)(D) 
will most likely be used with respect to digital wallet accounts that 
consumers may choose to associate with multiple credit card accounts, 
including those offered by unaffiliated third parties.\114\
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    \114\ This standard for comparing load fees set forth in final 
Sec.  1026.61(a)(5)(iii)(D)(4) differs from the comparison for load 
fees adopted in the 2016 Final Rule with regard to covered separate 
credit features accessible by hybrid prepaid-credit cards. 
Specifically, as adopted in the 2016 Final Rule, Regulation E 
comment 18(g)-5.iii compares what fees are charged for a load from a 
covered separate credit feature accessible to a hybrid prepaid-
credit card in the course of a transaction to the per transaction 
fee that is charged to access available funds in prepaid accounts in 
the same prepaid account program without a covered separate credit 
feature. Also, Regulation E comment 18(g)-5.iv compares what fees 
are charged for a load from a covered separate credit feature 
accessible by a hybrid prepaid-credit card outside the course of a 
transaction to the fees, if any, to load funds as a direct deposit 
of salary from an employer or a direct deposit of government 
benefits that are charged on prepaid accounts in the same prepaid 
account program without a covered separate credit feature. The 
Bureau took this approach in the 2016 Final Rule because it believed 
that many prepaid accountholders who wish to use covered separate 
credit features may not have other asset or credit accounts from 
which they can draw or transfer funds, and was concerned that 
prepaid account issuers might therefore inflate such load fees as a 
backdoor way to impose finance charges on draws from the covered 
separate credit feature without triggering certain restrictions on 
fees applicable to credit card accounts. 81 FR 83934, 84187 (Nov. 
22, 2016). In contrast, the Bureau believes that competitive 
pressures would discourage digital wallet providers seeking to 
qualify for the exception in final Sec.  1026.61(a)(5)(iii)(D) from 
artificially inflating all load fees in this manner. Nonetheless, 
the Bureau will continue to monitor this issue to ensure that 
concerns discussed above do not occur in relation to the exception 
in final Sec.  1026.61(a)(5)(iii)(D).
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61(a)(5)(iii)(D)(5)
The Bureau's Proposal
    To satisfy the exception in proposed Sec.  1026.61(a)(5)(iii)(D), 
under proposed Sec.  1026.61(a)(5)(iii)(D)(5), the card issuer would 
have been required to apply the same specified terms and conditions to 
the credit card account when a consumer authorizes linking the prepaid 
card to the credit card account, as described in proposed Sec.  
1026.61(a)(5)(iii)(D)(2), as it applies to the consumer's credit card 
account when the consumer does not authorize such a linkage. In 
addition, to satisfy proposed Sec.  1026.61(a)(5)(iii)(D)(5), the card 
issuer would have been required to apply the same specified terms and 
conditions to extensions of credit from the credit card account made 
with the prepaid card as with the traditional credit card.
    Proposed Sec.  1026.61(a)(5)(iii)(D)(5) would have specifically 
defined ``specified terms and conditions'' to mean the terms and 
conditions required to be disclosed under Sec.  1026.6(b), any 
repayment terms and conditions, and the limits on liability for 
unauthorized credit transactions that apply to the credit card account. 
Proposed comment 61(a)(5)(iii)(D)(5)-1 would have provided additional 
detail regarding this definition. Specifically, proposed comment 
61(a)(5)(iii)(D)(5)-1.i would have explained that the terms and 
conditions required to be disclosed under Sec.  1026.6(b) include: (a) 
Pricing terms, such as periodic rates, annual

[[Page 6404]]

percentage rates (APRs), and fees and charges imposed on the credit 
account; (b) any security interests acquired under the credit account; 
(c) claims and defenses rights under Sec.  1026.12(c); and (d) error 
resolution rights under Sec.  1026.13. Proposed comment 
61(a)(5)(iii)(D)(5)-1.ii would have explained that the repayment terms 
and conditions related to a credit card account include the length of 
the billing cycle, the payment due date, any grace period on the 
transactions on the account, the minimum payment formula, and the 
required or permitted methods for making conforming payments on the 
credit card account. The Bureau notes that the limits on liability for 
unauthorized use of a credit card are set forth in Sec.  1026.12(b), 
and error resolution procedures applicable to unauthorized use of an 
open-end credit account are set forth in Sec.  1026.13. Proposed 
comments 61(a)(5)(iii)(D)(5)-2 and 3 would have provided more detailed 
guidance on application of the two conditions, as discussed below.
    Same specified terms and conditions regardless of whether the 
credit feature is linked to the prepaid account. As discussed above, to 
satisfy the condition set forth in proposed Sec.  
1026.61(a)(5)(iii)(D)(5), a card issuer would have been required to 
apply the same specified terms and conditions to the credit card 
account when a consumer authorizes linking the prepaid card to the 
credit card account as described in proposed Sec.  
1026.61(a)(5)(iii)(D)(2), as it applies to the consumer's credit card 
account when the consumer does not authorize such a linkage. Proposed 
comment 61(a)(5)(iii)(D)(5)-2 would have provided examples of the 
circumstances in which a card issuer would not meet the condition 
described above. Proposed comment 61(a)(5)(iii)(D)(5)-2.i would have 
provided that a card issuer would not satisfy this condition if the 
card issuer structures the credit card account as a ``charge card 
account'' (where no periodic rate is used to compute a finance charge 
on the credit card account) if the credit feature is linked to a 
prepaid card, as described in proposed Sec.  1026.61(a)(5)(iii)(D)(2), 
but applies a periodic rate to compute a finance charge on the 
consumer's account (and thus does not use a charge card account 
structure) if there is no such link.\115\ As another example, proposed 
comment 61(a)(5)(iii)(D)(5)-2.ii would have provided that a card issuer 
would not satisfy the condition if the card issuer imposes a $50 annual 
fee on a consumer's credit card account if the credit feature is linked 
as described in proposed Sec.  1026.61(a)(5)(iii)(D)(2), but does not 
impose an annual fee on the consumer's credit card account if there is 
no such link.
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    \115\ The term ``charge card'' is defined in Sec.  
1026.2(a)(15)(iii) to mean a credit card on an account for which no 
periodic rate is used to compute a finance charge.
---------------------------------------------------------------------------

    Same specified terms and conditions regardless of whether credit is 
accessed by the prepaid card or the traditional credit card. For the 
proposed exception in proposed Sec.  1026.61(a)(5)(iii)(D) to apply, 
proposed Sec.  1026.61(a)(5)(iii)(D)(5) would have provided that the 
card issuer must apply the same specified terms and conditions to 
extensions of credit from the credit card account made with the prepaid 
card as with the traditional credit card. As discussed above, under 
proposed Sec.  1026.61(a)(5)(iii)(D)(1), to qualify for the proposed 
exception, the credit feature must be a credit card account under an 
open-end (not home-secured) consumer credit plan that a consumer can 
access through a traditional credit card.\116\
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    \116\ As discussed above, for purposes of proposed Sec.  
1026.61(a)(5)(iii)(D), proposed comment 61(a)(5)(iii)(D)(1)-1 would 
define the term ``traditional credit card'' to mean a credit card 
that is not a hybrid prepaid-credit card.
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    Proposed comment 61(a)(5)(iii)(D)(5)-3 would have provided several 
examples illustrating the condition described above. Proposed comment 
61(a)(5)(iii)(D)(5)-3.i would have set forth examples of circumstances 
in which a card issuer that has an arrangement with a prepaid account 
issuer would not meet the condition of proposed Sec.  
1026.61(a)(5)(iii)(D)(5) described above. For example, proposed comment 
61(a)(5)(iii)(D)(5)-3.i.A would have provided that the card issuer 
would not meet this condition if it considers transactions using the 
traditional credit card to obtain goods or services from an 
unaffiliated merchant of the card issuer as purchase transactions with 
certain APRs, fees, and a grace period that applies to those purchase 
transactions, but treats transactions involving extensions of credit 
using the prepaid card to obtain goods or services from an unaffiliated 
merchant of the card issuer as a cash advance that is subject to 
different APRs, fees, grace periods, and other specified terms and 
conditions. As another example, proposed comment 61(a)(5)(iii)(D)(5)-
3.i.B would have provided that the card issuer would not satisfy this 
condition if it generally treats one-time transfers of credit using the 
credit card account number to asset accounts as cash advance 
transactions with certain APRs and fees, but treats one-time transfers 
of credit using the prepaid card to the prepaid account as purchase 
transactions that are subject to different APRs and fees.
    Proposed comment 61(a)(5)(iii)(D)(5)-3.ii would have provided 
guidance on how a card issuer would have been required to meet this 
condition in proposed Sec.  1026.61(a)(5)(iii)(D)(5) with respect to 
the claims and defenses rights set forth in Sec.  1026.61(c). These 
rights apply in certain circumstances to purchases of property or 
services made with a credit card. Proposed comment 61(a)(5)(iii)(D)(5)-
3.ii would have explained that to satisfy this condition in proposed 
Sec.  1026.61(a)(5)(iii)(D)(5) with respect to the claims and defenses 
rights in Sec.  1026.12(c), the card issuer must treat the prepaid card 
when it is used to access credit from the credit card account to 
purchase property or services as if it is a credit card and provide the 
same rights under Sec.  1026.12(c) as it applies to property or 
services purchased with the traditional credit card.
    Proposed comment 61(a)(5)(iii)(D)(5)-3.iii would have provided 
guidance on how a card issuer must meet this condition in proposed 
Sec.  1026.61(a)(5)(iii)(D)(5) with respect to limits on liability set 
forth in Sec.  1026.12(b). Section 1026.12(b) sets forth certain limits 
on liability for unauthorized use of a credit card. Proposed comment 
61(a)(5)(iii)(D)(5)-3.iii would have provided that to apply the same 
limits on liability for unauthorized extensions of credit from the 
credit card account using the prepaid card as it applies to 
unauthorized extensions of credit from the credit card account using 
the traditional credit card, the card issuer must treat the prepaid 
card as if it were an accepted credit card for purposes of the limits 
on liability for unauthorized extensions of credit set forth in Sec.  
1026.12(b) and impose the same liability under Sec.  1026.12(b) as it 
applies to unauthorized transactions using the traditional credit card.
Comments Received
    A digital wallet provider commenter requested that the Bureau 
remove the condition in proposed Sec.  1026.61(a)(5)(iii)(D)(5), while 
a group of consumer advocates specifically requested that the Bureau 
retain this proposed condition.\117\
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    \117\ The Bureau is not removing this condition for the reasons 
discussed in the section-by-section analysis of Sec.  
1026.61(a)(5)(iii) above.
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    One trade association requested that the Bureau revise proposed 
Sec.  1026.61(a)(5)(iii)(D)(5) to eliminate

[[Page 6405]]

any suggestion that the prepaid card, as opposed to the credit card 
account, extends credit. This commenter also requested that the Bureau 
remove proposed comments 61(a)(5)(iii)(D)(5)-3.ii and iii, pertaining 
to the claims and defenses right in Sec.  1026.12(c) and limits on 
liability for unauthorized use in Sec.  1026.12(b) respectively. This 
commenter suggested that those provisions are confusing, do not reflect 
consumer expectations, and impose conditions that may not be feasible 
as a practical or technical matter in relation to overdraft credit 
features attached to prepaid accounts that may be offered in the 
future. This commenter noted that proposed comments 
61(a)(5)(iii)(D)(5)-3.ii and iii require a credit card issuer to 
``treat'' a prepaid card offered and maintained by another company as a 
credit card. The commenter indicated that a card issuer may not be able 
to treat the prepaid card as a credit card because the card issuer has 
no control over a product offered and controlled by a different 
company, even one with whom it may have a business arrangement for 
other purposes. In addition, this commenter indicated that the 
condition in proposed Sec.  1026.61(a)(5)(iii)(D)(5) should not require 
that the rights in Sec.  1026.12(c) be applied to transactions where 
the prepaid card was used to transfer credit to the prepaid account in 
the course of a transaction to purchase goods or services with the 
prepaid account. The commenter raised concerns about how the claims and 
defenses right in Sec.  1026.12(c) would apply to split-tender 
transactions where the prepaid transaction for the purchase of property 
or services is paid partly for with prepaid account funds and partly 
with credit transferred from the credit card account. This commenter 
asserted that it would be difficult for customers and the card issuer 
to identify when credit is transferred in connection with prepaid 
account transaction to purchase property or services if credit is used 
for only a portion of the transaction, as the amount of the prepaid 
account transaction is different from the amount of the credit 
extension shown on the credit card account's monthly statement. This 
commenter also indicated that, in the case of a transaction made with a 
prepaid card to purchase property or services, a customer who has used 
the prepaid card or card number for the transaction and has a receipt 
reflecting the prepaid account number and the amount of the purchase 
transaction, will naturally address inquiries about the transaction to 
the prepaid account issuer.
The Final Rule
    For the reasons set forth herein, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(D)(5) and accompanying commentary generally as 
proposed with several modifications to clarify the intent of the 
provisions. In final Sec.  1026.61(a)(5)(iii)(D)(5), the Bureau is 
adopting the condition as proposed that a card issuer must apply the 
same specified terms and conditions to the credit card account 
regardless of whether the credit feature is linked to the prepaid 
account. In addition, the Bureau is adopting Sec.  
1026.61(a)(5)(iii)(D)(5) as proposed to define ``specified terms and 
conditions'' to mean terms and conditions required to be disclosed 
under Sec.  1026.6(b), any repayment terms and conditions, and the 
limits on liability for unauthorized credit transactions. The Bureau 
also is adopting comments 61(a)(5)(iii)(D)(5)-1 and 2 as proposed. As 
discussed in more detail below, the Bureau is adopting the condition in 
Sec.  1026.61(a)(5)(iii)(D)(5) requiring the same specified terms and 
conditions on the credit card account regardless of whether the credit 
is accessed by the prepaid card or the traditional credit card, and 
related comment 61(a)(5)(iii)(D)(5)-3, as proposed with some revisions 
to clarify the intent of the provisions.
    Same specified terms and conditions regardless of whether the 
credit feature is linked to the prepaid account. In adopting final 
Sec.  1026.61(a)(5)(iii)(D)(5), the Bureau believes that ensuring that 
the specified terms and conditions of the credit card account do not 
vary depending on whether the consumer authorizes a prepaid card to 
access the account is important to address a number of policy concerns. 
First, as discussed in the section-by-section analysis of Sec.  
1026.61(a)(5)(iii)(D)(2) above, the fact that the specified terms and 
conditions on the credit card account would not vary based on whether 
the consumer authorizes the prepaid card to access the credit card 
account will help simplify consumers' decisions about account 
acquisition, retention, and link authorization and make these decisions 
less prone to undue pressure and the consequences of linking the two 
accounts less complex; thus, along with the other conditions, this 
condition obviates the need for applying the 30-day waiting period in 
Sec.  1026.61(c) and the long form pre-acquisition disclosure 
requirements in Regulation E Sec.  1005.18(b)(4)(vii). Second, the 
condition helps to ensure that the specified terms and conditions of 
the prepaid account and the credit card account operate independently 
of whether the two accounts are linked, and restricts the kind of price 
restructuring that the Bureau observed with regard to overdraft service 
programs on checking accounts. Third, this condition prevents a card 
issuer from manipulating repayment terms on the credit card account 
when it is linked to the prepaid account to ensure that the consumer 
retains control over the funds in his or her prepaid account even if 
the two accounts are linked.\118\
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    \118\ As explained in the 2016 Final Rule, the Bureau was 
concerned that when a prepaid account was connected to a covered 
separate credit feature, the creditor may manipulate the repayment 
terms of the credit feature to better ensure repayment of the credit 
from the prepaid account funds. As a result, the 2016 Final Rule 
contained several provisions designed to prevent this type of 
manipulation. See, e.g., Sec. Sec.  1026.7(b)(11) and 1026.12(d)(3), 
comments 5(b)(2)(ii)-4.i and 12(d)(2)-1, and Regulation E Sec.  
1005.10(e)(1). The Bureau designed these provisions to ensure that 
consumers retain control over the funds in their prepaid accounts 
even when a covered separate credit feature becomes associated with 
that prepaid account. See, e.g., 81 FR 83934, 83982, 84192, 84199, 
84211, 84213 (Nov. 22, 2016). This condition ensures that the card 
issuer could not engage in this type of manipulation of repayment 
terms when the prepaid account is linked to the credit card account 
under the exception.
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    The Bureau believes that an appropriate comparison standard for 
determining whether the same specified terms and conditions are 
provided to the consumer is to compare the specified terms and 
conditions on the consumer's account if there is a link to the prepaid 
account as described above with the specified terms and conditions that 
apply to the consumer's account if there is no such link. This approach 
ensures that the application and solicitation disclosures provided to 
the consumer under Sec.  1026.60 with respect to the credit card 
account would reflect the same specified terms and conditions 
regardless of whether the consumer decides to link the two accounts, 
which will make consumers' decisions about account acquisition, 
retention, and link authorization simpler and less prone to undue 
pressure and the consequences of linking the two accounts less complex. 
In addition, the Bureau believes that this comparison approach captures 
situations when the specified terms and conditions vary based on 
whether there is a link, but it does avoid capturing situations where 
specified terms and conditions vary due to consumers' 
creditworthiness.\119\
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    \119\ See note 113 above for a discussion of how this approach 
differs from the approach for comparing terms, conditions, and 
features on the prepaid account in connection with a covered 
separate credit feature as adopted in the 2016 Final Rule.
---------------------------------------------------------------------------

    In final Sec.  1026.61(a)(5)(iii)(D)(5), the condition regarding 
credit card account

[[Page 6406]]

terms and conditions is similar to the condition for prepaid account 
terms, conditions, and features set forth in final Sec.  
1026.61(a)(5)(iii)(D)(4), although it applies to a smaller set of 
account terms. Specifically, final Sec.  1026.61(a)(5)(iii)(D)(4) 
applies to all account terms, conditions, and features on the prepaid 
account while final Sec.  1026.61(a)(5)(iii)(D)(5) applies only to 
``specified terms and conditions'' on the credit card account, which is 
defined to mean terms and conditions required to be disclosed under 
Sec.  1026.6(b), any repayment terms and conditions, and the limits on 
liability for unauthorized credit transactions. This smaller set of 
account terms allows card issuers to adjust credit limits or other 
metrics (other than the specified terms and conditions) to account for 
any change in credit risk where a consumer has linked the two accounts. 
In addition, the Bureau recognizes that the merchants at which the 
prepaid card and the traditional credit card can be used might not 
necessarily be the same, and the smaller set of account terms to which 
the condition in final Sec.  1026.61(a)(5)(iii)(D)(5) applies ensures 
that a card issuer would not lose the exception because of these or 
similar differences in account features depending on whether the credit 
is accessed using the prepaid card or the traditional credit card 
itself.
    Thus, a card issuer can satisfy final Sec.  
1026.61(a)(5)(iii)(D)(5) even if it applies different terms or 
conditions to the linked credit card account than it would apply if the 
accounts were not linked, so long as the those terms or conditions are 
not ``specified terms and conditions,'' as defined in final Sec.  
1026.61(a)(5)(iii)(D)(5) and final comment 61(a)(5)(iii)(D)(5)-1. For 
example, a card issuer could offer different rewards points for 
purchases on the credit card account or offer a different credit limit 
on the credit card account, depending on whether the prepaid account is 
linked to the credit card account. Rewards points and the credit limit 
offered on the credit card account would not be ``specified terms and 
conditions'' because these terms are not required to be disclosed under 
Sec.  1026.6(b), are not repayment terms or conditions, and are not 
limitations on liability for unauthorized use.
    Same specified terms and conditions regardless of whether credit is 
accessed by the prepaid card or the traditional credit card. For the 
exception in proposed Sec.  1026.61(a)(5)(iii)(D) to apply, proposed 
Sec.  1026.61(a)(5)(iii)(D)(5) would have provided that the card issuer 
would have been required to apply the same specified terms and 
conditions to extensions of credit from the credit card account made 
with the prepaid card as with the traditional credit card. The Bureau 
is adopting this condition as proposed with slight adjustments to 
clarify that the credit is extended from the credit card account and 
the credit card account is accessed by the prepaid card or the 
traditional credit card. Specifically, for the exception in final Sec.  
1026.61(a)(5)(iii)(D) to apply, final Sec.  1026.61(a)(5)(iii)(D)(5) 
provides that the card issuer must apply the same specified terms and 
conditions to extensions of credit from the credit card account 
accessed by the prepaid card as it applies to extensions of credit 
accessed by the traditional credit card. As discussed above, under 
final Sec.  1026.61(a)(5)(iii)(D)(1), to qualify for the exception, the 
credit feature must be a credit card account under an open-end (not 
home-secured) consumer credit plan that a consumer can access through a 
traditional credit card. The Bureau believes that this condition is 
important to address the policy concerns described above by making 
consumers' decisions about account acquisition, retention, and link 
authorization simpler and less prone to undue pressure and the 
consequences of linking the two accounts less complex.\120\
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    \120\ In some cases, a card issuer may impose different terms 
and conditions to extensions of credit from a credit card account 
depending on how that credit is accessed. For example, a card issuer 
may impose a higher annual percentage rate on transactions made with 
a check that accesses the credit card account than it imposes on 
purchase transactions made with the credit card. In addition, the 
limits on liability for unauthorized use in Sec.  1026.12(b) and the 
claims and defenses rights in Sec.  1026.12(c) generally only apply 
to credit extended through use of a credit card, and they do not 
apply to credit accessed by use of a check. This condition ensures 
that a card issuer cannot vary the specified terms and conditions 
depending on whether the transactions are conducted with the linked 
prepaid card or the traditional credit card, which will make 
consumers' decisions about account acquisition, retention, and link 
authorization simpler and less prone to undue pressure and the 
consequences of linking the two accounts less complex.
---------------------------------------------------------------------------

    Proposed comment 61(a)(5)(iii)(D)(5)-3 would have provided 
additional guidance on the condition described above and several 
examples illustrating the condition. The Bureau is adopting this 
comment as proposed with some modifications to clarify the intent of 
the provisions. Specifically, the Bureau is modifying the heading to 
comment 61(a)(5)(iii)(D)(5)-3 and a sentence in the lead-in paragraph 
to that comment to clarify that the credit is extended from the credit 
card account and the credit card account is accessed by the prepaid 
card or the traditional credit card. This sentence in final comment 
61(a)(5)(iii)(D)(5)-3 now provides that for the exception in final 
Sec.  1026.61(a)(5)(iii)(D) to apply, under final Sec.  
1026.61(a)(5)(iii)(D)(5), a card issuer must not vary the specified 
terms and conditions on the credit card account when a consumer 
authorizes linking the account with the prepaid card as described in 
Sec.  1026.61(a)(5)(iii)(D)(2), depending on whether a particular 
credit extension from the credit card account is accessed by the 
prepaid card or by the traditional credit card.
    Proposed comment 61(a)(5)(iii)(D)(5)-3.i would have set forth two 
examples of circumstances in which a card issuer that has an 
arrangement with a prepaid account issuer would not meet the condition 
of proposed Sec.  1026.61(a)(5)(iii)(D)(5) described above. The Bureau 
is adopting comment 61(a)(5)(iii)(D)(5)-3.i as proposed with some 
modifications to the example in comment 61(a)(5)(iii)(D)(5)-3.i.A to 
clarify that it covers situations where the prepaid card is used to 
draw, transfer, or authorize the draw or transfer of credit from the 
linked credit card account in the course of completing transactions 
conducted with the prepaid card to purchase goods or services. 
Specifically, final comment 61(a)(5)(iii)(D)(5)-3.i.A provides that the 
card issuer would not meet the condition described above if it 
considers transactions using the traditional credit card to obtain 
goods or services from an unaffiliated merchant of the card issuer as 
purchase transactions with certain APRs, fees, and a grace period that 
applies to those purchase transactions, but treats credit extensions as 
cash advances that are subject to different APRs, fees, grace periods, 
and other specified terms and conditions where the prepaid card is used 
to draw, transfer, or authorize the draw or transfer of credit from the 
linked credit card account in the course of authorizing, settling, or 
otherwise completing transactions conducted with the prepaid card to 
obtain goods or services from an unaffiliated merchant of the card 
issuer. The Bureau is adopting the example in comment 
61(a)(5)(iii)(D)(5)-3.i.B as proposed.
    Proposed comment 61(a)(5)(iii)(D)(5)-3.ii would have provided 
guidance on how a card issuer would be required to meet this condition 
in proposed Sec.  1026.61(a)(5)(iii)(D)(5) with respect to the claims 
and defenses rights set forth in Sec.  1026.61(c). These rights apply 
in certain circumstances to purchases of property or services made with 
a credit card. The Bureau is modifying comment 61(a)(5)(iii)(D)(5)-3.ii 
to clarify that it covers situations where the prepaid card is used to 
draw, transfer, or authorize the draw or transfer of credit from the

[[Page 6407]]

linked credit card account in the course of completing transactions 
conducted with the prepaid card to purchase goods or services.
    Specifically, final comment 61(a)(5)(iii)(D)(5)-3.ii provides that 
to apply the same rights under Sec.  1026.12(c) regarding claims and 
defenses applicable to use of a credit card to purchase property or 
services, the card issuer must treat an extension of credit as a credit 
card transaction to purchase property or services where a prepaid card 
is used to draw, transfer, or authorize the draw or transfer of credit 
from the linked credit card account in the course of authorizing, 
settling, or otherwise completing transactions conducted with the 
prepaid card to purchase property or services and provide the same 
rights under Sec.  1026.12(c) as it applies to property or services 
purchased with the traditional credit card. This includes situations 
where a consumer uses a prepaid card to make a purchase to obtain 
property or services from a merchant and credit is transferred from the 
linked credit card account in the course of authorizing, settling, or 
otherwise completing the prepaid transaction to make the purchase. For 
a transaction where a prepaid card is used to obtain property or 
services from a merchant and the transaction is partially paid with 
funds from the asset feature of the prepaid account, and partially paid 
with credit from the linked credit card account, the amount of the 
purchase transaction that is funded by credit would be subject to this 
guidance. A card issuer is not required to provide the rights under 
Sec.  1026.12(c) with respect to the amount of the transaction funded 
from the prepaid account.
    The Bureau is not removing comment 61(a)(5)(iii)(D)(5)-3.ii, as 
requested by one industry commenter discussed above. The Bureau 
believes that final comment 61(a)(5)(iii)(D)(5)-3.ii, along with the 
other conditions set forth in the exception, is important to address 
the policy concerns described above by making consumers' decisions 
about account acquisition, retention, and link authorization simpler 
and less prone to undue pressure and the consequences of linking the 
two accounts less complex. The Bureau also does not believe that final 
comment 61(a)(5)(iii)(D)(5)-3.ii imposes significant operational 
burdens on digital wallet providers or card issuers in order to take 
advantage of the exception in final Sec.  1026.61(a)(5)(iii)(D). The 
Bureau believes that with respect to digital wallet transactions, 
payment networks currently are identifying when credit is transferred 
from a linked credit card account to the digital wallet in the course 
of completing a transaction with the digital wallet to purchase goods 
or services, and card issuers currently are applying the claims and 
defenses rights in Sec.  1026.12(c) to these credit transactions. 
Therefore, they should be able to comply with this provision with 
minimal additional burden.
    Proposed comment 61(a)(5)(iii)(D)(5)-3.iii would have provided 
guidance on how a card issuer must meet the condition in proposed Sec.  
1026.61(a)(5)(iii)(D)(5) described above with respect to limits on 
liability set forth in Sec.  1026.12(b). Section 1026.12(b) sets forth 
certain limits on liability for unauthorized use of a credit card. The 
Bureau has made modifications to this comment to clarify the intent of 
the provision. Specifically, final comment 61(a)(5)(iii)(D)(5)-3.iii 
provides that, to apply the same limits on liability for unauthorized 
extensions of credit from the credit card account using the prepaid 
card as it applies to unauthorized extensions of credit from the credit 
card account using the traditional credit card, the card issuer must 
treat an extension of credit accessed by the prepaid card as a credit 
card transaction for purposes of the limits on liability for 
unauthorized extensions of credit set forth in Sec.  1026.12(b) and 
impose the same liability under Sec.  1026.12(b) to this credit 
extension as it applies to unauthorized transactions using the 
traditional credit card.
    The Bureau is not removing comment 61(a)(5)(iii)(D)(5)-3.iii, as 
requested by one industry commenter. The Bureau believes that final 
comment 61(a)(5)(iii)(D)(5)-3.iii, along with the other conditions set 
forth in the exception, is important to address the policy concerns 
described above by making consumers' decisions about account 
acquisition, retention, and link authorization simpler and less prone 
to undue pressure and the consequences of linking the two accounts less 
complex. The Bureau also does not believe that final comment 
61(a)(5)(iii)(D)(5)-3.iii imposes significant operational burdens on 
digital wallet providers or card issuers in order to take advantage of 
the exception in final Sec.  1026.61(a)(5)(iii)(D). The Bureau believes 
that, with respect to digital wallet transactions, payment networks 
currently are identifying when credit is transferred from a linked 
credit card account to the digital wallet, and card issuers currently 
are applying the limits on liability in Sec.  1026.12(b) to these 
credit transactions.
Regulation Z Technical Corrections
    The Bureau is making technical corrections to several provisions of 
the Prepaid Accounts Rule in Regulation Z, which are not intended to 
change the meaning of the Prepaid Accounts Rule. Specifically, the 
Bureau is correcting cross-references in comments 52(b)(2)(i)-7 
(changing ``Sec.  1026.52(a)(2)(i)(B)(1)'' to ``Sec.  
1026.52(b)(2)(i)(B)(1)''), 61(a)(3)(i)-1.ii (changing ``comment 
61(a)(2)(i)-1.iv'' to ``comment 61(a)(3)(i)-1.iv''),\121\ 
61(a)(4)(ii)(A)-4 (changing ``Sec.  1026.61(a)(4)(iii)(A)'' to ``Sec.  
1026.61(a)(4)(ii)(A)''), and 61(a)(4)(ii)(B)(1)-1.i.B and ii.A 
(changing ``Sec.  1026.61(a)(4)(A)(ii)(2)'' to ``Sec.  
1026.61(a)(4)(ii)(A)(2)''); and correcting a typographical error in 
comments 6(b)(3)(iii)(D)-1 introductory text and 61(b)-2 (changing 
``assessed'' to ``accessed''). The Bureau is also adding a heading in 
commentary for Paragraph 61(a)(4)(ii).
---------------------------------------------------------------------------

    \121\ Conforming changes related to the expanded negative 
balance exception are also being made in comment 61(a)(3)(i)-1.ii. 
See note 103 in the section-by-section analysis of Sec.  
1026.61(a)(4) above.
---------------------------------------------------------------------------

VI. Effective Date

    As discussed below, the Bureau is extending the overall effective 
date of the Prepaid Accounts Rule to April 1, 2019, including the 
requirement to submit prepaid account agreements to the Bureau. This 
final rule adopting certain changes to the Prepaid Accounts Rule will 
become effective 30 days after publication in the Federal Register, 
prior to the previous April 1, 2018 effective date and consistent with 
section 553(d) of the Administrative Procedure Act.\122\
---------------------------------------------------------------------------

    \122\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

A. Effective Date of the Prepaid Accounts Rule

The Bureau's Proposal
    While the Bureau did not propose a further extension of the 
effective date of the Prepaid Accounts Rule in the June 2017 Proposal, 
the Bureau solicited comment on whether a further delay of the 
effective date would be necessary and appropriate in light of the 
specific amendments proposed therein. The Bureau also solicited comment 
on which provisions in particular might cause financial institutions to 
need additional time, whether any further modifications to any of the 
particular amendments proposed therein would reduce or eliminate that 
need, and the appropriate length of such a further delay.
Comments Received
    A group of consumer advocates urged the Bureau not to delay the 
effective date of the rule any further. These

[[Page 6408]]

commenters stated that the Prepaid Accounts Rule represents a long-
awaited step towards ensuring consumer access to safe financial 
products, and argued that the Bureau had sufficiently solicited 
feedback and made accommodations to industry where it was necessary, 
specifically citing the changes the Bureau proposed in the June 2017 
Proposal.
    Industry commenters, including trade associations, issuing banks, 
program managers, and others, as well as a think tank, generally 
advocated for the Bureau to consider a further extension of the 
effective date. Some of these commenters suggested extensions of 
varying lengths, while others did not suggest a particular length of 
time in their comments. Of those that suggested a specific length, some 
recommended that the Bureau adopt a specific effective date, ranging 
from October 1, 2018 to January 1, 2020. Other commenters suggested 
that the new effective date should depend on the publication date of 
this final rule, generally arguing for an effective date of 12 to 18 
months after publication.
    Regardless of the specific length of time requested for an 
extension, commenters requesting an extension offered similar arguments 
in support of their request for more time. Generally speaking, these 
commenters argued that once the Bureau issued this final rule, industry 
would need to review and analyze it, coordinate with internal and 
external parties to create a compliance plan, and implement the plan. 
Some commenters suggested that the amendments proposed by the Bureau in 
the June 2017 Proposal diverged significantly from the requirements of 
the 2016 Final Rule and, if adopted, implementing them would require 
additional compliance time. Specifically, some commenters raised 
concerns that any required changes to retail packaging would take 
significant time to implement, given the significant number of vendors 
and other outside companies involved in that process. Several 
commenters also referenced the ``freeze'' period many prepaid account 
programs are subject to during the winter holiday season that would 
make it difficult to adopt the sorts of changes contemplated by the 
Prepaid Accounts Rule and the June 2017 Proposal during that time. The 
level of detail regarding the extent of these logistical challenges 
varied by commenter. One trade association and one program manager 
provided detailed timelines regarding implementation; these commenters 
requested that the Bureau extend the effective date to April 1, 2019.
    A digital wallet provider specifically argued that, if the Bureau 
did not address certain issues relating to negative balances on prepaid 
accounts linked to credit cards, it would need additional time to 
develop systems to address those situations. As discussed in the 
section-by-section analysis of Sec.  1026.61(a)(4) above, the Bureau 
believes that the final rule addresses those concerns such that this 
commenter would not need to modify its systems in the way described in 
its comment letter.
    In addition, commenters raised other specific points that they 
contended warranted a further extension of the effective date. Two 
trade associations and a business advocacy group argued that, even if 
the Bureau had not proposed further changes to the Prepaid Accounts 
Rule, an effective date of April 1, 2018 still gave insufficient time 
for industry to implement the rule. One of the trade associations based 
its argument in part on an assertion that, notwithstanding the Bureau's 
decision to allow financial institutions to sell through packaging 
manufactured in the normal course of business prior to the effective 
date, continuing to sell prepaid accounts with out-of-date packaging 
and disclosures that no longer describe how the product will work could 
lead to consumer confusion or expose institutions to potential charges 
from the Federal Trade Commission or State attorneys general for 
unfair, deceptive, or abusive practices.\123\ This commenter suggested 
that extending the effective date by an additional six months would 
allow institutions, who decide to pull and replace current stock, to 
exhaust and replenish their inventory.
---------------------------------------------------------------------------

    \123\ It is unclear, based on this comment letter, whether the 
trade association or its members believe that this concern persists 
given the changes the Bureau proposed (and is finalizing) regarding 
error resolution and limited liability for unverified prepaid 
accounts.
---------------------------------------------------------------------------

    A trade association representing technology companies suggested 
that the Bureau should take additional time to review the Prepaid 
Accounts Rule and make changes to the rule, particularly to exempt 
digital wallets from the rule. A trade association representing the 
prepaid industry argued that additional time was required to allow 
industry to implement additional changes necessitated by the Bureau's 
rule regarding pre-dispute arbitration agreements.\124\
---------------------------------------------------------------------------

    \124\ 82 FR 33210 (July 19, 2017). On November 1, 2017, the 
President signed a joint resolution passed by Congress disapproving 
the Arbitration Agreements Rule under the Congressional Review Act. 
See 82 FR 55500 (Nov. 22, 2017). Pursuant to the joint resolution, 
the Arbitration Agreements Rule has no force or effect. Public Law 
115-74. This disapproval resolution was signed well before March 19, 
2018, when compliance would have been required under the arbitration 
rule. Thus, the Bureau believes that this trade association should 
have no further concern that the Bureau's arbitration rule creates a 
need for a further delay of the Prepaid Accounts Rule's effective 
date.
---------------------------------------------------------------------------

    Most commenters' requests for further extensions of the effective 
date were based on their estimates of how long it would take them to 
comply with the Prepaid Accounts Rule, as amended by this final rule. 
However, some commenters pointed to other factors. For example, one 
trade association argued that combining the rule's general effective 
date with the effective date of the requirement for prepaid account 
issuers to submit their agreements to the Bureau would reduce confusion 
arising from multiple dates, and suggested making both dates October 1, 
2018. Several industry commenters, in requesting that the Bureau extend 
the effective date by another year, to April 1, 2019, argued that an 
April effective date would avoid disruption and the diversion of 
critical resources during the holiday period, during which, they said, 
it is often difficult for industry to make significant changes to 
prepaid account programs. Another trade association suggested that it 
would take until January 1, 2020 for the Bureau to address the issues 
raised in the June 2017 Proposal and for industry to comply with any 
resulting changes.
The Final Rule
    For the reasons set forth herein, the Bureau believes it is 
necessary and appropriate to extend the general effective date of the 
Prepaid Accounts Rule by an additional 12 months, to April 1, 2019. The 
Bureau is likewise extending the effective date of Sec.  1005.19(b) for 
the agreement submission requirement to April 1, 2019. The rule will 
thus have one effective date, April 1, 2019, for all of its provisions.
    The Bureau acknowledges that the amendments regarding error 
resolution and limited liability protections on unverified prepaid 
accounts may require some financial institutions to change language on 
or in retail packaging. This may be particularly true for those 
financial institutions that will not offer error resolution and limited 
liability protections on unverified prepaid accounts but will allow 
consumers to use them.\125\ These financial institutions may thus need 
to modify the initial disclosures contained in their retail packaging 
to include the revised model language in appendix A-

[[Page 6409]]

7(c), and put that revised packaging into production by the Prepaid 
Accounts Rule's effective date. The Bureau appreciates that in some 
circumstances these changes may be difficult to accomplish by April 1, 
2018, and thus believes that a further extension of the effective date 
is appropriate. The Bureau notes that these revisions do not require 
wholesale changes to the pre-acquisition disclosures required by the 
rule. Rather, they involve replacing one set of model disclosure 
language with another set of model disclosure language. Thus, the 
Bureau does not believe that these changes should require the multiple 
rounds of extensive legal review and redesign of packaging suggested by 
some commenters. However, the Bureau appreciates concerns raised by 
industry regarding the limited availability of retail packaging 
manufacturers, particularly during a period when a large number of 
financial institutions will be making design changes simultaneously. 
The Bureau believes that the new effective date will also significantly 
mitigate concerns expressed by commenters relating to potential charges 
of unfair, deceptive, or abusive practices, by allowing additional time 
to print compliant packaging material and sell through existing stock.
---------------------------------------------------------------------------

    \125\ These concerns are discussed in detail in the section-by-
section analysis of Sec.  1005.18(e)(3) above.
---------------------------------------------------------------------------

    The Bureau notes that the other revisions to the Prepaid Accounts 
Rule adopted in this final rule do not generally impose new obligations 
on financial institutions and other participants in the prepaid 
industry. Rather, as discussed in detail in the section-by-section 
analysis of part V above, these amendments generally relieve burden, 
provide industry with additional flexibility in complying with the 
rule, or clarify provisions that were identified as being potentially 
ambiguous. Thus, the Bureau does not believe that these other revisions 
in the final rule should significantly increase the amount of time that 
industry will need to comply with the rule, even if some additional 
time is needed to modify systems for entities that wish to take full 
advantage of the additional flexibility provided by the amendments in 
this final rule.
    However, given the concerns raised by industry regarding the time 
needed to comply with the Prepaid Accounts Rule, including the 
amendments finalized herein, the Bureau believes that a further 
extension of the effective date to April 1, 2019 is sufficient for 
industry to comply with the rule. Given the compliance concerns raised 
by commenters and the timing of this final rule, the Bureau is 
concerned that a six month extension of the effective date (to October 
1, 2018) suggested by some commenters may not provide enough time, 
particularly as several commenters suggested that date assuming that 
this final rule would be issued in the fall of 2017. As noted by 
several commenters, an effective date during the winter holiday season 
would likely create significant complications for industry, given the 
common ``freeze'' period many prepaid account programs are subject to 
during that time of year. Thus, the Bureau believes that it is 
appropriate to provide an additional year for industry to comply with 
the Prepaid Accounts Rule, as amended by this final rule. Extending the 
effective date of the Prepaid Accounts Rule to April 1, 2019 will 
ensure that industry has sufficient time to implement the rule while 
also ensuring that consumers maintain access to prepaid accounts during 
the implementation period and after the rule's effective date.
    To implement this effective date delay, the Bureau is making 
conforming changes in Sec. Sec.  1005.18(b)(2)(ix)(D), (h), and 1005.19 
and the commentary accompanying Sec.  1005.18(b)(2)(ix)(D) and (E), and 
(h), and removing the commentary that accompanied Sec.  
1005.19(f).\126\
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    \126\ See also the section-by-section analyses of Sec. Sec.  
1005.18(b)(2)(ix)(D), (h), and 1005.19(f) above for additional 
discussion regarding these changes.
---------------------------------------------------------------------------

    The Bureau will continue its efforts to support industry 
implementation of the Prepaid Accounts Rule, as amended by this final 
rule, including by monitoring industry's implementation efforts, and 
expects that continued engagement and dialogue will assist industry in 
complying with the rule.

B. Safe Harbor for Early Compliance

The Bureau's Proposal
    In response to the 2017 Effective Date Proposal, two trade 
association commenters urged the Bureau to establish a safe harbor for 
financial institutions that comply with the Prepaid Accounts Rule (or 
portions of it) prior to the rule's effective date. These commenters 
were concerned that financial institutions may be exposed to potential 
liability if they comply early, suggesting the possibility that there 
may be some conflict between the Prepaid Accounts Rule and current 
requirements for payroll card accounts and government benefit accounts, 
though these commenters did not provide any specific examples. In 
response to those concerns, in the 2017 Effective Date Final Rule as 
well as the June 2017 Proposal, the Bureau noted its agreement that 
early compliance could benefit both industry and consumers, and stated 
that it was not aware of any conflicts between the requirements of the 
Prepaid Accounts Rule and current Federal regulations applying to 
accounts that will be covered by the rule.\127\ Thus, while the Bureau 
did not propose language for a specific provision addressing early 
compliance with the Prepaid Accounts Rule, the Bureau sought comment on 
whether a specific provision addressing early compliance with the 
Prepaid Accounts Rule would be necessary and appropriate to address 
conflicts between the Prepaid Accounts Rule and current Federal 
requirements for accounts that will be covered by the rule.
---------------------------------------------------------------------------

    \127\ Regulation E, for example, currently contains protections 
for consumers who use payroll card accounts and certain government 
benefit accounts, as well as consumers who use certain gift cards 
and similar products. See Sec. Sec.  1005.18, 1005.15, and 1005.20, 
respectively. Regulations promulgated by the Department of the 
Treasury also require prepaid cards that are eligible to receive 
Federal payments to comply with the rules governing payroll card 
accounts, among other requirements. 31 CFR 210.5(b)(5)(i).
---------------------------------------------------------------------------

Comments Received
    Several industry trade association commenters and a think tank 
requested that the Bureau provide a safe harbor to ensure that early 
compliance with the Prepaid Accounts Rule will not expose financial 
institutions to liability, although commenters did not put forth 
specific theories of liability.\128\ Two trade associations 
representing credit unions contended that, because the Prepaid Accounts 
Rule makes numerous changes to existing rules, compliance with the new 
rule in advance of the effective date could lead to financial 
institutions being targeted as non-compliant with the existing rules. A 
trade association representing the prepaid industry suggested that 
issuers could face potential liability stemming from a private action, 
alleging that financial institutions that change their disclosures to 
comply with the rule early would be noncompliant with the current 
version of Regulation E. The Bureau specifically solicited comment on 
whether specific provisions of current requirements for such accounts 
conflict with provisions of the Prepaid Accounts Rule; however, with 
one exception described below, commenters did not identify any specific 
provisions of current legal requirements for payroll card accounts, 
government benefit accounts, or any other types of prepaid accounts 
that they believed conflict

[[Page 6410]]

with provisions of the Prepaid Accounts Rule.\129\
---------------------------------------------------------------------------

    \128\ With one exception described below, these commenters 
requested a safe harbor that would apply to all accounts covered by 
the Prepaid Accounts Rule, not just payroll card and government 
benefit accounts.
    \129\ The Bureau also solicited comment regarding whether a 
specific provision addressing early compliance should only be 
available to financial institutions that comply with the entire 
Prepaid Accounts Rule prior to its effective date, or whether it 
should also cover financial institutions that comply with portions 
of the Prepaid Accounts Rule prior to its effective date. The Bureau 
received no comments on this issue.
---------------------------------------------------------------------------

    One trade association identified what it described as 
inconsistencies between current rules for government benefit accounts 
under Regulation E and the Prepaid Accounts Rule, in cases where the 
government agency elects to take advantage of the respective provisions 
in the current rules and the Prepaid Accounts Rule allowing for an 
alternative to providing a periodic statement.\130\ The trade 
association asserted that three specific provisions that apply to 
government agencies using the periodic statement alternative presented 
inconsistencies: Currently effective Sec.  1005.15(d)(4) and revised 
Sec.  1005.15(e)(4) in the Prepaid Accounts Rule, which pertain to 
error resolution time limits; \131\ currently effective Sec.  
1005.15(d)(2) and revised Sec.  1005.15(e)(2), which pertain to 
delivery of the annual error resolution notice; \132\ and currently 
effective Sec.  1005.15(d)(3) and revised Sec.  1005.15(e)(3), which 
pertain to time limits for limitations on consumers' liability.\133\ 
The commenter expressed concern that financial institutions and 
government agencies that comply with the Prepaid Accounts Rule's 
version of these provisions prior to the effective date would not be in 
compliance with current Regulation E, and thus argued that such 
financial institutions and government agencies should be provided with 
a safe harbor.
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    \130\ Under currently effective Sec.  1005.15(c), a government 
agency need not furnish the periodic statement required by Sec.  
1005.9(b) if the agency makes available to the consumer: The 
consumer's account balance, through a readily available telephone 
line and at a terminal; and a written history of the consumer's 
account transactions that is provided promptly in response to an 
oral or written request and that covers at least 60 days preceding 
the date of a request by the consumer. Under the 2016 Final Rule's 
version of Sec.  1005.15(d), a government agency need not furnish 
the periodic statement if the agency makes available to the 
consumer: The consumer's account balance, through a readily 
available telephone line and at a terminal; an electronic history of 
the consumer's account transactions, such as through a website, that 
covers at least 12 months preceding the date the consumer 
electronically accesses the account; and a written history of the 
consumer's account transactions that is provided promptly in 
response to an oral or written request and that covers at least 24 
months preceding the date the agency receives the consumer's 
request.
    \131\ With respect to error resolution time limits, the 
commenter noted that, under currently effective Sec.  1005.15(d)(4), 
a government agency is required to comply with Regulation E's error 
resolution requirements in response to an oral or written notice of 
an error from the consumer that is received no later than 60 days 
after the consumer obtains the written account history or other 
account information in which the error is first reflected. The 2016 
Final Rule, in Sec.  1005.15(e)(4), provides that an agency is 
required to comply with the error resolution requirements in 
response to an oral or written notice of an error from the consumer 
that is received no later than 60 days after the consumer 
electronically accesses the consumer's account (provided that the 
history made available reflects the error), or the agency sends a 
written history of the consumer's transactions in which the error is 
first reflected. Alternatively, an agency may comply by 
investigating any oral or written notice of error received within 
120 days after the transfer allegedly in error was credited or 
debited to the consumer's account.
    \132\ The commenter noted that the 2016 Final Rule's version of 
Sec.  1005.15(e)(2) allows agencies to provide on or with each 
electronic or written history a notice substantially similar to the 
abbreviated notice for periodic statements contained in appendix A-
3(b), as an alternative to the current requirement of providing an 
annual notice concerning error resolution that is substantially 
similar to the notice contained in appendix A-5(b).
    \133\ With respect to limited liability, the issue raised by the 
commenter was essentially the same as for error resolution: Namely, 
the timelines that would apply for financial institutions that make 
use of the periodic statement alternative. Specifically, the 
commenter noted that under currently effective Sec.  1005.15(d)(3), 
for purposes of Sec.  1005.6(b)(3) (which generally provides that a 
consumer must report an unauthorized EFT that appears on a periodic 
statement within 60 days of the financial institution's transmittal 
of the statement to avoid liability for subsequent transfers), the 
60-day period begins with transmittal of a written account history 
or other account information provided to the consumer under Sec.  
1005.15(c). Under the 2016 Final Rule's version of Sec.  
1005.15(e)(3)(i), the commenter noted, the 60-day period begins on 
the earlier of the date the consumer electronically accesses the 
consumer's account, provided the electronic history made available 
reflects the unauthorized transfer; or the date the agency sends a 
written history in which the unauthorized transfer is first 
reflected. Section 1005.15(e)(3)(ii) further provides that an agency 
may comply with this provision by limiting the consumer's liability 
for any transfer reported by the consumer within 120 days after the 
transfer was credited or debited to the consumer's account.
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The Final Rule
    The Bureau continues to believe that early compliance may benefit 
both industry and consumers. However, after having carefully considered 
the issue as described below, the Bureau does not believe that a 
specific provision for early compliance with the Prepaid Accounts Rule 
is warranted.
    Specifically, the Bureau considered early compliance issues with 
regard to two separate types of products that will be subject to the 
Prepaid Accounts Rule: Those that are not currently covered by 
Regulation E, and those that are (namely, payroll card accounts and 
government benefit accounts, as well as cards receiving Federal 
payments via a Treasury rule that requires compliance with the payroll 
card rules in Regulation E).\134\ For accounts not currently subject to 
Regulation E, a safe harbor for early compliance is neither necessary 
nor appropriate because current Federal law does not contain any 
obligations that conflict with the provisions of the Prepaid Accounts 
Rule. For accounts currently subject to Regulation E, neither 
commenters nor the Bureau have identified any affirmative requirements 
in current regulations that would conflict with affirmative 
requirements in the Prepaid Accounts Rule, and thus the Bureau does not 
believe that a safe harbor for early compliance is either necessary or 
appropriate for these products either.\135\ This is consistent with the 
Bureau's approach in other rulemakings, where the Bureau has sometimes 
included in regulatory text specific provisions regarding early 
compliance in situations where compliance with a new regulation would 
cause a person to be noncompliant with a current regulation.\136\ (For 
example, if a current rule requires a person to provide disclosure form 
A and only disclosure form A and a new rule requires disclosure form B, 
without a provision to address early compliance that person may be in 
violation of the current rule by providing disclosure form B in advance 
of the effective date.)
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    \134\ 31 CFR 210.5(b)(5)(i).
    \135\ For example, the Bureau understands that many financial 
institutions currently offer error resolution and limited liability 
protections on prepaid accounts that are equivalent to or greater 
than the parallel provisions of Regulation E. They are thus in 
partial early compliance with the rule.
    \136\ For example, the Bureau provided for an optional early 
compliance period for amendments to its mortgage disclosure rules in 
part because the amendments clarified potential ambiguity in the 
rule, and the Bureau determined that some creditors may have already 
complied with the amendments, for various reasons. 82 FR 37656, 
37763-64 (Aug. 11, 2017).
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    With respect to the examples offered by one commenter relating to 
government benefit accounts, the Bureau believes that agencies and 
other financial institutions that move to early compliance with the 
Prepaid Accounts Rule would only be out of compliance with existing 
rules in two extraordinarily narrow circumstances that could easily be 
avoided by appropriate action during the transition period.\137\ 
Moreover, these are not

[[Page 6411]]

situations in which the Prepaid Accounts Rule requires entities to do 
something that is prohibited under the existing regulations; rather, 
compliance with the existing rule remains permissible under the Prepaid 
Accounts Rule, while the Prepaid Accounts Rule will provide certain 
additional compliance options that are not available under current 
regulations. Given how narrow the circumstances at issue are and how 
easy it would be for any agencies that choose to adopt early compliance 
to manage the transition period, the Bureau is not persuaded that a 
specific provision for early compliance with the Prepaid Accounts 
Rule's version of Sec.  1005.15 is either necessary or appropriate.
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    \137\ If an agency chooses to implement the Prepaid Accounts 
Rule's version of the periodic statement alternative prior to the 
rule's effective date, it would be out of compliance with the 
currently-effective version of Regulation E only if a consumer 
reported an unauthorized transaction or other error on a government 
benefit account that was inside the currently effective rule's 
timelines but outside the Prepaid Accounts Rule's timelines, and the 
financial institution elected to reject the claim as outside the 
reporting timeframes. (This could happen if a disputed transaction 
occurs on a date that is more than 60 days after the consumer first 
accessed the electronic account transaction history on which the 
error appeared, but which is less than 60 days after the date the 
agency sends to the consumer a written history of the consumer's 
account transactions at the consumer's request in which the error 
first appears.) Similarly, an agency may comply with both the 
existing and new annual error resolution notice requirements by 
sending an annual error resolution notice. It would be out of 
compliance with current Regulation E only if it failed to provide an 
annual error resolution notice under currently-effective Sec.  
1005.15(e)(2) prior to April 1, 2019.
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    The Bureau believes that rewriting the Prepaid Accounts Rule to 
allow industry to take advantage of the additional compliance options 
it permits in these two narrow circumstances before April 1, 2019 would 
be unduly complex, and that both industry and consumers will be best 
served by maintaining the same effective date for all prepaid accounts. 
In particular, to take advantage of the additional compliance options 
in the context of government benefit accounts, financial institutions 
would need to be in full compliance with the Prepaid Accounts Rule's 
periodic statement alternative (on which the modified timing 
requirements are based) as well; initial disclosures regarding access 
to account information and error resolution/limited liability 
protections would also be implicated. Providing a safe harbor in this 
instance would thus necessitate an earlier effective date for the 
portions of the rule governing government benefit accounts coupled with 
a subsequent mandatory compliance date; the Bureau believes such an 
approach would be complicated, cause industry confusion, and run 
contrary to the Bureau's intentions in further extending the Prepaid 
Accounts Rule's overall effective date to April 1, 2019.
    At the same time, the Bureau does not believe that the lack of a 
specific provision for early compliance imposes a burden on financial 
institutions, including government agencies, as the only cost to those 
entities will be delaying the date on which they activate systems that 
permit error resolution and limited liability claims to be resolved 
under the new timeframes established by the Prepaid Accounts Rule and 
cease to send annual error resolution notices in lieu of providing 
electronic and written account histories with such notices.\138\ 
Nothing in the current regulation will prevent institutions from making 
available electronic account transaction histories in advance of the 
Prepaid Accounts Rule's new effective date; the Bureau notes that, in 
fact, many government benefit account programs currently offer 
electronic account transaction histories.\139\ Agencies and 
institutions simply may not resolve errors or limit liability using the 
Prepaid Accounts Rule's modified timelines based on accessing 
electronic account transaction history, or provide abbreviated error 
resolution notices on electronic and written account transaction 
histories in lieu of sending the annual notice, until the Prepaid 
Accounts Rule goes into effect. The Prepaid Accounts Rule's amendments 
to Sec.  1005.15(d) and (e) were intended to more closely align the 
periodic statement alternative for government benefit accounts with the 
alternative for other prepaid accounts.\140\ The Bureau does not 
believe that making significant revisions to the rule's effective date 
provisions to accommodate a rare and easily-avoided compliance concern 
would be in the best interest of industry or consumers.
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    \138\ The Bureau notes that, to the extent government agencies 
have obtained the proper consent to deliver periodic statements 
electronically, government benefit accounts will be governed by the 
general limited liability and error resolution provisions of 
Sec. Sec.  1005.6 and 1005.11, rather than the periodic statement 
alternative of currently effective Sec.  1005.15.
    \139\ For example, all 65 of the government benefit account 
agreements reviewed by the Bureau in its 2014 Study of Prepaid 
Account Agreements indicated that at least 60 days of electronic 
access to account information was available. Study of Prepaid 
Account Agreements at 18 tbl. 5 and 19 tbl. 6 (Nov. 2014).
    \140\ 81 FR 83934, 84000 (Nov. 22, 2016).
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    As noted above, aside from this minor issue, the Bureau believes 
that early compliance with the Prepaid Accounts Rule may benefit both 
industry and consumers. The Bureau will continue its outreach to 
industry over the course of the implementation period to understand 
industry's ongoing experience in implementing the Prepaid Accounts Rule 
and monitor whether other concerns arise regarding perceived conflicts 
between current regulations and the Prepaid Accounts Rule.

VII. Section 1022(b)(2)(A) of the Dodd-Frank Act

    In developing this final rule, the Bureau has considered the 
potential benefits, costs, and impacts as required by section 
1022(b)(2) of the Dodd-Frank Act. Specifically, section 1022(b)(2) 
calls for the Bureau to consider the potential benefits and costs of a 
regulation to consumers and covered persons, including the potential 
reduction of consumer access to consumer financial products or 
services, the impact on depository institutions and credit unions with 
$10 billion or less in total assets as described in section 1026 of the 
Dodd-Frank Act, and the impact on consumers in rural areas. In 
addition, 12 U.S.C. 5512(b)(2)(B) directs the Bureau to consult, before 
and during the rulemaking, with appropriate prudential regulators or 
other Federal agencies regarding consistency with the objectives those 
agencies administer. The Bureau consulted, or offered to consult with, 
the prudential regulators, the Department of the Treasury, the 
Securities and Exchange Commission, and the Federal Trade Commission 
regarding consistency with any prudential, market, or systemic 
objectives they administer.
    The baseline \141\ for this discussion is the market for prepaid 
accounts as it would exist ``but for'' this final rule. That is, the 
Bureau evaluates the benefits, costs, and impacts of this final rule on 
consumers and covered persons relative to the baseline established by 
the Prepaid Accounts Rule.\142\ The discussion below covers the major 
provisions in this final rule as well as certain alternatives that the 
Bureau considered.
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    \141\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits, 
costs, and impacts and an appropriate baseline.
    \142\ As discussed above, the Bureau refers to the 2016 Final 
Rule, as amended by the 2017 Effective Date Final Rule, as the 
Prepaid Accounts Rule. The Bureau previously considered the 
benefits, costs, and impacts of the major provisions of both the 
2016 Final Rule and the 2017 Effective Date Final Rule. See 81 FR 
83934, 84269 (Nov. 22, 2016); 82 FR 18975, 18979 (Apr. 25, 2017).
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    The major provisions of this final rule addressed in this 
discussion include:
     Amending the Prepaid Accounts Rule to provide that 
Regulation E's error resolution and limited liability requirements do 
not extend to prepaid accounts that have not successfully completed the 
financial institution's consumer identification and verification 
process;
     Creating a limited exception to the credit-related 
provisions of the Prepaid Accounts Rule by narrowing the Prepaid

[[Page 6412]]

Accounts Rule's definition of ``business partner'' in Regulation Z so 
that it no longer includes certain arrangements between prepaid account 
issuers and credit card issuers that offer traditional credit card 
products; \143\
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    \143\ Although a credit card account is subject to the credit 
card provisions of Regulation Z in its own right if the account and 
the arrangement between the prepaid account issuer and credit card 
account issuer meet all conditions for this exception, it will not 
be subject to the provisions in Regulation Z that apply only to 
covered separate credit features accessible by a hybrid prepaid-
credit card. In addition, the prepaid account with which it is 
linked will not be subject to the provisions in Regulation E that 
apply only to prepaid accounts connected to covered separate credit 
features.
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     No longer considering incidental credit extended through a 
negative balance on a prepaid account to be subject to Regulation Z 
where a covered separate credit feature offered by a business partner 
is attached to the prepaid account, provided certain conditions are 
met; and
     Extending the overall effective date of the Prepaid 
Accounts Rule to April 1, 2019.
    In addition to these changes, the Bureau is making clarifications 
and minor adjustments to certain other discrete aspects of the Prepaid 
Accounts Rule. Like the major provisions discussed, these 
clarifications and minor adjustments will provide industry participants 
with additional options for compliance and should not increase burden 
on covered persons. In addition, the Bureau does not believe that this 
final rule's minor modifications to the Prepaid Accounts Rule's 
disclosure requirements will appreciably decrease transparency or have 
an adverse impact on informed consumer choice.\144\
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    \144\ For example, revised Sec.  1005.18(b)(1)(ii)(D) allows 
financial institutions offering prepaid accounts that qualify for 
the retail location exception in Sec.  1005.18(b)(1)(ii) to satisfy 
the requirement that they provide the long form disclosure after 
acquisition by delivering such disclosure electronically without 
receiving consumer consent under the E-Sign Act in cases where the 
financial institution does not provide the long form disclosure 
inside the prepaid account packaging material and does not otherwise 
mail or deliver to the consumer written account-related 
communications within 30 days of obtaining the consumer's contact 
information.
---------------------------------------------------------------------------

    In considering the relevant potential benefits, costs, and impacts 
of this final rule, the Bureau has applied its knowledge and expertise 
concerning consumer financial markets. Although the Bureau did not 
receive comments specific to its consideration of the benefits, costs, 
and impacts of the June 2017 Proposal, the Bureau has considered the 
comments on the substantive proposal in considering the relevant 
potential benefits, costs, and impacts of this final rule. Because the 
Prepaid Accounts Rule is not yet in effect and this final rule 
addresses potential impacts of the Prepaid Accounts Rule on some 
industry participants for a subset of their prepaid accounts, this 
discussion of the potential benefits, costs, and impacts on consumers 
and covered persons, evaluated relative to the baseline established by 
that rule, is largely qualitative.
    This final rule generally decreases the burden incurred by industry 
participants and provides covered persons with more options for 
complying with the provisions of the Prepaid Accounts Rule. As 
described in more detail below, the Bureau does not believe that this 
final rule's provisions will reduce consumer access to consumer 
financial products and services. In particular, the provisions relating 
to error resolution and limited liability for unverified accounts may 
increase consumer access to consumer financial products and services 
relative to the baseline established by the Prepaid Accounts Rule.
    Error resolution and limited liability for unverified accounts. The 
Bureau is revising Sec. Sec.  1005.11(c)(2)(i), 1005.18(d)(1)(ii) and 
(e)(3), comments 18(e)-4 through 6, and appendix A-7(c) to provide that 
Regulation E's error resolution and limited liability requirements do 
not extend to prepaid accounts that have not successfully completed the 
financial institution's consumer identification and verification 
process (i.e., accounts that have not concluded the process, accounts 
where the process is concluded but the consumer's identity could not be 
verified, and accounts in programs for which there is no such 
process).\145\ The Bureau is also making related changes to model 
disclosure language. In addition, the Bureau is requiring that, for 
accounts in programs where there is no verification process, financial 
institutions either explain in their initial disclosures their error 
resolution process and limitations on consumers' liability for 
unauthorized transfers, or explain that there are no such protections, 
and that such institutions comply with the process (if any) that they 
disclose.
---------------------------------------------------------------------------

    \145\ Given current business practices, the Bureau believes that 
this amendment will predominately affect financial institutions 
distributing prepaid accounts to consumers through the retail 
channel.
---------------------------------------------------------------------------

    Covered persons will avoid the burdens associated with providing 
Regulation E's error resolution and limited liability protections for 
those prepaid accounts held by consumers who have not successfully 
completed the consumer identification and verification process.\146\ 
The Bureau considered the costs associated with providing error 
resolution and limited liability protections in its section 1022(b)(2) 
discussion for the 2016 Final Rule.\147\ Potential sources of burden 
include, among other things, receiving oral or written error claims, 
investigating error claims, providing consumers with investigation 
results in writing, responding to consumer requests for copies of the 
documents that the financial institution relied on in making its 
determination, and correcting any errors discovered within the required 
timeframes.
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    \146\ Covered persons that choose not to offer Regulation E 
error resolution and limited liability protections for unverified 
prepaid accounts will need to disclose which protections they do 
offer or that they do not offer such protections, and comply with 
any such protections they disclose.
    \147\ 81 FR 83934, 84292 (Nov. 22, 2016).
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    During the Bureau's outreach efforts to industry regarding 
implementation and in comments submitted on the June 2017 Proposal, 
industry participants expressed concern that offering error resolution 
and limited liability protections for holders of unverified accounts, 
in particular, would significantly increase fraud risk. These industry 
participants mentioned various changes in functionality or processes 
that could mitigate this risk. For example, commenters asserted that 
financial institutions would limit pre-verification functionality on 
accounts. In pre-proposal outreach, some financial institutions told 
the Bureau that they believed that they would need to replace retail 
packaging to accurately reflect this decreased functionality, 
notwithstanding the Bureau's decision to allow financial institutions 
to use non-compliant packaging manufactured in the normal course of 
business prior to the effective date. In pre-proposal outreach and in 
response to the June 2017 Proposal, industry representatives suggested 
that financial institutions may issue paper checks to consumers holding 
unverified accounts in various scenarios, including when a consumer 
fails the verification process (instead of allowing the consumer to 
spend down the balance) and when a transaction on an unverified account 
is disputed (to decrease the likelihood that further errors are 
asserted on the account).
    In addition to the direct cost associated with investigating errors 
and providing funds in response to claims by holders of unverified 
accounts, covered persons, under the requirements of the 2016 Final 
Rule, would incur costs in changing account functionality or refund 
processes. By

[[Page 6413]]

amending the Prepaid Accounts Rule's requirement that financial 
institutions resolve errors and limit consumers' liability pursuant to 
Regulation E to exclude those prepaid accounts, other than payroll card 
accounts or government benefit accounts, for which the consumer 
identification and verification process has not been completed, this 
final rule will allow covered persons to avoid such costs.
    Consumers holding or desiring to hold unverified prepaid accounts 
may both derive benefits and incur costs from this final rule's 
provisions relative to those benefits and costs they would experience 
were the baseline requirements established by the Prepaid Accounts Rule 
in force. Under this final rule, consumers holding unverified accounts 
will no longer be assured the benefits arising from the Prepaid 
Accounts Rule's error resolution and limited liability protections. 
However, if absent this final rule, financial institutions would have 
attempted to mitigate potential fraud losses by not offering unverified 
prepaid accounts, consumers desiring to hold unverified accounts would 
have lost access to such products altogether. In such a scenario, 
consumers desiring to hold unverified prepaid accounts would be forced 
to choose a less-desired alternative and would not have enjoyed any of 
the benefits arising from the Prepaid Accounts Rule's consumer 
protections (unless that alternative product was a verified prepaid 
account). Alternatively, if financial institutions would have responded 
to the Prepaid Accounts Rule's requirement that unverified prepaid 
accounts offer error resolution and limited liability protections by 
decreasing the functionality associated with such accounts, this final 
rule will enable current and future accountholders to retain current 
functionality on unverified accounts, though they will not enjoy the 
error resolution and limited liability protections of the Prepaid 
Accounts Rule. Therefore, as a result of this final rule, consumers 
holding unverified prepaid accounts (or those desiring to hold 
unverified accounts) may experience increased product access or 
functionality relative to the baseline.
    In addition to these impacts on consumers holding or desiring to 
hold unverified prepaid accounts, consumers holding verified prepaid 
accounts may also benefit relative to the baseline established by the 
Prepaid Accounts Rule's requirement that financial institutions offer 
error resolution and limited liability protections for unverified 
accounts. Under the Prepaid Accounts Rule, financial institutions may 
have raised prices to account for forecasted or actual fraud resulting 
from providing error resolution and limited liability protections on 
unverified accounts. This final rule allows financial institutions to 
avoid such costs. Financial institutions may pass through some portion 
of the cost savings to holders of verified accounts by lowering prices, 
or they may invest cost savings into innovation efforts to create 
higher quality products.
    In terms of alternatives, the Bureau considered applying error 
resolution and limited liability protections to pre-verification 
transactions for those accounts later verified. The Bureau also 
considered applying these protections to only those pre-verification 
transactions occurring within a specified time (such as 30 days) prior 
to account verification. Although those approaches would have decreased 
the risk that holders of unverified accounts would experience a loss of 
funds in the event of an unauthorized transaction or other error, 
covered persons would have incurred the burdens associated with 
providing these protections (including any attendant fraud losses) for 
pre-verification transactions. Commenters stated that financial 
institutions rely on verified consumer information to identify 
fraudulent transactions when they are attempted. Therefore, even if the 
accountholder's identity is verified later, the financial institution 
is unable to leverage verified consumer information to limit fraud 
exposure on pre-verification transactions, thereby driving up costs. 
The Bureau's approach provides more incentive for consumers to verify 
accounts upon acquisition and, by so doing, may increase investigation 
speed (and decrease the costs associated with conducting those 
investigations), relative to these alternatives. The Bureau's approach 
should decrease uncertainty regarding responsibilities and liabilities 
among industry participants.
    ``Business partner'' redefined to exclude certain arrangements. The 
Bureau is amending the definition of ``business partner'' in Sec.  
1026.6(a)(5)(iii) and related commentary to exclude business 
arrangements between prepaid account issuers and issuers of traditional 
credit cards from coverage under the Prepaid Accounts Rule's tailored 
provisions applicable to hybrid prepaid-credit cards, provided certain 
conditions are satisfied. The 2016 Final Rule had defined the term 
``business partner'' to mean a person (other than the prepaid account 
issuer or its affiliate) that can extend credit through a separate 
credit feature where the person or its affiliate has an arrangement 
with a prepaid account issuer or its affiliate. As revised by this 
final rule, Sec.  1026.61(a)(5)(iii)(D) now provides that a person that 
can extend credit through a credit card account is not a business 
partner of a prepaid account issuer with which it has an arrangement, 
as defined in Sec.  1026.61(a)(5)(iii)(A) through (C), with regard to 
such a credit card account so long as certain conditions are met. For 
example, under these conditions, the credit card account remains 
subject to Regulation Z's credit card requirements in its own right, 
and both the credit card and prepaid accounts' pricing terms must be 
independent of whether the two accounts are linked. Thus, if certain 
conditions are met, this final rule provides that prepaid account 
issuers may enter into certain business arrangements with credit card 
issuers without being subject to the Prepaid Accounts Rule's tailored 
provisions applicable to hybrid prepaid-credit cards.
    Although the Bureau believes that few industry participants will be 
impacted directly by the Prepaid Accounts Rule's credit-related 
provisions, this change will relieve burden for those industry 
participants that currently qualify for the exception and will decrease 
the cost incurred by industry participants entering into qualifying 
relationships in the future. For example, under the Prepaid Accounts 
Rule's prior definition of ``business partner,'' a provider of a 
digital wallet that could store funds that had a cross-marketing 
arrangement with a credit card issuer could have been subject to those 
provisions of the Prepaid Accounts Rule applicable to covered separate 
credit features accessible by a hybrid prepaid-credit card if the 
prepaid card from time to time could access credit from the credit card 
account in the course of a transaction to obtain goods or services, 
obtain cash, or conduct P2P transfers. Among other things, the digital 
wallet provider would have been required to wait 30 days after the 
digital wallet account was registered before allowing a consumer to add 
a credit card account issued by a ``business partner,'' though there 
would be no such required waiting period for credit card accounts 
offered by unaffiliated card issuers with whom there is no such 
relationship. Under the 2016 Final Rule, this requirement applied even 
if the credit card account was subject to the provisions of Regulation 
Z that apply to credit card accounts in its own right.
    Because the Bureau narrowly tailored this amendment, consumers 
likely will not incur many costs as a result. For example, Sec.  
1026.61(a)(5)(iii)(D)(1)

[[Page 6414]]

provides that for the credit card account to be eligible for the 
exclusion, it must be a credit card account under an open-end (not 
home-secured) consumer credit plan that a consumer can access through a 
traditional credit card and thus subject to the applicable credit card 
provisions of Regulation Z in its own right. Therefore, consumers will 
still enjoy the credit card protections provided by Regulation Z with 
respect to the linked credit card account. In addition, the Bureau 
believes that when the conditions of the ``business partner'' exclusion 
in Sec.  1026.61(a)(5)(iii)(D) are met, consumers will be further 
protected because of the provisions intended to help make the choice to 
acquire or retain a prepaid account independent of the choice of 
whether to link a credit feature to it. For example, Sec.  
1026.61(a)(5)(iii)(D)(3) generally prohibits both the prepaid account 
issuer and the credit card issuer from conditioning the acquisition or 
retention of either the prepaid or credit card account on whether the 
consumer authorizes their linkage. Also, under Sec.  
1026.61(a)(5)(iii)(D)(4) and (5), both the prepaid account issuer and 
card issuer generally are prohibited from varying the prepaid and 
credit card account terms and conditions based on whether the consumer 
chooses to link the accounts.\148\ These provisions will help to ensure 
that the consumer's choice to acquire or retain a prepaid account or a 
credit card account is distinct from his or her choice to link a credit 
card account and a prepaid account. By preventing pricing structures 
from depending on the individual consumer's choice to link the 
accounts, this final rule's provisions help provide the consumer with 
an opportunity to independently identify and appreciate the costs 
associated with each product. In addition, Sec.  
1026.61(a)(5)(iii)(D)(2) generally requires that the consumer provide 
either the prepaid account issuer or the card issuer a written request 
that is separately signed or initialized authorizing the prepaid card 
to access the credit card account, thereby helping to ensure that any 
account linkages are transparent and represent the consumer's 
deliberate choice.
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    \148\ More specifically, Sec.  1026.61(a)(5)(iii)(D)(4) ensures 
that the prepaid account issuer applies the same terms, conditions, 
or features to the prepaid account regardless of whether a consumer 
authorizes linking the prepaid card to the credit card account 
offered by the card issuer subject to the exception. In addition, 
the prepaid account issuer is required to apply the same fees to 
load funds from a linked credit card account to the prepaid account 
as it charges for a comparable load from a credit feature offered by 
a person who is not the prepaid account issuer, its affiliate, or 
person with whom the prepaid account issuer has an arrangement. With 
respect to the credit card account, Sec.  1026.61(a)(5)(iii)(D)(5) 
requires the card issuer to apply the same specified terms and 
conditions to the credit card account regardless of whether the 
consumer authorizes its linkage to the prepaid account and 
additionally requires that the issuer apply the same specified terms 
and conditions to extensions of credit accessed by the prepaid card 
from the credit card account as it applies to extensions of credit 
accessed by the traditional credit card.
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    In addition, this change helps to decrease the likelihood of 
consumer confusion. Absent this final rule's amendment to the 
definition of ``business partner,'' there would be more instances in 
which the Prepaid Accounts Rule's provisions would apply to some, but 
not all, of the credit card accounts provisioned to a consumer's 
digital wallet. This uneven application could have resulted in 
increased consumer confusion relative to the approach taken in this 
final rule because credit card payment credentials stored within the 
same digital wallet would have been subject to different disclosure 
regimes and use restrictions with greater frequency than will be 
experienced under this final rule's approach. By helping to foster 
uniformity in application and therefore increasing transparency, this 
final rule's amendment to the definition of ``business partner'' will 
benefit these consumers.
    As discussed above, the Bureau also considered changing the basis 
for qualifying for the exception in Sec.  1026.61(a)(5)(iii)(D), 
including extending the exception to apply to credit card accounts 
offered by the prepaid account issuer or its affiliate as well as 
allowing providers to vary certain terms and conditions based on 
whether the prepaid account and the credit card account are linked. The 
Bureau did not adopt these changes in this final rule. The Bureau 
believes that the approach taken in this final rule more adequately 
ensures the separation and independence of linked prepaid and credit 
card accounts and thereby leads to better-informed consumer choice. The 
Bureau believes that conditioning the exception on the requirement that 
providers not vary terms and conditions based on whether the prepaid 
account and the credit card account are linked will help to ensure that 
consumers' decisions about account acquisition, retention, and link 
authorization are simpler and less prone to undue pressure (and thereby 
do not require the protections provided by the tailored provisions in 
Regulations Z and E applicable only to covered separate credit features 
and linked prepaid accounts). Nonetheless, the Bureau does not believe 
that these safeguards would be sufficient to protect consumers when the 
prepaid account and the credit card account are offered by entities 
under common control. The Bureau believes that ensuring separation and 
independence is more complicated when both accounts are issued by 
entities under common control, particularly given that offset, security 
interest, and other types of linkages may be present.
    The Bureau also considered requiring that card issuers comply with 
Sec.  1026.12(d)(3)(ii), which permits a written plan authorizing 
periodic deductions from the prepaid account only if the deductions are 
no more frequent than once per calendar month, to qualify for the 
exception, as suggested by consumer advocate commenters. The Bureau is 
not adopting such a requirement in this final rule. The Bureau believes 
that adding such a repayment provision, which would impose an 
additional burden on industry, is not necessary given the consumer 
protections already offered by limits on repayment terms.\149\
---------------------------------------------------------------------------

    \149\ Final Sec.  1026.61(a)(5)(iii)(D)(5) prevents the card 
issuer from varying the repayment terms of the credit card account 
based on whether the consumer has authorized linking the prepaid 
card to the credit card account or based on whether a particular 
credit extension from the credit card account is accessed by the 
prepaid card or by the traditional credit card.
---------------------------------------------------------------------------

    Treatment of negative balances. The Bureau is expanding the 
exception in Sec.  1026.61(a)(4) that allows prepaid account issuers to 
provide certain incidental forms of credit structured as a negative 
balance on the asset feature of prepaid accounts, to include those 
situations where a covered separate credit feature offered by a 
business partner is attached to the prepaid account, provided the other 
requirements in Sec.  1026.61(a)(4) are met. In these situations, the 
incidental credit structured as a negative balance on the prepaid 
account will not be subject to Regulation Z, although the business 
partner's separate credit feature will be subject to Regulation Z.
    Broadening the exception in Sec.  1026.61(a)(4) to include those 
situations where a covered separate credit feature offered by a 
business partner is attached to the prepaid account, provided the other 
requirements in Sec.  1026.61(a)(4) are met, enables industry 
participants to avoid several operational costs that they might incur 
in preventing negative balances on the prepaid account when a covered 
separate credit feature offered by a business partner is attached. 
These costs would have included building Regulation Z-compliant systems 
to hold otherwise permissible negative balances

[[Page 6415]]

in separate subaccounts when covered separate credit features issued by 
a business partner are linked or charging the incidental credit to the 
linked covered separate credit features. One commenter indicated that 
when a covered separate credit feature is offered by a business 
partner, it may not always be possible to charge the incidental credit 
to the linked covered separate credit feature if doing so could cause 
the account to exceed its credit limit.
    Although the negative balance may be repaid from the next incoming 
deposit because the offset provisions in Sec.  1026.12(d) will not 
apply in these cases, consumers may benefit from this provision 
relative to the baseline even though they may have less control of 
their funds. For example, one commenter indicated that incidental 
credit that is charged to the linked covered separate credit feature 
would likely be deemed a cash advance by the card issuer, subjecting 
the customer to interest and fees. This final rule's approach helps to 
avoid that outcome. Further, without the exception in Sec.  
1026.61(a)(4), it is possible that a prepaid account issuer would build 
Regulation Z-compliant systems to hold otherwise permissible negative 
balances in separate subaccounts when business partner credit cards are 
linked. Consumers could be confused by the presence of subaccounts, 
especially to the extent that the trigger for their creation (whether a 
linked credit card is issued by the prepaid account issuer's business 
partner) may not be transparent to the consumer.
    The Bureau considered multiple alternative approaches to address 
the treatment of incidental credit structured as a negative balance. 
This final rule's approach is more permissive than that articulated in 
the June 2017 Proposal, which would not have permitted those situations 
where a covered separate credit feature offered by a business partner 
is attached to the prepaid account to qualify for the negative balance 
exception in Sec.  1026.61(a)(4). As observed by commenters, the 
Bureau's approach in this final rule relieves operational burden for 
prepaid account issuers and avoids potential consumer confusion.
    The Bureau also considered broadening the exception for incidental 
credit structured as a negative balance to include situations in which 
a covered separate credit feature offered by the prepaid issuer or its 
affiliate is attached to the prepaid account. However, the Bureau 
believes that the operational concerns that arise when a business 
partner offers a covered separate credit feature do not arise when the 
issuer or its affiliate offers the feature. In particular, the prepaid 
account issuer or its affiliate, in these cases, would already offer 
Regulation Z-compliant covered separate credit feature. The Bureau 
believes when the same or affiliated parties offer both the prepaid 
account and the covered separate credit feature, they will encounter 
fewer difficulties in charging the incidental credit to the covered 
separate credit feature or waiving interest and fees on the incidental 
credit when it is charged to the covered separate credit feature.
    Extending the effective date to April 1, 2019. The Bureau is 
extending the overall effective date of the Prepaid Accounts Rule to 
April 1, 2019. The Bureau previously considered the benefits, costs, 
and impacts to consumers and covered persons of a six month effective 
date delay in the 2017 Effective Date Final Rule.\150\ The Bureau 
acknowledges that the amendments regarding error resolution and limited 
liability protections on unverified accounts may require some financial 
institutions to change to language on or in retail packaging. The 
Bureau appreciates that in some circumstances these changes may be 
difficult to accomplish by April 1, 2018, and thus believes that a 
further extension of the effective date is appropriate. The Bureau 
believes that the other revisions to the Prepaid Accounts Rule adopted 
in this final rule do not generally impose new obligations on covered 
persons. Rather, these amendments generally relieve burdens, provide 
industry with additional flexibility in complying with the Prepaid 
Accounts Rule, or clarify provisions that were identified as being 
potentially ambiguous. Covered persons will benefit from receiving 
additional flexibility with respect to when they must be compliant with 
the provisions of the Prepaid Accounts Rule. However, consumers' 
realization of the benefits arising from the Prepaid Accounts Rule will 
be delayed by an additional year. Both consumers and covered persons 
may benefit from decreased disruption arising from the implementation 
of the Prepaid Accounts Rule that could result from this further delay.
---------------------------------------------------------------------------

    \150\ 82 FR 18975, 18979 (Apr. 25, 2017).
---------------------------------------------------------------------------

    Potential specific impacts of this final rule. The requirements of 
this final rule apply uniformly across covered financial institutions 
without regard to their asset size. The Bureau does not expect this 
final rule to have a differential impact on depository institutions and 
credit unions with $10 billion or less in total assets, as described in 
section 1026 of the Dodd-Frank Act. The Bureau solicited comment 
regarding the impact of the June 2017 Proposal's provisions on those 
depository institutions and credit unions with $10 billion or less in 
total assets and how those impacts may be distinct from those 
experienced by larger institutions. The Bureau did not receive any 
comments directly addressing this issue in response to that request.
    The Bureau has no reason to believe that the additional flexibility 
offered to covered persons by this final rule will differentially 
affect consumers in rural areas. The Bureau requested comment regarding 
the impact of the June 2017 Proposal's provisions on consumers in rural 
areas and how those impacts may differ from those experienced by 
consumers generally. The Bureau did not receive any comments directly 
addressing this issue in response to that request.

VIII. Regulatory Flexibility Act

    The Regulatory Flexibility Act,\151\ as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996,\152\ (RFA) 
requires each agency to consider the potential impact of its 
regulations on small entities, including small businesses, small 
governmental units, and small not-for-profit organizations.\153\ The 
RFA defines a ``small business'' as a business that meets the size 
standard developed by the Small Business Administration (SBA) pursuant 
to the Small Business Act.\154\
---------------------------------------------------------------------------

    \151\ Public Law 96-354, 94 Stat. 1164 (1980).
    \152\ Public Law 104-21, section 241, 110 Stat. 847, 864-65 
(1996).
    \153\ 5 U.S.C. 601 through 612. The term ```small organization' 
means any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition under notice and comment].'' 
5 U.S.C. 601(4). The term ```small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' 5 U.S.C. 601(5).
    \154\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consulting with the SBA and providing an 
opportunity for public comment. Id.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the head of the agency certifies that 
the rule will not have a significant economic impact on a substantial 
number of small entities.\155\ The Bureau also is subject to certain 
additional procedures under the RFA involving the convening of a panel

[[Page 6416]]

to consult with small entity representatives prior to proposing a rule 
for which an IRFA is required.\156\
---------------------------------------------------------------------------

    \155\ 5 U.S.C. 601 et seq.
    \156\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    The Bureau's director certified that the June 2017 Proposal would 
not have a significant economic impact on a substantial number of small 
entities and that an IRFA was therefore not required.\157\ Upon 
considering relevant comments as well as differences between this final 
rule and the June 2017 Proposal, the Bureau concludes that this rule 
will not have a significant economic impact on a substantial number of 
small entities. Therefore, a FRFA is not required.\158\
---------------------------------------------------------------------------

    \157\ 82 FR 29630, 29661 (June 29, 2017). The June 2017 Proposal 
was the second rule proposed by the Bureau to amend the 2016 Final 
Rule, which created comprehensive consumer protections for prepaid 
accounts under Regulations E and Z. In the 2014 Proposal, the Bureau 
concluded that the rule would not have a significant economic impact 
on a substantial number of small entities and that an IRFA was 
therefore not required. 79 FR 77102, 77283 (Dec. 23, 2014). That 
conclusion remained unchanged for the 2016 Final Rule. 81 FR 83934, 
84308 (Nov. 22, 2016). In addition, the Bureau determined that both 
the 2017 Effective Date Proposal and the 2017 Effective Date Final 
Rule, which extended the general effective date of the 2016 Final 
Rule by six months, likewise would not have a significant economic 
impact on a substantial number of small entities. 82 FR 13782, 13785 
(Mar. 15, 2017); 82 FR 18975, 18979 (Apr. 25, 2017).
    \158\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------

    As discussed above, this final rule amends certain provisions of 
the Prepaid Accounts Rule. Specifically, the Bureau is amending the 
Prepaid Accounts Rule so that it no longer requires financial 
institutions to resolve errors or limit consumers' liability on 
unverified prepaid accounts (other than payroll card accounts or 
government benefit accounts). In addition, the Bureau is creating a 
limited exception to the credit-related provisions of the Prepaid 
Accounts Rule by narrowing the Prepaid Accounts Rule's definition of 
``business partner'' in Regulation Z so that it no longer includes 
certain arrangements between prepaid account issuers and credit card 
issuers that offer traditional credit card products.\159\ Further, this 
final rule amends the Prepaid Accounts Rule so that it no longer 
considers incidental credit extended through a negative balance on a 
prepaid account to be subject to Regulation Z when a covered separate 
credit feature offered by a business partner is attached to the prepaid 
account, provided other requirements are satisfied. The Bureau also is 
extending the overall effective date of the Prepaid Accounts Rule to 
April 1, 2019, and is making clarifications or minor adjustments to 
certain other discrete aspects of the Prepaid Accounts Rule.
---------------------------------------------------------------------------

    \159\ Although a credit card account is subject to the credit 
card provisions of Regulation Z in its own right if the account and 
the arrangement between the prepaid account issuer and credit card 
account issuer meet all conditions for this exception, it will not 
be subject to the provisions in Regulation Z that apply only to 
covered separate credit features accessible by a hybrid prepaid-
credit card. In addition, the prepaid account with which it is 
linked will not be subject to the provisions in Regulation E that 
apply only to prepaid accounts connected to covered separate credit 
features.
---------------------------------------------------------------------------

    This final rule's amendments generally benefit small entities by 
providing additional flexibility with respect to their implementation 
of the Prepaid Accounts Rule and will not increase burden on small 
entities. In particular, the credit-related amendments address certain 
complications that arise when a covered separate credit feature is 
attached to a digital wallet, and the Bureau believes that, at present, 
few small entities will be affected by the relevant provisions of the 
Prepaid Accounts Rule or these amendments.
    Error resolution and limited liability for unverified accounts. The 
Bureau is revising Sec. Sec.  1005.11(c)(2)(i), 1005.18(d)(1)(ii) and 
(e)(3), comments 18(e)-4 through 6, and appendix A-7(c) to provide that 
Regulation E's error resolution and limited liability requirements do 
not extend to prepaid accounts that have not successfully completed the 
financial institution's consumer identification and verification 
process (i.e., accounts that have not concluded the process, accounts 
where the process is concluded but the consumer's identity could not be 
verified, and accounts in programs for which there is no such process). 
The Bureau is adopting related changes to model language in appendix A-
7(c) and is requiring that those financial institutions offering 
prepaid account programs that do not have a consumer identification and 
verification process disclose to consumers any error resolution and 
limited liability protections offered (or, if applicable, that no such 
protections are offered).
    Those small entities offering unverified prepaid accounts will 
benefit from avoiding the burdens associated with providing Regulation 
E's error resolution and limited liability protections for prepaid 
accounts held by consumers who have not successfully completed the 
consumer identification and verification process. In addition, any 
increase in fraud risk arising from the Prepaid Accounts Rule's 
requirement that financial institutions offer error resolution and 
limited liability protections to consumers holding unregistered 
accounts may be avoided. However, these benefits will be limited if 
small entities tend not to distribute prepaid accounts that can be used 
before verification or that offer significant pre-verification 
functionality.
    ``Business partner'' redefined to exclude certain arrangements. The 
Bureau is amending the definition of ``business partner'' in Sec.  
1026.61(a)(5)(iii) and related commentary to exclude business 
arrangements between prepaid account issuers and issuers of traditional 
credit cards from coverage under the Prepaid Accounts Rule's tailored 
provisions applicable to hybrid prepaid-credit cards if certain 
conditions are satisfied. This amendment will facilitate compliance 
with the Prepaid Accounts Rule by digital wallet providers offering 
products that both offer the ability to store funds (such that the 
digital wallet is a prepaid account) and permit consumers to use the 
digital wallet account number from time to time to access stored 
credentials for credit card accounts in the course of a transaction. If 
the conditions described above are met, such products will be excepted 
from the tailored provisions in the Prepaid Accounts Rule applicable 
only to covered separate credit features and prepaid accounts with 
those features. Small entities offering products that qualify for the 
exception will be relieved of the burdens associated with complying 
with these tailored provisions as a result of this final rule.
    Treatment of negative balances. The Bureau is amending Sec.  
1026.61(a)(4) to allow a prepaid account issuer to provide incidental 
forms of credit structured as a negative balance on the prepaid account 
when a covered separate credit feature offered by business partner is 
attached to the prepaid account.\160\ In this case, the incidental 
credit structured as a negative balance on the prepaid account will not 
be subject to Regulation Z. As described above, this amendment will 
relieve small entities offering certain digital wallet products (those 
which store funds and to which a covered separate credit feature 
offered by a business partner may be attached) from the potential 
implementation burdens associated either with (1) constructing 
Regulation Z-compliant subaccounts to hold otherwise permissible 
negative balances; or (2) charging the incidental credit to the 
business partner's linked covered separate credit feature.
---------------------------------------------------------------------------

    \160\ As discussed above, the other prerequisites contained in 
Sec.  1026.61(a)(4) must also be satisfied.
---------------------------------------------------------------------------

    Extending the overall effective date to April 1, 2019. The Bureau 
is extending the overall effective date of the Prepaid Accounts Rule to 
April 1, 2019. This

[[Page 6417]]

extension will relieve burden on small entities by providing additional 
time to comply with the provisions of the Prepaid Accounts Rule.
    Other modifications. In addition to these provisions, the Bureau is 
making clarifications or minor adjustments to certain other discrete 
aspects of the Prepaid Accounts Rule. Similar to those provisions 
discussed, these clarifications or minor adjustments will provide 
additional options for compliance and will not increase burden on small 
entities.
    In summary, this final rule will not increase costs incurred by 
small entities relative to the baseline established by the Prepaid 
Accounts Rule because this rulemaking's amendments provide additional 
flexibility to financial institutions with respect to how they may 
comply with the Prepaid Accounts Rule. Small entities retain the option 
of complying with the Prepaid Accounts Rule as it existed prior to 
these modifications. Therefore, small entities will not experience a 
significant economic impact as a result of this final rule.

Certification

    Accordingly, the undersigned hereby certifies that this final rule 
will not have a significant economic impact on a substantial number of 
small entities.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\161\ Federal 
agencies are generally required to seek Office of Management and Budget 
(OMB) approval for information collection requirements prior to 
implementation. The collections of information related to the Prepaid 
Accounts Rule have been reviewed and approved by OMB previously in 
accordance with the PRA and assigned OMB Control Numbers 3170-0014 
(Regulation E) and 3170-0015 (Regulation Z). Under the PRA, the Bureau 
may not conduct or sponsor and, notwithstanding any other provision of 
law, a person is not required to respond to an information collection 
unless the information collection displays a valid control number 
assigned by OMB.
---------------------------------------------------------------------------

    \161\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    The Bureau did not receive any comments regarding its PRA 
discussion in the June 2017 Proposal. The Bureau has determined that 
this final rule amends the Prepaid Accounts Rule to provide firms with 
additional flexibility and clarity with respect to required 
disclosures; therefore, it will have only minimal impact on the 
industry-wide aggregate PRA burden relative to the baseline.

X. Congressional Review Act

    Pursuant to the Congressional Review Act,\162\ the Bureau will 
submit a report containing this rule and other required information to 
the U.S. Senate, the U.S. House of Representatives, and the Comptroller 
General of the United States prior to the rule's published effective 
date. The Office of Information and Regulatory Affairs has designated 
this rule as not a ``major rule'' as defined by 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    \162\ 5 U.S.C. 801 et seq.
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 1005

    Automated teller machines, Banking, Banks, Consumer protection, 
Credit unions, Electronic fund transfers, National banks, Remittance 
transfers, Reporting and recordkeeping requirements, Savings 
associations.

12 CFR Part 1026

    Advertising, Appraisal, Appraiser, Banking, Banks, Consumer 
protection, Credit, Credit unions, Mortgages, National banks, Reporting 
and recordkeeping requirements, Savings associations, Truth in lending.

Authority and Issuance

    For the reasons set forth above, the Bureau is further amending 12 
CFR parts 1005 and 1026, as amended November 22, 2016, at 81 FR 83934, 
and April 25, 2017, at 82 FR 18975, as follows:

PART 1005--ELECTRONIC FUND TRANSFERS (REGULATION E)

0
1. The authority citation for part 1005 continues to read as follows:

    Authority: 12 U.S.C. 5512, 5532, 5581; 15 U.S.C. 1693b. Subpart 
B is also issued under 12 U.S.C. 5601 and 15 U.S.C. 1693o[dash]1.

Subpart A--General

0
2. Amend Sec.  1005.2 by revising paragraph (b)(3)(ii)(D)(3) to read as 
follows:


Sec.  1005.2  Definitions.

* * * * *
    (b) * * *
    (3) * * *
    (ii) * * *
    (D) * * *
    (3) A loyalty, award, or promotional gift card as defined in Sec.  
1005.20(a)(4), or that satisfies the criteria in Sec.  1005.20(a)(4)(i) 
and (ii) and is excluded from Sec.  1005.20 pursuant to Sec.  
1005.20(b)(4); or
* * * * *

0
3. Amend Sec.  1005.11 by revising paragraphs (c)(2)(i)(A) and (B) and 
removing paragraph (c)(2)(i)(C) to read as follows:


Sec.  1005.11  Procedures for resolving errors.

* * * * *
    (c) * * *
    (2) * * *
    (i) * * *
    (A) The institution requires but does not receive written 
confirmation within 10 business days of an oral notice of error; or
    (B) The alleged error involves an account that is subject to 
Regulation T of the Board of Governors of the Federal Reserve System 
(Securities Credit by Brokers and Dealers, 12 CFR part 220).
* * * * *

0
4. Amend Sec.  1005.18 by:
0
a. Revising paragraphs (b)(1)(i) and (ii).
0
b. Removing ``long form disclosures'' and adding in its place ``long 
form disclosure'' in the introductory text of paragraph (b)(1)(iii).
0
c. Revising paragraphs (b)(1)(iii)(C) and (b)(2)(ix)(C).
0
d. In paragraph (b)(2)(ix)(D):
0
i. Removing ``type'' and adding in its place ``types'' in the heading.
0
ii. Removing ``April 1, 2018'' everywhere it appears and adding in its 
place ``April 1, 2019''.
0
e. Removing ``disclosures'' and adding in its place ``disclosure'' in 
paragraphs (b)(2)(ix)(E)(2) and (3).
0
f. Removing ``additional fee types disclosures'' and adding in its 
place ``an additional fee types disclosure'' in paragraph 
(b)(2)(ix)(E)(4).
0
g. Removing ``customer'' everywhere it appears and adding in its place 
``consumer'' in paragraph (b)(2)(xi).
0
h. Revising paragraphs (b)(6)(i)(B) and (C).
0
i. Removing ``long form disclosures'' and adding in its place ``a long 
form disclosure'' in paragraph (b)(6)(ii).
0
j. Removing ``disclosures'' and adding in its place ``disclosure'' in 
paragraph (b)(6)(iii)(A).
0
k. Removing ``preferred-'' and adding in its place ``preferred'' in 
paragraph (b)(6)(iii)(B)(2).
0
l. Revising paragraph (b)(7)(i)(B).
0
m. Removing ``Long form disclosures'' and adding in its place ``The 
long form disclosure'' in paragraph (b)(7)(ii)(C).
0
n. Revising paragraphs (b)(9)(i)(C), (d)(1)(ii), and (e)(3).
0
o. Removing ``April 1, 2018'' everywhere it appears and adding in its 
place ``April 1, 2019'' in paragraph (h).
    The revisions read as follows:


Sec.  1005.18  Requirements for financial institutions offering prepaid 
accounts.

* * * * *

[[Page 6418]]

    (b) * * *
    (1) * * *
    (i) General. Except as provided in paragraph (b)(1)(ii) or (iii) of 
this section, a financial institution shall provide the disclosures 
required by paragraph (b) of this section before a consumer acquires a 
prepaid account. When a prepaid account is used for disbursing funds to 
a consumer, and the financial institution or third party making the 
disbursement does not offer any alternative means for the consumer to 
receive those funds in lieu of accepting the prepaid account, for 
purposes of this paragraph, the disclosures required by paragraph (b) 
of this section may be provided at the time the consumer receives the 
prepaid account.
    (ii) Disclosures for prepaid accounts acquired in retail locations. 
A financial institution is not required to provide the long form 
disclosure required by paragraph (b)(4) of this section before a 
consumer acquires a prepaid account in person at a retail location if 
the following conditions are met:
    (A) The prepaid account access device is contained inside the 
packaging material.
    (B) The disclosure required by paragraph (b)(2) of this section is 
provided on or are visible through an outward-facing, external surface 
of a prepaid account access device's packaging material.
    (C) The disclosure required by paragraph (b)(2) of this section 
includes the information set forth in paragraph (b)(2)(xiii) of this 
section that allows a consumer to access the information required to be 
disclosed by paragraph (b)(4) of this section by telephone and via a 
website.
    (D) The long form disclosure required by paragraph (b)(4) of this 
section is provided after the consumer acquires the prepaid account. If 
a financial institution does not provide the long form disclosure 
inside the prepaid account packaging material, and it is not otherwise 
already mailing or delivering to the consumer written account-related 
communications within 30 days of obtaining the consumer's contact 
information, it may provide the long form disclosure pursuant to this 
paragraph in electronic form without regard to the consumer notice and 
consent requirements of section 101(c) of the Electronic Signatures in 
Global and National Commerce Act (E-Sign Act) (15 U.S.C. 7001 et seq.).
    (iii) * * *
    (C) The long form disclosure required by paragraph (b)(4) of this 
section is provided after the consumer acquires the prepaid account.
    (2) * * *
    (ix) * * *
    (C) Fee variations in additional fee types. If an additional fee 
type required to be disclosed pursuant to paragraph (b)(2)(ix)(A) of 
this section has more than two fee variations, or when providing a 
short form disclosure for multiple service plans pursuant to paragraph 
(b)(6)(iii)(B)(2) of this section, the financial institution must 
disclose the name of the additional fee type and the highest fee amount 
in accordance with paragraph (b)(3)(i) of this section; for disclosures 
other than for multiple service plans, it may, but is not required to, 
consolidate the fee variations into two categories and disclose the 
names of those two fee variation categories and the fee amounts in a 
format substantially similar to that used to disclose the two-tier fees 
required by paragraphs (b)(2)(v) and (vi) of this section and in 
accordance with paragraphs (b)(3)(i) and (b)(7)(ii)(B)(1) of this 
section. Except when providing a short form disclosure for multiple 
service plans pursuant to paragraph (b)(6)(iii)(B)(2) of this section, 
if an additional fee type has two fee variations, the financial 
institution must disclose the name of the additional fee type together 
with the names of the two fee variations and the fee amounts in a 
format substantially similar to that used to disclose the two-tier fees 
required by paragraphs (b)(2)(v) and (vi) of this section and in 
accordance with paragraph (b)(7)(ii)(B)(1) of this section. If a 
financial institution only charges one fee under a particular fee type, 
the financial institution must disclose the name of the additional fee 
type and the fee amount; it may, but is not required to, disclose also 
the name of the one fee variation for which the fee amount is charged, 
in a format substantially similar to that used to disclose the two-tier 
fees required by paragraphs (b)(2)(v) and (vi) of this section, except 
that the financial institution would disclose only the one fee 
variation name and fee amount instead of two.
* * * * *
    (6) * * *
    (i) * * *
    (B) Electronic disclosures. Unless provided in written form prior 
to acquisition pursuant to paragraph (b)(1)(i) of this section, the 
disclosures required by paragraph (b) of this section must be provided 
in electronic form when a consumer acquires a prepaid account through 
electronic means, including via a website or mobile application, and 
must be viewable across all screen sizes. The long form disclosure must 
be provided electronically through a website when a financial 
institution is offering prepaid accounts at a retail location pursuant 
to the retail location exception in paragraph (b)(1)(ii) of this 
section. Electronic disclosures must be provided in a manner which is 
reasonably expected to be accessible in light of how a consumer is 
acquiring the prepaid account, in a responsive form, and using machine-
readable text that is accessible via Web browsers or mobile 
applications, as applicable, and via screen readers. Electronic 
disclosures provided pursuant to paragraph (b) of this section need not 
meet the consumer consent and other applicable provisions of the 
Electronic Signatures in Global and National Commerce Act (E-Sign Act) 
(15 U.S.C. 7001 et seq.).
    (C) Oral disclosures. Unless provided in written form prior to 
acquisition pursuant to paragraph (b)(1)(i) of this section, 
disclosures required by paragraphs (b)(2) and (5) of this section must 
be provided orally when a consumer acquires a prepaid account orally by 
telephone pursuant to the exception in paragraph (b)(1)(iii) of this 
section. For prepaid accounts acquired in retail locations or orally by 
telephone, the disclosure required by paragraph (b)(4) of this section 
provided by telephone pursuant to paragraph (b)(1)(ii)(C) or 
(b)(1)(iii)(B) of this section also must be made orally.
* * * * *
    (7) * * *
    (i) * * *
    (B) Long form disclosure. The information required by paragraph 
(b)(4)(i) of this section must be located in the first line of the long 
form disclosure. The information required by paragraph (b)(4)(ii) of 
this section must be generally grouped together and organized under 
subheadings by the categories of function for which a financial 
institution may impose the fee. Text describing the conditions under 
which a fee may be imposed must appear in the table required by 
paragraph (b)(6)(iii)(A) of this section in close proximity to the fee 
amount. The statements in the long form disclosure required by 
paragraphs (b)(4)(iii) through (vi) of this section must be generally 
grouped together, provided in that order, and appear below the 
information required by paragraph (b)(4)(ii) of this section. If, 
pursuant to paragraph (b)(4)(vii) of this section, the financial 
institution includes the disclosures described in Regulation Z, 12 CFR 
1026.60(e)(1), such disclosures must appear below the statements

[[Page 6419]]

required by paragraph (b)(4)(vi) of this section.
* * * * *
    (9) * * *
    (i) * * *
    (C) The financial institution provides a means for the consumer to 
acquire a prepaid account by telephone or electronically principally in 
a foreign language. However, foreign language pre-acquisition 
disclosures are not required for payroll card accounts and government 
benefit accounts where the foreign language is offered by telephone via 
a real-time language interpretation service provided by a third party 
or by the employer or government agency on an informal or ad hoc basis 
as an accommodation to prospective payroll card account or government 
benefit account holders.
* * * * *
    (d) * * *
    (1) * * *
    (ii) Error resolution. A notice concerning error resolution that is 
substantially similar to the notice contained in paragraph (b) of 
appendix A-7 of this part, in place of the notice required by Sec.  
1005.7(b)(10). Alternatively, for prepaid account programs for which 
the financial institution does not have a consumer identification and 
verification process, the financial institution must describe its error 
resolution process and limitations on consumers' liability for 
unauthorized transfers or, if none, state that there are no such 
protections.
* * * * *
    (e) * * *
    (3) Limitations on liability and error resolution for unverified 
accounts. (i) For prepaid accounts that are not payroll card accounts 
or government benefit accounts, a financial institution is not required 
to comply with the liability limits and error resolution requirements 
in Sec. Sec.  1005.6 and 1005.11 for any prepaid account for which it 
has not successfully completed its consumer identification and 
verification process.
    (ii) For purposes of paragraph (e)(3)(i) of this section, a 
financial institution has not successfully completed its consumer 
identification and verification process where:
    (A) The financial institution has not concluded its consumer 
identification and verification process with respect to a particular 
prepaid account, provided that it has disclosed to the consumer the 
risks of not registering and verifying the account using a notice that 
is substantially similar to the model notice contained in paragraph (c) 
of appendix A-7 of this part.
    (B) The financial institution has concluded its consumer 
identification and verification process with respect to a particular 
prepaid account, but could not verify the identity of the consumer, 
provided that it has disclosed to the consumer the risks of not 
registering and verifying 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
    (C) The financial institution does not have a consumer 
identification and verification process for the prepaid account 
program, provided that it has made the alternative disclosure described 
in paragraph (d)(1)(ii) of this section and complies with the process 
it has disclosed.
    (iii) Resolution of errors following successful verification. Once 
a financial institution successfully completes its consumer 
identification and verification process with respect to a prepaid 
account, the financial institution must limit the consumer's liability 
for unauthorized transfers and resolve errors that occur following 
verification in accordance with Sec.  1005.6 or Sec.  1005.11, or the 
modified timing requirements in this paragraph (e), as applicable.
* * * * *

0
5. Amend Sec.  1005.19 by:
0
a. Removing ``names of other relevant parties'' and adding in its place 
``list of names of other relevant parties'' in paragraph (b)(1)(i).
0
b. Removing ``(b)(2)'' and adding in its place ``(b)(2)(i)'' in 
paragraph (b)(1)(iii).
0
c. Revising paragraphs (b)(2) and (b)(6)(ii) and (iii).
0
d. Removing ``(b)(2)'' and adding in its place ``(b)(2)(i)'' in 
paragraphs (c)(3) and (d)(2)(v).
0
e. Revising paragraph (f).
    The revisions read as follows:


Sec.  1005.19  Internet posting of prepaid account agreements.

* * * * *
    (b) * * *
    (2) Amended agreements--(i) Submission of amended agreements 
generally. If a prepaid account agreement previously submitted to the 
Bureau is amended, the issuer must submit the entire amended agreement 
to the Bureau, in the form and manner specified by the Bureau, no later 
than 30 days after the change becomes effective. If other identifying 
information about the issuer and its submitted agreements pursuant to 
paragraph (b)(1)(i) of this section previously submitted to the Bureau 
is amended, the issuer must submit updated information to the Bureau, 
in the form and manner specified by the Bureau, no later than 30 days 
after the change becomes effective.
    (ii) Submission of updated list of names of other relevant parties. 
Notwithstanding paragraph (b)(2)(i) of this section, an issuer may 
delay submitting a change to the list of names of other relevant 
parties to a particular agreement until the earlier of:
    (A) Such time as the issuer is otherwise submitting an amended 
agreement or changes to other identifying information about the issuer 
and its submitted agreements pursuant to paragraph (b)(1)(i) of this 
section; or
    (B) May 1 of each year, for any updates to the list of names of 
other relevant parties for that agreement that occurred between the 
issuer's last submission of relevant party information and April 1 of 
that year.
* * * * *
    (6) * * *
    (ii) Fee information. Fee information must be set forth either in 
the prepaid account agreement or in addenda to that agreement that 
attach either or both the short form disclosure for the prepaid account 
pursuant to Sec.  1005.18(b)(2) and the fee information and statements 
required to be disclosed in the long form disclosure for the prepaid 
account pursuant to Sec.  1005.18(b)(4). The agreement or addenda 
thereto must contain all of the fee information, as defined by 
paragraph (a)(3) of this section.
    (iii) Integrated agreement. An issuer may not provide provisions of 
the agreement or fee information to the Bureau in the form of change-
in-terms notices or riders (other than the optional fee information 
addenda described in paragraph (b)(6)(ii) of this section). Changes in 
provisions or fee information must be integrated into the text of the 
agreement, or the optional fee information addenda, as appropriate.
* * * * *
    (f) Initial submission date. The requirements of this section apply 
to prepaid accounts beginning on April 1, 2019. An issuer must submit 
to the Bureau no later than May 1, 2019 all prepaid account agreements 
it offers as of April 1, 2019.

0
6. In appendix A to part 1005, revise Model Clause A-7 to read as 
follows:

Appendix A to Part 1005--Model Disclosure Clauses and Forms

* * * * *

A-7--Model Clauses for Financial Institutions Offering Prepaid Accounts 
(Sec.  1005.18(d) and (e)(3))

    (a) Disclosure by financial institutions of information about 
obtaining account information for prepaid accounts (Sec.  
1005.18(d)(1)(i)).
    You may obtain information about the amount of money you have 
remaining in

[[Page 6420]]

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.
    (b) Disclosure of error-resolution procedures for financial 
institutions that do not provide periodic statements (Sec.  
1005.18(d)(1)(ii) and (d)(2)).
    In Case of Errors or Questions About Your Prepaid Account 
Telephone us at [telephone number] or Write us at [address] [or 
email us at [email address]] as soon as you can, if you think an 
error has occurred in your prepaid account. We must allow you to 
report an error until 60 days after the earlier of the date you 
electronically access your account, if the error could be viewed in 
your electronic history, or the date we sent the FIRST written 
history on which the error appeared. You may request a written 
history of your transactions at any time by calling us at [telephone 
number] or writing us at [address]. You will need to tell us:
    Your name and [prepaid account] number.
    Why you believe there is an error, and the dollar amount 
involved.
    Approximately when the error took place.
    If you tell us orally, we may require that you send us your 
complaint or question in writing within 10 business days.
    We will determine whether an error occurred within 10 business 
days after we hear from you and will correct any error promptly. If 
we need more time, however, we may take up to 45 days to investigate 
your complaint or question. If we decide to do this, [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. [Keep reading to learn more about how to 
register your card.]
    For errors involving new accounts, point-of-sale, or foreign-
initiated transactions, we may take up to 90 days to investigate 
your complaint or question. For new accounts, we may take up to 20 
business days to credit your account for the amount you think is in 
error.
    We will tell you the results within three business days after 
completing our investigation. If we decide that there was no error, 
we will send you a written explanation.
    You may ask for copies of the documents that we used in our 
investigation.
    If you need more information about our error-resolution 
procedures, call us at [telephone number] [the telephone number 
shown above] [or visit [internet address]].
    (c) Warning regarding unverified prepaid accounts (Sec.  
1005.18(e)(3)).
    It is important to register your prepaid account as soon as 
possible. Until you register your account and we verify your 
identity, we are not required to research or resolve any errors 
regarding your account. To register your account, go to [internet 
address] or call us at [telephone number]. We will ask you for 
identifying information about yourself (including your full name, 
address, date of birth, and [Social Security Number] [government-
issued identification number]), so that we can verify your identity.
* * * * *

0
7. In supplement I to part 1005:
0
a. Under Section 1005.2--Definitions, revise Paragraph 2(b)(3).
0
b. Under Section 1005.18--Requirements for Financial Institutions 
Offering Prepaid Accounts, revise 18(a) Coverage, 18(b)(1) Timing of 
Disclosures, 18(b)(2) Short Form Disclosure Content, 18(b)(4) Long Form 
Disclosure Content, 18(b)(5) Disclosure Requirements Outside the Short 
Form Disclosure, 18(b)(6)(i) General, 18(b)(7)(ii) Prominence and Size, 
18(b)(9) Prepaid Accounts Acquired in Foreign Languages, 18(c) Access 
to Prepaid Account Information, 18(e) Modified Limitations on Liability 
and Error Resolution Requirements, and 18(h) Effective Date and Special 
Transition Rules for Disclosure Provisions.
0
c. Under Section 1005.19--Internet Posting of Prepaid Account 
Agreements:
0
i. Revise 19(a) Definitions, 19(b)(1) Submissions on a Rolling Basis, 
19(b)(2) Amended Agreements, and 19(b)(6) Form and Content of 
Agreements Submitted to the Bureau.
0
ii. Remove subsection 19(f) Effective Date.
    The revisions read as follows:

Supplement I to Part 1005--Official Interpretations

Section 1005.2--Definitions

* * * * *
2(b) Account
* * * * *
Paragraph 2(b)(3)
Paragraph 2(b)(3)(i)
    1. Debit card includes prepaid card. For purposes of subpart A of 
Regulation E, unless otherwise specified, the term debit card also 
includes a prepaid card.
    2. Certain employment-related cards not covered as payroll card 
accounts. The term ``payroll card account'' does not include an account 
used solely to disburse incentive-based payments (other than 
commissions which can represent the primary means through which a 
consumer is paid), such as bonuses, which are unlikely to be a 
consumer's primary source of salary or other compensation. The term 
also does not include an account used solely to make disbursements 
unrelated to compensation, such as petty cash reimbursements or travel 
per diem payments. Similarly, a payroll card account does not include 
an account that is used in isolated instances to which an employer 
typically does not make recurring payments, such as when providing 
final payments or in emergency situations when other payment methods 
are unavailable. While such accounts would not be payroll card 
accounts, such accounts could constitute prepaid accounts generally, 
provided the other conditions of the definition of that term in Sec.  
1005.2(b)(3) are satisfied. In addition, all transactions involving the 
transfer of funds to or from a payroll card account or prepaid account 
are covered by the regulation, even if a particular transaction 
involves payment of a bonus, other incentive-based payment, or 
reimbursement, or the transaction does not represent a transfer of 
wages, salary, or other employee compensation.
    3. Marketed or labeled as ``prepaid.'' The term ``marketed or 
labeled as `prepaid' '' means promoting or advertising an account using 
the term ``prepaid.'' For example, an account is marketed or labeled as 
prepaid if the term ``prepaid'' appears on the access device associated 
with the account or the access device's packaging materials, or on a 
display, advertisement, or other publication to promote purchase or use 
of the account. An account may be marketed or labeled as prepaid if the 
financial institution, 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.'' 
A product or service that is marketed or labeled as prepaid is not a 
``prepaid account'' pursuant to Sec.  1005.2(b)(3)(i)(C) if it does not 
otherwise meet the definition of account under Sec.  1005.2(b)(1).
    4. Issued on a prepaid basis. To be issued on a prepaid basis, a 
prepaid account must be loaded with funds when it is first provided to 
the consumer for use. For example, if a consumer purchases a prepaid 
account and provides funds that are loaded onto a card at the time of 
purchase, the prepaid account is issued on a prepaid basis.
    5. Capable of being loaded with funds. A prepaid account that is 
not issued on a prepaid basis but is capable of being loaded with funds 
thereafter includes a prepaid card issued to a consumer with a zero 
balance to which funds may be

[[Page 6421]]

loaded by the consumer or a third party subsequent to issuance.
    6. Product acting as a pass-through vehicle for funds. To satisfy 
Sec.  1005.2(b)(3)(i)(D), a prepaid account must be issued on a prepaid 
basis or be capable of being loaded with funds. This means that the 
prepaid account must be capable of holding funds, rather than merely 
acting as a pass-through vehicle. For example, if a product, such as a 
digital wallet, is only capable of storing a consumer's payment 
credentials for other accounts but is incapable of having funds stored 
on it, such a product is not a prepaid account. However, if a product 
allows a consumer to transfer funds, which can be stored before the 
consumer designates a destination for the funds, the product satisfies 
Sec.  1005.2(b)(3)(i)(D).
    7. Not required to be reloadable. Prepaid accounts need not be 
reloadable by the consumer or a third party.
    8. Primary function. To satisfy Sec.  1005.2(b)(3)(i)(D), an 
account's primary function must be to provide consumers with general 
transaction capability, which includes the general ability to use 
loaded funds to conduct transactions with multiple, unaffiliated 
merchants for goods or services, or at automated teller machines, or to 
conduct person-to-person transfers. This definition excludes accounts 
that provide such capability only incidentally. For example, the 
primary function of a brokerage account is to hold funds so that the 
consumer can conduct transactions through a licensed broker or firm, 
not to conduct transactions with multiple, unaffiliated merchants for 
good or services, or at automated teller machines, or to conduct 
person-to-person transfers. Similarly, the primary function of a 
savings account is to accrue interest on funds held in the account; 
such accounts restrict the extent to which the consumer can conduct 
general transactions and withdrawals. Accordingly, brokerage accounts 
and savings accounts do not satisfy Sec.  1005.2(b)(3)(i)(D), and thus 
are not prepaid accounts as defined by Sec.  1005.2(b)(3). The 
following examples provide additional guidance:
    i. An account's primary function is to enable a consumer to conduct 
transactions with multiple, unaffiliated merchants for goods or 
services, at automated teller machines, or to conduct person-to-person 
transfers, even if the account also enables a third party to disburse 
funds to a consumer. For example, a prepaid account that conveys tax 
refunds or insurance proceeds to a consumer meets the primary function 
test if the account can be used, e.g., to purchase goods or services at 
multiple, unaffiliated merchants.
    ii. Whether an account satisfies Sec.  1005.2(b)(3)(i)(D) is 
determined by reference to the account, not the access device 
associated with the account. An account satisfies Sec.  
1005.2(b)(3)(i)(D) even if the account's access device can be used for 
other purposes, for example, as a form of identification. Such accounts 
may include, for example, a prepaid account used to disburse student 
loan proceeds via a card device that can be used at unaffiliated 
merchants or to withdraw cash from an automated teller machine, even if 
that access device also acts as a student identification card.
    iii. Where multiple accounts are associated with the same access 
device, the primary function of each account is determined separately. 
One or more accounts can satisfy Sec.  1005.2(b)(3)(i)(D) even if other 
accounts associated with the same access device do not. For example, a 
student identification card may act as an access device associated with 
two separate accounts: An account used to conduct transactions with 
multiple, unaffiliated merchants for goods or services, and an account 
used to conduct closed-loop transactions on campus. The account used to 
conduct transactions with multiple, unaffiliated merchants for goods or 
services satisfies Sec.  1005.2(b)(3)(i)(D), even though the account 
used to conduct closed-loop transactions does not (and as such the 
latter is not a prepaid account as defined by Sec.  1005.2(b)(3)).
    iv. An account satisfies Sec.  1005.2(b)(3)(i)(D) if its primary 
function is to provide general transaction capability, even if an 
individual consumer does not in fact use it to conduct multiple 
transactions. For example, the fact that a consumer may choose to 
withdraw the entire account balance at an automated teller machine 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.
    v. An account whose primary function is other than to conduct 
transactions with multiple, unaffiliated merchants for goods or 
services, or at automated teller machines, or to conduct person-to-
person transfers, does not satisfy Sec.  1005.2(b)(3)(i)(D). Such 
accounts may include, for example, a product whose only function is to 
make a one-time transfer of funds into a separate prepaid account.
    9. Redeemable upon presentation at multiple, unaffiliated 
merchants. For guidance, see comments 20(a)(3)-1 and -2.
    10. Person-to-person transfers. A prepaid account whose primary 
function is to conduct person-to-person transfers is an account that 
allows a consumer to send funds by electronic fund transfer to another 
consumer or business. An account may qualify as a prepaid account if 
its primary function is person-to-person transfers even if it is 
neither redeemable upon presentation at multiple, unaffiliated 
merchants for goods or services, nor usable at automated teller 
machines. A transaction involving a store gift card would not be a 
person-to-person transfer if it could only be used to make payments to 
the merchant or affiliated group of merchants on whose behalf the card 
was issued.
Paragraph 2(b)(3)(ii)
    1. Excluded health care and employee benefit related prepaid 
products. For purposes of Sec.  1005.2(b)(3)(ii)(A), ``health savings 
account'' means a health savings account as defined in 26 U.S.C. 
223(d); ``flexible spending arrangement'' means a health benefits or a 
health flexible spending arrangement pursuant to 26 U.S.C. 125; 
``medical savings account'' means an Archer MSA as defined in 26 U.S.C. 
220(d); ``health reimbursement arrangement'' means a health 
reimbursement arrangement which is treated as employer-provided 
coverage under an accident or health plan for purposes of 26 U.S.C. 
106; ``dependent care assistance program'' means a dependent care 
assistance program pursuant to 26 U.S.C. 129; and ``transit or parking 
reimbursement arrangement'' means a qualified transportation fringe 
benefit provided by an employer pursuant to 26 U.S.C. 132.
    2. Excluded disaster relief funds. For purposes of Sec.  
1005.2(b)(3)(ii)(B), ``qualified disaster relief funds'' means funds 
made available through a qualified disaster relief program as defined 
in 26 U.S.C. 139(b).
    3. Marketed and labeled as a gift card or gift certificate. Section 
1005.2(b)(3)(ii)(D) excludes, among other things, reloadable general-
use prepaid cards that are both marketed and labeled as gift cards or 
gift certificates, whereas Sec.  1005.20(b)(2) excludes such products 
that are marketed or labeled as gift cards or gift certificates. 
Comment 20(b)(2)-2 describes, in part, a network-branded GPR card that 
is principally advertised as a less-costly alternative to a bank 
account but is promoted in a television, radio, newspaper, or internet 
advertisement, or on signage as ``the perfect gift'' during the holiday 
season.

[[Page 6422]]

For purposes of Sec.  1005.20, such a product would be considered 
marketed as a gift card or gift certificate because of this occasional 
holiday marketing activity. For purposes of Sec.  1005.2(b)(3)(ii)(D), 
however, such a product would not be considered to be both marketed and 
labeled as a gift card or gift certificate and thus would be covered by 
the definition of prepaid account.
    4. Loyalty, award, or promotional gift cards. Section 
1005.2(b)(3)(ii)(D)(3) excludes loyalty, award, or promotional gift 
cards as defined in Sec.  1005.20(a)(4); those cards are excluded from 
coverage under Sec.  1005.20 pursuant to Sec.  1005.20(b)(3). Section 
1005.2(b)(3)(ii)(D)(3) also excludes cards that satisfy the criteria in 
Sec.  1005.20(a)(4)(i) and (ii) and are excluded from coverage under 
Sec.  1005.20 pursuant to Sec.  1005.20(b)(4) because they are not 
marketed to the general public; such products are not required to set 
forth the disclosures enumerated in Sec.  1005.20(a)(4)(iii) in order 
to be excluded pursuant to Sec.  1005.2(b)(3)(ii)(D)(3).
* * * * *

Section 1005.18--Requirements for Financial Institutions Offering 
Prepaid Accounts

18(a) Coverage
    1. Issuance of access device. Consistent with Sec.  1005.5(a) and 
except as provided, as applicable, in Sec.  1005.5(b), a financial 
institution may issue an access device only in response to an oral or 
written request for the device, or as a renewal or substitute for an 
accepted access device. A consumer is deemed to request an access 
device for a payroll card account when the consumer chooses to receive 
salary or other compensation through a payroll card account. A consumer 
is deemed to request an access device for a prepaid account when, for 
example, the consumer acquires a prepaid account offered for sale at a 
retail location or applies for a prepaid account by telephone or 
online. If an access device for a prepaid account is provided on an 
unsolicited basis where the prepaid account is used for disbursing 
funds to a consumer, and the financial institution or third party 
making the disbursement does not offer any alternative means for the 
consumer to receive those funds in lieu of accepting the prepaid 
account, in order to satisfy Sec.  1005.5(b)(2), the financial 
institution must inform the consumer that the consumer has no other 
means by which to initially receive the funds in the prepaid account 
other than by accepting the access device, as well as the consequences 
of disposing of the access device.
    2. Application to employers and service providers. Typically, 
employers and third-party service providers do not meet the definition 
of a ``financial institution'' subject to the regulation because they 
neither hold prepaid accounts (including payroll card accounts) nor 
issue prepaid cards and agree with consumers to provide EFT services in 
connection with prepaid accounts. However, to the extent an employer or 
a service provider undertakes either of these functions, it would be 
deemed a financial institution under the regulation.
18(b) Pre-Acquisition Disclosure Requirements
* * * * *
18(b)(1) Timing of Disclosures
18(b)(1)(i) General
    1. Disclosing the short form and long form before acquisition. 
Section 1005.18(b)(1)(i) generally requires delivery of a short form 
disclosure as described in Sec.  1005.18(b)(2), accompanied by the 
information required to be disclosed by Sec.  1005.18(b)(5), and a long 
form disclosure as described in Sec.  1005.18(b)(4) before a consumer 
acquires a prepaid account.
    i. For purposes of Sec.  1005.18(b)(1)(i), a consumer acquires a 
prepaid account by purchasing, opening or choosing to be paid via a 
prepaid account, as illustrated by the following examples:
    A. A consumer inquires about obtaining a prepaid account at a 
branch location of a bank. A consumer then receives the disclosures 
required by Sec.  1005.18(b). After receiving the disclosures, a 
consumer then opens a prepaid account with the bank. This consumer 
received the short form and long form pre-acquisition in accordance 
with Sec.  1005.18(b)(1)(i).
    B. A consumer learns that he or she can receive wages via a payroll 
card account, at which time the consumer is provided with a payroll 
card and the disclosures required by Sec.  1005.18(b) to review. The 
consumer then chooses to receive wages via a payroll card account. 
These disclosures were provided pre-acquisition in compliance with 
Sec.  1005.18(b)(1)(i). By contrast, if a consumer receives the 
disclosures required by Sec.  1005.18(b) to review at the end of the 
first pay period, after the consumer received the first payroll payment 
on the payroll card, these disclosures were provided to a consumer 
post-acquisition, and thus not provided in compliance with Sec.  
1005.18(b)(1)(i).
    ii. Section 1005.18(b)(1)(i) permits delivery of the disclosures 
required by Sec.  1005.18(b) at the time the consumer receives the 
prepaid account, rather than prior to acquisition, for prepaid accounts 
that are used for disbursing funds to consumers when the financial 
institution or third party making the disbursement does not offer any 
alternative means for the consumer to receive those funds in lieu of 
accepting the prepaid account. For example, a utility company refunds 
consumers' initial deposits for its utility services via prepaid 
accounts delivered to consumers by mail. Neither the utility company 
nor the financial institution that issues the prepaid accounts offer 
another means for a consumer to receive that refund other than by 
accepting the prepaid account. In this case, the financial institution 
may provide the disclosures required by Sec.  1005.18(b) together with 
the prepaid account (e.g., in the same envelope as the prepaid 
account); it is not required to deliver the disclosures separately 
prior to delivery of the prepaid account.
    2. Disclosures provided electronically. Disclosures required by 
Sec.  1005.18(b) may be provided before or after a consumer has 
initiated the process of acquiring a prepaid account electronically. 
When the disclosures required by Sec.  1005.18(b) are presented after a 
consumer has initiated the process for acquiring a prepaid account 
online or via a mobile device, but before a consumer chooses to accept 
the prepaid account, such disclosures are also made pre-acquisition in 
accordance with Sec.  1005.18(b)(1)(i). The disclosures required by 
Sec.  1005.18(b) that are provided electronically when a consumer 
acquires a prepaid account electronically are not considered to be 
given pre-acquisition unless a consumer must view the web page 
containing the disclosures before choosing to accept the prepaid 
account. The following examples illustrate several methods by which a 
financial institution may present Sec.  1005.18(b) disclosures before a 
consumer acquires a prepaid account electronically in compliance with 
Sec.  1005.18(b)(1)(i):
    i. A financial institution presents the short form disclosure 
required by Sec.  1005.18(b)(2), together with the information required 
by Sec.  1005.18(b)(5), and the long form disclosure required by Sec.  
1005.18(b)(4) on the same web page. A consumer must view the web page 
before choosing to accept the prepaid account.
    ii. A financial institution presents the short form disclosure 
required by

[[Page 6423]]

Sec.  1005.18(b)(2), together with the information required by Sec.  
1005.18(b)(5), on a web page. The financial institution includes, after 
the short form disclosure or as part of the statement required by Sec.  
1005.18(b)(2)(xiii), a link that directs the consumer to a separate web 
page containing the long form disclosure required by Sec.  
1005.18(b)(4). The consumer must view the web page containing the long 
form disclosure before choosing to accept the prepaid account.
    iii. A financial institution presents on a web page the short form 
disclosure required by Sec.  1005.18(b)(2), together with the 
information required by Sec.  1005.18(b)(5), followed by the initial 
disclosures required by Sec.  1005.7(b), which contains the long form 
disclosure required by Sec.  1005.18(b)(4), in accordance with Sec.  
1005.18(f)(1). The financial institution includes, after the short form 
disclosure or as part of the statement required by Sec.  
1005.18(b)(2)(xiii), a link that directs the consumer to the section of 
the initial disclosures containing the long form disclosure pursuant to 
Sec.  1005.18(b)(4). A consumer must view this web page before choosing 
to accept the prepaid account.
18(b)(1)(ii) Disclosures for Prepaid Accounts Acquired in Retail 
Locations
    1. Retail locations. Section 1005.18(b)(1)(ii) sets forth an 
alternative timing regime for pre-acquisition disclosures for prepaid 
accounts acquired in person at retail locations. For purposes of Sec.  
1005.18(b)(1)(ii), a retail location is 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 financial institution that issues 
the prepaid account. A branch of a financial institution that offers 
its own prepaid accounts is not a retail location with respect to those 
accounts and, thus, both the short form and the long form disclosure 
must be provided pre-acquisition pursuant to the timing requirement set 
forth in Sec.  1005.18(b)(1)(i).
    2. Disclosures provided inside prepaid account access device 
packaging material. Except when providing the long form disclosure 
post-acquisition in accordance with the retail location exception set 
forth in Sec.  1005.18(b)(1)(ii), the disclosures required by Sec.  
1005.18(b)(2), (4), and (5) must be provided to a consumer pre-
acquisition in compliance with Sec.  1005.18(b)(1)(i). A short form 
disclosure is not considered to have been provided pre-acquisition if, 
for example, it is inside the packaging material accompanying a prepaid 
account access device such that the consumer cannot see or access the 
disclosure before acquiring the prepaid account.
    3. Consumers working in retail locations. A payroll card account 
offered to consumers working in retail locations is not eligible for 
the retail location exception in Sec.  1005.18(b)(1)(ii); thus, a 
consumer employee must receive both the short form and long form 
disclosures for the payroll card account pre-acquisition pursuant to 
the timing requirement set forth in Sec.  1005.18(b)(1)(i).
    4. Providing the long form disclosure by telephone and website 
pursuant to the retail location exception. Pursuant to Sec.  
1005.18(b)(1)(ii), a financial institution may provide the long form 
disclosure described in Sec.  1005.18(b)(4) after a consumer acquires a 
prepaid account in a retail location, if the conditions set forth in 
Sec.  1005.18(b)(1)(ii)(A) through (D) are met. Pursuant to Sec.  
1005.18(b)(1)(ii)(C), a financial institution must make the long form 
disclosure accessible to consumers by telephone and via a website when 
not providing a written version of the long form disclosure pre-
acquisition. A financial institution may, for example, provide the long 
form disclosure by telephone using an interactive voice response or 
similar system or by using a customer service agent. A financial 
institution that has not obtained the consumer's contact information is 
not required to comply with the requirements set forth in Sec.  
1005.18(b)(1)(ii)(D). A financial institution is able to contact the 
consumer when, for example, it has the consumer's mailing address or 
email address.
18(b)(1)(iii) Disclosures for Prepaid Accounts Acquired Orally by 
Telephone
    1. Prepaid accounts acquired by telephone. Section 
1005.18(b)(1)(iii) sets forth requirements for prepaid accounts 
acquired orally by telephone. For purposes of Sec.  1005.18(b)(1)(iii), 
a prepaid account is considered to have been acquired orally by 
telephone when a consumer speaks to a customer service agent or 
communicates with an automated system, such as an interactive voice 
response system, to provide personally identifiable information to 
acquire a prepaid account. Prepaid accounts acquired using a mobile 
device without speaking to a customer service agent or communicating 
with an automated system are not considered to have been acquired 
orally by telephone.
18(b)(2) Short Form Disclosure Content
    1. Disclosures that are not applicable or are free. The short form 
disclosures required by Sec.  1005.18(b)(2) must always be provided 
prior to prepaid account acquisition, even when a particular feature is 
free or is not applicable to a specific prepaid account product. For 
example, if a financial institution does not charge a fee to a consumer 
for withdrawing money at an automated teller machine in the financial 
institution's network or an affiliated network, which is required to be 
disclosed pursuant to Sec.  1005.18(b)(2)(iii), the financial 
institution would list ``ATM withdrawal in-network'' on the short form 
disclosure and list ``$0'' as the fee. If, however, the financial 
institution does not have its own network or an affiliated network from 
which a consumer can withdraw money via automated teller machine, the 
financial institution would list ``ATM withdrawal in-network'' on the 
short form disclosure but instead of disclosing a fee amount, state 
``N/A.'' (The financial institution must still disclose any fee it 
charges for out-of-network ATM withdrawals.)
    2. Prohibition on disclosure of finance charges. Pursuant to Sec.  
1005.18(b)(3)(vi), a financial institution may not include in the short 
form disclosure finance charges as described in Regulation Z, 12 CFR 
1026.4(b)(11), imposed in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit card as defined in Sec.  
1026.61. See also comment 18(b)(3)(vi)-1.
18(b)(2)(i) Periodic Fee
    1. Periodic fee variation. If the amount of a fee disclosed on the 
short form could vary, the financial institution must disclose in the 
short form the information required by Sec.  1005.18(b)(3)(i). If the 
amount of the periodic fee could vary, the financial institution may 
opt instead to use an alternative disclosure pursuant to Sec.  
1005.18(b)(3)(ii). See comments 18(b)(3)(i)-1 and 18(b)(3)(ii)-1.
18(b)(2)(iii) ATM Withdrawal Fees
    1. International ATM withdrawal fees. Pursuant to Sec.  
1005.18(b)(2)(iii), a financial institution must disclose the fees 
imposed when a consumer uses an automated teller machine to initiate a 
withdrawal of cash in the United States from the prepaid account, both 
within and outside of the financial institution's network or a network 
affiliated with the financial institution. A financial institution may 
not disclose its fee (if any) for using an automated teller

[[Page 6424]]

machine to initiate a withdrawal of cash in a foreign country in the 
disclosure required by Sec.  1005.18(b)(2)(iii), although it may be 
required to disclose that fee as an additional fee type pursuant to 
Sec.  1005.18(b)(2)(ix).
18(b)(2)(iv) Cash Reload Fee
    1. Total of all charges. Pursuant to Sec.  1005.18(b)(2)(iv), a 
financial institution must disclose the total of all charges imposed 
when a consumer reloads cash into a prepaid account, including charges 
imposed by the financial institution as well as any charges that may be 
imposed by third parties for the cash reload. The cash reload fee 
includes the cost of adding cash to the prepaid account at a point-of-
sale terminal, the cost of purchasing an additional card or other 
device on which cash is loaded and then transferred into the prepaid 
account, or any other method a consumer may use to reload cash into the 
prepaid account. For example, a financial institution does not have its 
own proprietary cash reload network and instead contracts with a third-
party reload network for this service. The financial institution itself 
does not charge any fee related to cash reloads but the third-party 
reload network charges a fee of $3.95 per cash reload. The financial 
institution must disclose the cash reload fee as $3.95. If the 
financial institution offers more than one method to reload cash into 
the prepaid account, Sec.  1005.18(b)(3)(i) requires disclosure of the 
highest cash reload fee. For example, a financial institution contracts 
with two third-party cash reload networks; one third party charges 
$3.95 for a point-of-sale reload and the other third party charges 
$2.95 for purchase of a reload pack. In addition to the third-party 
cash reload charge, the financial institution charges a $1 fee for 
every cash reload. The financial institution must disclose the cash 
reload fee on the short form as $4.95, that is, the highest third-party 
fee plus the financial institution's $1 fee. See comment 18(b)(3)(v)-1 
for additional guidance regarding third-party fees for cash reloads.
    2. Cash deposit fee. If a financial institution does not permit 
cash reloads via a third-party reload network but instead permits cash 
deposits, for example, in a bank branch, the term ``cash deposit'' may 
be substituted for ``cash reload.''
18(b)(2)(v) ATM Balance Inquiry Fees
    1. International ATM balance inquiry fees. Pursuant to Sec.  
1005.18(b)(2)(v), a financial institution must disclose the fees 
imposed when a consumer uses an automated teller machine to check the 
balance of the prepaid account in the United States, both within and 
outside of the financial institution's network or a network affiliated 
with the financial institution. A financial institution may not 
disclose its fee (if any) for using an automated teller machine to 
check the balance of the prepaid account in a foreign country in the 
disclosure required by Sec.  1005.18(b)(2)(v), although it may be 
required to disclose that fee as an additional fee type pursuant to 
Sec.  1005.18(b)(2)(ix).
18(b)(2)(vii) Inactivity Fee
    1. Inactivity fee conditions. Section 1005.18(b)(2)(vii) requires 
disclosure of any fee for non-use, dormancy, or inactivity of the 
prepaid account as well as the conditions that trigger the financial 
institution to impose that fee. For example, a financial institution 
that imposes an inactivity fee of $1 per month after 12 months without 
any transactions on the prepaid account would disclose on the short 
form ``Inactivity (after 12 months with no transactions)'' and ``$1.00 
per month.''
18(b)(2)(viii) Statements Regarding Additional Fee Types
18(b)(2)(viii)(A) Statement Regarding Number of Additional Fee Types 
Charged
    1. Fee types counted in total number of additional fee types. 
Section 1005.18(b)(2)(viii)(A) requires a statement disclosing the 
number of additional fee types the financial institution may charge 
consumers with respect to the prepaid account, using the following 
clause or a substantially similar clause: ``We charge [x] other types 
of fees.'' The number of additional fee types disclosed must reflect 
the total number of fee types under which the financial institution may 
charge fees, excluding fees required to be disclosed pursuant to Sec.  
1005.18(b)(2)(i) through (vii) and (b)(5) and any finance charges as 
described in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection 
with a covered separate credit feature accessible by a hybrid prepaid-
credit card as defined in 12 CFR 1026.61. The following clarify which 
fee types to include in the total number of additional fee types:
    i. Fee types excluded from the number of additional fee types. The 
number of additional fee types required to be disclosed pursuant to 
Sec.  1005.18(b)(2)(viii)(A) does not include the fees otherwise 
required to be disclosed in the short form pursuant to Sec.  
1005.18(b)(2)(i) through (vii), nor any purchase fee or activation fee 
required to be disclosed outside the short form pursuant to Sec.  
1005.18(b)(5). It also does not include any finance charges as 
described in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection 
with a credit feature defined in 12 CFR 1026.61. The number of 
additional fee types includes only fee types under which the financial 
institution may charge fees; accordingly, third-party fees are not 
included unless they are imposed for services performed on behalf of 
the financial institution. In addition, the number of additional fee 
types includes only fee types the financial institution may charge 
consumers with respect to the prepaid account; accordingly, additional 
fee types does not include other revenue sources such as interchange 
fees or fees paid by employers for payroll card programs, government 
agencies for government benefit programs, or other entities sponsoring 
prepaid account programs for financial disbursements.
    ii. Fee types counted in the number of additional fee types. Fee 
types that bear a relationship to, but are separate from, the static 
fee types disclosed in the short form must be counted as additional 
fees for purposes of Sec.  1005.18(b)(2)(viii). For example, the ATM 
withdrawal and ATM balance inquiry fee types required to be disclosed 
respectively by Sec.  1005.18(b)(2)(iii) and (v) that are excluded from 
the number of additional fee types pursuant to Sec.  
1005.18(b)(2)(viii) do not include such services outside of the United 
States. Thus, any international ATM fees charged by the financial 
institution for ATM withdrawal or balance inquiries must each be 
counted in the total number of additional fee types. Similarly, any 
fees for reloading funds into a prepaid account in a form other than 
cash (such as electronic reload and check reload, as described in 
comment 18(b)(2)(viii)(A)-2) must be counted in the total number of 
additional fee types because Sec.  1005.18(b)(2)(iv) is limited to cash 
reloads. Also, additional fee types disclosed in the short form 
pursuant to Sec.  1005.18(b)(2)(ix) must be counted in the total number 
of additional fee types.
    2. Examples of fee types and fee variations. The term fee type, as 
used in Sec.  1005.18(b)(2)(viii) and (ix), is a general category under 
which a financial institution charges fees to consumers. A financial 
institution may charge only one fee within a particular fee type, or 
may charge two or more variations of fees within the same fee type. The 
following is a list of examples of fee types a financial institution 
may use when determining both the number of additional fee types 
charged pursuant to Sec.  1005.18(b)(2)(viii)(A) and any additional fee 
types to disclose pursuant

[[Page 6425]]

to Sec.  1005.18(b)(2)(ix). A financial institution may create an 
appropriate name for other additional fee types.
    i. Fee types related to reloads of funds. Fee types for reloading 
funds into a prepaid account. Fees for cash reloads are required to be 
disclosed in the short form pursuant to Sec.  1005.18(b)(2)(iv) and 
that such fees are not counted in the total number of additional fee 
types or disclosed as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Fee types for other methods to reload funds, such as 
Electronic reload or Check reload, would be counted in the total number 
of additional fee types and may be required to be disclosed as 
additional fee types pursuant to Sec.  1005.18(b)(2)(ix).
    A. Electronic reload. Fees for reloading a prepaid account through 
electronic methods. Fee variations within this fee type may include 
fees for transferring funds from a consumer's bank account via ACH, 
reloads conducted using a debit card or credit card, and for incoming 
wire transfers.
    B. Check reload. Fees for reloading a prepaid account using checks. 
Fee variations within this fee type may include fees for depositing 
checks at an ATM, depositing checks with a teller at the financial 
institution's branch location, mailing checks to the financial 
institution for deposit, and depositing checks using remote deposit 
capture.
    ii. Fee types related to withdrawals of funds. Fee types for 
withdrawing funds from a prepaid account. Per purchase fees and ATM 
withdrawal fees within the United States are fee types required to be 
disclosed in the short form respectively pursuant to Sec.  
1005.18(b)(2)(ii) and (iii) and thus such fees are not counted in the 
total number of additional fee types or disclosed as an additional fee 
type pursuant to Sec.  1005.18(b)(2)(ix). Fee types for other methods 
to withdraw funds, such as Electronic withdrawal, Teller withdrawal, 
Cash back at point of sale (POS), and Account closure would be counted 
in the total of additional fee types and may be required to be 
disclosed as additional fee types pursuant to Sec.  1005.18(b)(2)(ix).
    A. Electronic withdrawal. Fees for withdrawing funds from a prepaid 
account through electronic methods other than an ATM. Fee variations 
within this fee type may include fees for transferring funds from the 
prepaid account to a consumer's bank account or other destination.
    B. Teller withdrawal. Fees for withdrawing funds from a prepaid 
account in person with a teller at a bank or credit union. Fee 
variations within this fee type may include fees for withdrawing funds, 
whether at the financial institution's own branch locations or at 
another bank or credit union.
    C. Cash back at POS. Fees for withdrawing cash from a prepaid 
account via cash back at a merchant's point-of-sale terminal.
    D. Account closure. Fees for closing out a prepaid account, such as 
for a check refund. Fee variations within this fee type may include 
fees for regular and expedited delivery of close-out funds.
    iii. Fee types related to international transactions. Fee types for 
international transactions and ATM activity.
    A. International ATM withdrawal. Fees for withdrawing funds at an 
ATM outside the United States. This fee type does not include fees for 
ATM withdrawals in the United States, as such fees are required to be 
disclosed in the short form pursuant to Sec.  1005.18(b)(2)(iii).
    B. International ATM balance inquiry. Fees for balance inquiries at 
an ATM outside the United States. This fee type does not include fees 
for ATM balance inquiries in the United States, as such fees are 
required to be disclosed in the short form pursuant to Sec.  
1005.18(b)(2)(v).
    C. International transaction (excluding ATM withdrawal and balance 
inquiry). Fees for transactions outside the United States. Fee 
variations within this fee type may include fees for currency 
conversion, foreign exchange processing, and other charges for 
transactions outside of the United States.
    iv. Bill payment. Fees for bill payment services. Fee variations 
within this fee type may include fees for ACH bill payment, paper check 
bill payment, check cancellation, and expedited delivery of paper 
check.
    v. Person-to-person or card-to-card transfer of funds. Fees for 
transferring funds from one prepaid account to another prepaid account. 
Fee variations within this fee type may include fees for transferring 
funds to another prepaid account within or outside of a specified 
prepaid account program, transferring funds to another cardholder 
within the United States or outside the United States, and expedited 
transfer of funds.
    vi. Paper checks. Fees for providing paper checks that draw on the 
prepaid account. Fee variations within this fee type may include fees 
for providing checks and associated shipping costs. This does not 
include checks issued as part of a bill pay service, which are 
addressed in comment 18(b)(2)(viii)(A)-2.iv above.
    vii. Stop payment. Fees for stopping payment of a preauthorized 
transfer of funds.
    viii. Fee types related to card services. Fee types for card 
services.
    A. Card replacement. Fees for replacing or reissuing a prepaid card 
that has been lost, stolen, damaged, or that has expired. Fee 
variations within this fee types may include fees for replacing the 
card, regular or expedited delivery of the replacement card, and 
international card replacement.
    B. Secondary card. Fees for issuing an additional access device 
assigned to a particular prepaid account.
    C. Personalized card. Fees for customizing or personalizing a 
prepaid card.
    ix. Legal. Fees for legal process. Fee variations within this fee 
type may include fees for garnishments, attachments, levies, and other 
court or administrative orders against a prepaid account.
    3. Multiple service plans. Pursuant to Sec.  1005.18(b)(2)(vi), a 
financial institution using the multiple service plan short form 
disclosure pursuant to Sec.  1005.18(b)(6)(iii)(B)(2) must disclose 
only the fee for calling customer service via a live agent. Thus, 
pursuant to Sec.  1005.18(b)(2)(viii), any charge for calling customer 
service via an interactive voice response system must be counted in the 
total number of additional fee types.
    4. Consistency in additional fee type categorization. A financial 
institution must use the same categorization of fee types in the number 
of additional fee types disclosed pursuant to Sec.  1005.18(b)(2)(viii) 
and in its determination of which additional fee types to disclose 
pursuant to Sec.  1005.18(b)(2)(ix).
18(b)(2)(viii)(B) Statement Directing Consumers to Disclosure of 
Additional Fee Types
    1. Statement clauses. Section 1005.18(b)(2)(viii)(B) requires, if a 
financial institution makes a disclosure of additional fee types 
pursuant to Sec.  1005.18(b)(2)(ix), it must include in the short form 
a statement directing consumers to that disclosure, located after but 
on the same line of text as the statement regarding the number of 
additional fee types required by Sec.  1005.18(b)(2)(viii)(A), using 
the following clause or a substantially similar clause: ``Here are some 
of them:''. A financial institution that makes no disclosure pursuant 
to Sec.  1005.18(b)(2)(ix) may not include a disclosure pursuant to 
Sec.  1005.18(b)(2)(viii)(B). The following examples provide guidance 
regarding

[[Page 6426]]

substantially similar clauses a financial institution may use in 
certain circumstances to make its disclosures under Sec.  
1005.18(b)(2)(viii)(A) and (B):
    i. A financial institution that has one additional fee type and 
discloses that additional fee type pursuant to Sec.  1005.18(b)(2)(ix) 
might provide the statements required by Sec.  1005.18(b)(2)(viii)(A) 
and (B) together as: ``We charge 1 other type of fee. It is:''.
    ii. A financial institution that has five additional fee types and 
discloses one of those additional fee types pursuant to Sec.  
1005.18(b)(2)(ix) might provide the statements required by Sec.  
1005.18(b)(2)(viii)(A) and (B) together as: ``We charge 5 other types 
of fees. Here is 1 of them:''.
    iii. A financial institution that has two additional fee types and 
discloses both of those fee types pursuant to Sec.  1005.18(b)(2)(ix) 
might provide the statement required by Sec.  1005.18(b)(2)(viii)(A) 
and (B) together as: ``We charge 2 other types of fees. They are:''.
18(b)(2)(ix) Disclosure of Additional Fee Types
18(b)(2)(ix)(A) Determination of Which Additional Fee Types To Disclose
    1. Number of fee types to disclose. Section 1005.18(b)(2)(ix)(A) 
requires disclosure of the two fee types that generate the highest 
revenue from consumers for the prepaid account program or across 
prepaid account programs that share the same fee schedule during the 
time period provided in Sec.  1005.18(b)(2)(ix)(D) and (E), excluding 
the categories set forth in Sec.  1005.18(b)(2)(ix)(A)(1) through (3). 
See comment 18(b)(2)(viii)(A)-2 for guidance on and examples of fee 
types. If a prepaid account program has two fee types that satisfy the 
criteria in Sec.  1005.18(b)(2)(ix)(A), it must disclose both fees. If 
a prepaid account program has three or more fee types that potentially 
satisfy the criteria in Sec.  1005.18(b)(2)(ix)(A), the financial 
institution must disclose only the two fee types that generate the 
highest revenue from consumers. See comment 18(b)(2)(ix)(B)-1 for 
guidance regarding the disclosure of additional fee types for a prepaid 
account with fewer than two fee types that satisfy the criteria in 
Sec.  1005.18(b)(2)(ix)(A).
    2. Abbreviations. Commonly accepted or readily understandable 
abbreviations may be used as needed for additional fee types and fee 
variations disclosed pursuant to Sec.  1005.18(b)(2)(ix). For example, 
to accommodate on one line in the short form disclosure the additional 
fee types ``international ATM balance inquiry'' or ``person-to-person 
transfer of funds,'' with or without fee variations, a financial 
institution may choose to abbreviate the fee type name as ``Int'l ATM 
inquiry'' or ``P2P transfer.''
    3. Revenue from consumers. The revenue calculation for the 
disclosure of additional fee types pursuant to Sec.  
1005.18(b)(2)(ix)(A) is based on fee types that the financial 
institution may charge consumers with respect to the prepaid account. 
The calculation excludes other revenue sources such as revenue 
generated from interchange fees and fees paid by employers for payroll 
card programs, government agencies for government benefit programs, and 
other entities sponsoring prepaid account programs for financial 
disbursements. It also excludes third-party fees, unless they are 
imposed for services performed on behalf of the financial institution.
    4. Assessing revenue within and across prepaid account programs to 
determine disclosure of additional fee types. Pursuant to Sec.  
1005.18(b)(2)(ix)(A), the disclosure of the two fee types that generate 
the highest revenue from consumers must be determined for each prepaid 
account program or across prepaid account programs that share the same 
fee schedule. Thus, if a financial institution offers more than one 
prepaid account program, unless the programs share the same fee 
schedule, the financial institution must consider the fee revenue data 
separately for each prepaid account program and not consolidate the fee 
revenue data across prepaid account programs. Prepaid account programs 
are deemed to have the same fee schedules if they charge the same fee 
amounts, including offering the same fee waivers and fee reductions for 
the same features. The following examples illustrate how to assess 
revenue within and across prepaid account programs to determine the 
disclosure of additional fee types:
    i. Prepaid account programs with different fee schedules. A 
financial institution offers multiple prepaid account programs and each 
program has a different fee schedule. The financial institution must 
consider the revenue from consumers for each program separately; it may 
not consider the revenue from all of its prepaid account programs 
together in determining the disclosure of additional fee types for its 
programs.
    ii. Prepaid account programs with identical fee schedules. A 
financial institution offers multiple prepaid account programs and they 
all share the same fee schedule. The financial institution may consider 
the revenue across all of its prepaid account programs together in 
determining the disclosure of additional fee types for its programs.
    iii. Prepaid account programs with both different fee schedules and 
identical fee schedules. A financial institution offers multiple 
prepaid account programs, some of which share the same fee schedule. 
The financial institution may consider the revenue across all prepaid 
account programs with identical fee schedules in determining the 
disclosure of additional fee types for those programs. The financial 
institution must separately consider the revenue from each of the 
prepaid account programs with unique fee schedules.
    iv. Multiple service plan prepaid account programs. A financial 
institution that discloses multiple service plans on a short form 
disclosure as permitted by Sec.  1005.18(b)(6)(iii)(B)(2) must consider 
revenue across all of those plans in determining the disclosure of 
additional fee types for that program. If, however, the financial 
institution instead is disclosing the default service plan pursuant to 
Sec.  1005.18(b)(6)(iii)(B)(1), the financial institution must consider 
the revenue generated from consumers for the default service plan only. 
See Sec.  1005.18(b)(6)(iii)(B)(2) and comment 18(b)(6)(iii)(B)(2)-1 
for guidance on what constitutes multiple service plans.
    5. Exclusions. Once the financial institution has calculated the 
fee revenue data for the prepaid account program or across prepaid 
account programs that share the same fee schedule during the 
appropriate time period, it must remove from consideration the 
categories excluded pursuant to Sec.  1005.18(b)(2)(ix)(A)(1) through 
(3) before determining the fee types, if any, that generated the 
highest revenue.
    i. Exclusion for fee types required to be disclosed elsewhere. Fee 
types otherwise required to be disclosed in or outside the short form 
are excluded from the additional fee types required to be disclosed 
pursuant to Sec.  1005.18(b)(2)(ix)(A)(1). Thus, the following fee 
types are excluded: Periodic fee, per purchase fee, ATM withdrawal fees 
(for ATM withdrawals in the United States), cash reload fee, ATM 
balance inquiry fees (for ATM balance inquiries in the United States), 
customer service fees, and inactivity fee. However, while the cash 
reload fee type is excluded, other reload fee types, such as electronic 
reload and check reload, are not excluded under Sec.  
1005.18(b)(2)(ix)(A)(1) and thus may be disclosed as additional fee 
types

[[Page 6427]]

pursuant to Sec.  1005.18(b)(2)(ix). Similarly, while the fee types ATM 
withdrawal and ATM balance inquiry in the United States are excluded, 
international ATM withdrawal and international ATM balance inquiry fees 
are not excluded under Sec.  1005.18(b)(2)(ix)(A)(1) and thus may be 
disclosed as additional fee types pursuant to Sec.  1005.18(b)(2)(ix). 
Also pursuant to Sec.  1005.18(b)(2)(ix)(A)(1), the purchase price and 
activation fee, if any, required to be disclosed outside the short form 
disclosure pursuant to Sec.  1005.18(b)(5), are excluded from the 
additional fee types required to be disclosed pursuant to Sec.  
1005.18(b)(2)(ix).
    ii. De minimis exclusion. Any fee types that generated less than 5 
percent of the total revenue from consumers for the prepaid account 
program or across prepaid account programs that share the same fee 
schedule during the time period provided in Sec.  1005.18(b)(2)(ix)(D) 
and (E) are excluded from the additional fee types required to be 
disclosed pursuant to Sec.  1005.18(b)(2)(ix)(A)(2). For example, for a 
particular prepaid account program over the appropriate time period, 
bill payment, check reload, and card replacement are the only fee types 
that generated 5 percent or more of the total revenue from consumers 
at, respectively, 15 percent, 10 percent, and 7 percent. Two other fee 
types, legal fee and personalized card, generated revenue below 1 
percent of the total revenue from consumers. The financial institution 
must disclose bill payment and check reload as the additional fee types 
for that particular prepaid account program because those two fee types 
generated the highest revenue from consumers from among the categories 
not excluded from disclosure as additional fee types. For a different 
prepaid account program over the appropriate time period, bill payment 
is the only fee type that generated 5 percent or more of the total 
revenue from consumers. Two other fee types, check reload and card 
replacement, each generated revenue below 5 percent of the total 
revenue from consumers. The financial institution must disclose bill 
payment as an additional fee type for that particular prepaid account 
program because it is the only fee type that satisfies the criteria of 
Sec.  1005.18(b)(2)(ix)(A). The financial institution may, but is not 
required to, disclose either check reload or card replacement on the 
short form as well, pursuant to Sec.  1005.18(b)(2)(ix)(B). See comment 
18(b)(2)(ix)(B)-1.
    iii. Exclusion for credit-related fees. Any finance charges as 
described in Regulation Z, 12 CFR 1026.4(b)(11), imposed in connection 
with a covered separate credit feature accessible by a hybrid prepaid-
credit card as defined in 12 CFR 1026.61, are excluded from the 
additional fee types required to be disclosed pursuant to Sec.  
1005.18(b)(2)(ix)(A)(3). Pursuant to Sec.  1005.18(b)(2)(viii)(A)(2), 
such finance charges are also excluded from the number of additional 
fee types disclosed.
18(b)(2)(ix)(B) Disclosure of Fewer Than Two Additional Fee Types
    1. Disclosure of one or no additional fee types. The following 
examples provide guidance on the additional fee types disclosure 
pursuant to Sec.  1005.18(b)(2)(ix)(B) for a prepaid account with fewer 
than two fee types that satisfy the criteria in Sec.  
1005.18(b)(2)(ix)(A):
    i. A financial institution has a prepaid account program with only 
one fee type that satisfies the criteria in Sec.  1005.18(b)(2)(ix)(A) 
and thus, pursuant to Sec.  1005.18(b)(2)(ix)(A), the financial 
institution must disclose that one fee type. The prepaid account 
program has three other fee types that generate revenue from consumers, 
but they do not exceed the de minimis threshold or otherwise satisfy 
the criteria in Sec.  1005.18(b)(2)(ix)(B). Pursuant to Sec.  
1005.18(b)(2)(ix)(B), the financial institution is not required to make 
any additional disclosure, but it may choose to disclose one of the 
three fee types that do not meet the criteria in Sec.  
1005.18(b)(2)(ix)(A).
    ii. A financial institution has a prepaid account program with four 
fee types that generate revenue from consumers, but none exceeds the de 
minimis threshold or otherwise satisfy the criteria in Sec.  
1005.18(b)(2)(ix)(A). Pursuant to Sec.  1005.18(b)(2)(ix)(B), the 
financial institution is not required to make any disclosure, but it 
may choose to disclose one or two of the fee types that do not meet the 
criteria in Sec.  1005.18(b)(2)(ix)(A).
    2. No disclosure of finance charges as an additional fee type. 
Pursuant to Sec.  1005.18(b)(3)(vi), a financial institution may not 
disclose any finance charges as a voluntary additional fee disclosure 
under Sec.  1005.18(b)(2)(ix)(B).
18(b)(2)(ix)(C) Fee Variations in Additional Fee Types
    1. Two or more fee variations. Section 1005.18(b)(2)(ix)(C) 
specifies how to disclose additional fee types with two fee variations, 
more than two fee variations, and for multiple service plans pursuant 
to Sec.  1005.18(b)(6)(iii)(B)(2). See comment 18(b)(2)(viii)(A)-2 for 
guidance on and examples of fee types and fee variations within those 
fee types. The following examples illustrate how to disclose two-tier 
fees and other fee variations in additional fee types:
    i. Two fee variations with different fee amounts. A financial 
institution charges a fee of $1 for providing a card replacement using 
standard mail service and charges a fee of $5 for providing a card 
replacement using expedited delivery. The financial institution must 
calculate the total revenue generated from consumers for all card 
replacements, both via standard mail service and expedited delivery, 
during the required time period to determine whether it is required to 
disclose card replacement as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Because there are only two fee variations for the 
fee type ``card replacement,'' if card replacement is required to be 
disclosed as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix)(A), the financial institution must disclose both fee 
variations pursuant to Sec.  1005.18(b)(2)(ix)(C). Thus, the financial 
institution would disclose on the short form the fee type and two 
variations as ``Card replacement (regular or expedited delivery)'' and 
the fee amount as ``$1.00 or $5.00''.
    ii. More than two fee variations. A financial institution offers 
two methods of bill payment--via ACH and paper check--and offers two 
modes of delivery for bill payments made by paper check--regular 
standard mail service and expedited delivery. The financial institution 
charges $0.25 for bill pay via ACH, $0.50 for bill pay via paper check 
sent by regular standard mail service, and $3 for bill pay via paper 
check sent via expedited delivery. The financial institution must 
calculate the total revenue generated from consumers for all methods of 
bill pay and all modes of delivery during the required time period to 
determine whether it must disclose bill payment as an additional fee 
type pursuant to Sec.  1005.18(b)(2)(ix). Because there are more than 
two fee variations for the fee type ``bill payment,'' if bill payment 
is required to be disclosed as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix)(A), the financial institution has two options for the 
disclosure. The financial institution may disclose the highest fee, $3, 
followed by a symbol, such as an asterisk, linked to a statement 
explaining that the fee could be lower depending on how and where the 
prepaid account is used, pursuant to Sec.  1005.18(b)(3)(i). Thus, the 
financial institution would disclose on the short form the fee type as 
``Bill payment'' and

[[Page 6428]]

the fee amount as ``$3.00*''. Alternatively, the financial institution 
may consolidate the fee variations into two categories, such as regular 
delivery and expedited delivery. In this case, the financial 
institution would make this disclosure on the short form as: ``Bill 
payment (regular or expedited delivery)'' and the fee amount as 
``$0.50* or $3.00''.
    iii. Two fee variations with like fee amounts. A financial 
institution offers two methods of check reload for which it charges a 
fee--depositing checks at an ATM and depositing checks with a teller at 
the financial institution's branch locations. There is a fee of $0.50 
for both methods of check deposit. The financial institution must 
calculate the total revenue generated from both of these check reload 
methods during the required time period to determine whether it must 
disclose this fee type as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix). Because the fee amounts are the same for the two 
methods of check deposit, if the fee type is required to be disclosed 
as an additional fee type, the financial institution's options for 
disclosing this fee type in accordance with Sec.  1005.18(b)(2)(ix)(C) 
and (b)(3)(iii) include: ``Check reload (ATM or teller check dep)'' and 
the fee amount as ``$0.50'' or ``Check reload'' and the fee amount as 
``$0.50''.
    iv. Multiple service plans. A financial institution provides a 
short form disclosure for multiple service plans pursuant to Sec.  
1005.18(b)(6)(iii)(B)(2). Notwithstanding that an additional fee type 
has only two fee variations, a financial institution must disclose the 
highest fee in accordance with Sec.  1005.18(b)(3)(i).
    2. One fee variation under a particular fee type. Section 
1005.18(b)(2)(ix)(C) provides in part that, if a financial institution 
only charges one fee under a particular fee type, the financial 
institution must disclose the name of the additional fee type and the 
fee amount; it may, but is not required to, disclose also the name of 
the one fee variation, if any, for which the fee amount is charged, in 
a format substantially similar to that used to disclose the two-tier 
fees required by Sec.  1005.18(b)(2)(v) and (vi), except that the 
financial institution must disclose only the one fee variation name and 
fee amount instead of two. For example, a financial institution offers 
one method of electronic reload for which it charges a fee--electronic 
reload conducted using a debit card. The financial institution must 
calculate the total revenue generated from consumers for the fee type 
electronic reload (i.e., in this case, electronic reloads conducted 
using a debit card) during the required time period to determine 
whether it must disclose electronic reload as an additional fee type 
pursuant to Sec.  1005.18(b)(2)(ix). Because the financial institution 
only charges one fee variation under the fee type electronic reload, if 
this fee type is required to be disclosed as an additional fee type, 
the financial institution has two options for disclosing this fee type 
in accordance with Sec.  1005.18(b)(2)(ix)(C): ``Electronic reload 
(debit card)'' and the fee amount as ``$1.00'' or ``Electronic reload'' 
and the fee amount as ``$1.00''.
18(b)(2)(ix)(D) Timing of Initial Assessment of Additional Fee Types 
Disclosure
18(b)(2)(ix)(D)(1) Existing Prepaid Account Programs as of April 1, 
2019
    1. 24 month period with available data. Section 
1005.18(b)(2)(ix)(D)(1) requires for a prepaid account program in 
effect as of April 1, 2019 the financial institution must disclose 
additional fee types based on revenue for a 24-month period that begins 
no earlier than October 1, 2014. Thus, a prepaid account program that 
was in existence as of April 1, 2019 must assess its additional fee 
types disclosure from data collected during a consecutive 24-month 
period that took place between October 1, 2014 and April 1, 2019. For 
example, an existing prepaid account program was first offered to 
consumers on January 1, 2012 and provides its first short form 
disclosure on April 1, 2019. The earliest 24-month period from which 
that financial institution could calculate its first additional fee 
types disclosure would be from October 1, 2014 to September 30, 2016.
18(b)(2)(ix)(D)(2) Existing Prepaid Account Programs as of April 1, 
2019 With Unavailable Data
    1. 24 month period without available data. Section 
1005.18(b)(2)(ix)(D)(2) requires that if a financial institution does 
not have 24 months of fee revenue data for a particular prepaid account 
program from which to calculate the additional fee types disclosure in 
advance of April 1, 2019, the financial institution must disclose the 
additional fee types based on revenue it reasonably anticipates the 
prepaid account program will generate over the 24-month period that 
begins on April 1, 2019. For example, a financial institution begins 
offering to consumers a prepaid account program six months before April 
1, 2019. Because the prepaid account program will not have 24 months of 
fee revenue data prior to April 1, 2019, pursuant to Sec.  
1005.18(b)(2)(ix)(D)(2) the financial institution must disclose the 
additional fee types it reasonably anticipates the prepaid account 
program will generate over the 24-month period that begins on April 1, 
2019. The financial institution would take into account the data it had 
accumulated at the time of its calculation to arrive at the reasonably 
anticipated additional fee types for the prepaid account program.
18(b)(2)(ix)(E) Timing of Periodic Reassessment and Update of 
Additional Fee Types Disclosure
18(b)(2)(ix)(E)(2) Periodic Reassessment
    1. Periodic reassessment and, if applicable, update of additional 
fee types disclosure. Pursuant to Sec.  1005.18(b)(2)(ix)(E)(2), a 
financial institution must reassess whether its previously disclosed 
additional fee types continue to comply with the requirements of Sec.  
1005.18(b)(2)(ix) every 24 months based on revenue for the previous 24-
month period. The financial institution must complete this reassessment 
and update its disclosure, if applicable, within three months of the 
end of the 24-month period, except as provided in the update printing 
exception in Sec.  1005.18(b)(2)(ix)(E)(4). The following examples 
provide guidance on the periodic assessment and, if applicable, update 
of the disclosure of additional fee types pursuant to Sec.  
1005.18(b)(2)(ix)(E)(2):
    i. Reassessment with no change in the additional fee types 
disclosed. A financial institution disclosed two additional fee types 
(bill payment and card replacement) for a particular prepaid account 
program on April 1, 2019. Starting on April 1, 2021, the financial 
institution assessed the fee revenue data it collected over the 
previous 24 months, and the two additional fee types previously 
disclosed continue to qualify as additional fee types pursuant to Sec.  
1005.18(b)(2)(ix). The financial institution is not required to take 
any action with regard to the disclosure of additional fee types for 
that prepaid account program.
    ii. Reassessment with a change in the additional fee types 
disclosed. A financial institution disclosed two additional fee types 
(bill payment and card replacement) for a particular prepaid account 
program on April 1, 2019. Starting on April 1, 2021, the financial 
institution assessed the fee revenue data it collected over the 
previous 24 months, and bill payment continued to qualify as an 
additional fee type pursuant to Sec.  1005.18(b)(2)(ix) but check 
reload qualified as the second

[[Page 6429]]

additional fee type instead of card replacement. The financial 
institution must update the additional fee types disclosure in its 
short form disclosures provided electronically, orally, and in writing 
(other than for printed materials that qualify for the update printing 
exception in Sec.  1005.18(b)(2)(ix)(E)(4)) no later than July 1, 2021, 
which is three months after the end of the 24-month period.
    iii. Reassessment with the addition of an additional fee type 
already voluntarily disclosed. A financial institution disclosed one 
additional fee type (bill payment) and voluntarily disclosed one other 
additional fee type (card replacement, both for regular and expedited 
delivery) for a particular prepaid account program on April 1, 2019. 
Starting on April 1, 2021, the financial institution assessed the fee 
revenue data it collected over the previous 24 months, and bill payment 
continued to qualify as an additional fee type pursuant to Sec.  
1005.18(b)(2)(ix) and card replacement now qualified as the second 
additional fee type. Because the financial institution already had 
disclosed its card replacement fees in the format required for an 
additional fee type disclosure, the financial institution is not 
required to take any action with regard to the additional fee types 
disclosure in the short form for that prepaid account program.
    2. Reassessment more frequently than every 24 months. Pursuant to 
Sec.  1005.18(b)(2)(ix)(E)(2), a financial institution may, but is not 
required to, carry out the reassessment and update, if applicable, more 
frequently than every 24 months, at which time a new 24-month period 
commences. A financial institution may choose to do this, for example, 
to sync its reassessment process for additional fee types with its 
financial reporting schedule or other financial analysis it performs 
regarding the particular prepaid account program. If a financial 
institution chooses to reassess its additional fee types disclosure 
more frequently than every 24 months, it is still required to use 24 
months of fee revenue data to conduct the reassessment. For example, a 
financial institution first offered a particular prepaid account 
program on April 1, 2018 and thus was required to estimate its initial 
additional fee types disclosure pursuant to Sec.  
1005.18(b)(2)(ix)(D)(2). If the financial institution chooses to begin 
its reassessment of its fee revenue data on April 1, 2020, it would use 
the data it collected over the previous 24 months (April 1, 2018 to 
March 31, 2020) and complete its reassessment and its update, if 
applicable, by July 1, 2020.
18(b)(2)(ix)(E)(3) Fee Schedule Change
    1. Revised prepaid account programs. Section 
1005.18(b)(2)(ix)(E)(3) requires that if a financial institution 
revises the fee schedule for a prepaid account program, it must 
determine whether it reasonably anticipates that the previously 
disclosed additional fee types will continue to comply with the 
requirements of Sec.  1005.18(b)(2)(ix) for the 24 months following 
implementation of the fee schedule change. A fee schedule change resets 
the 24-month period for assessment; a financial institution must comply 
with the requirements of Sec.  1005.18(b)(2)(ix)(E)(2) at the end of 
the 24-month period following implementation of the fee schedule 
change. If the financial institution reasonably anticipates that the 
previously disclosed additional fee types will not comply with the 
requirements of Sec.  1005.18(b)(2)(ix), 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, except as 
provided in the update printing exception in Sec.  
1005.18(b)(2)(ix)(E)(4). For example, if a financial institution lowers 
its card replacement fee from $4 to $3 on June 1, 2019 after having 
first assessed its additional fee types disclosure as of April 1, 2019, 
the financial institution would assess whether it reasonably 
anticipates that the existing additional fee types disclosure will 
continue to reflect the additional fee types that generate the highest 
revenue from consumers for that prepaid account program for the next 24 
months (until June 1, 2021). If the financial institution reasonably 
anticipates that its additional fee types will remain unchanged over 
the next 24 months, the financial institution is not required to take 
any action with regard to the additional fee types disclosure for that 
prepaid account program. In the same example, if the financial 
institution reasonably anticipates that the previously disclosed 
additional fee types will not comply with the requirements of Sec.  
1005.18(b)(2)(ix) for the 24 months following implementation of the fee 
schedule change, the financial institution must update the listing of 
additional fee types at the time the fee schedule change goes into 
effect, except as provided in the update printing exception pursuant to 
Sec.  1005.18(b)(2)(ix)(E)(4).
18(b)(2)(ix)(E)(4) Update Printing Exception
    1. Application of the update printing exception to prepaid accounts 
sold in retail locations. Pursuant to Sec.  1005.18(b)(2)(ix)(E)(4), 
notwithstanding the requirements to update the additional fee types 
disclosure in Sec.  1005.18(b)(2)(ix)(E), a financial institution is 
not required to update the listing of additional fee types that are 
provided on, in, or with prepaid account packaging materials that were 
manufactured, printed, or otherwise produced prior to a periodic 
reassessment and update pursuant to Sec.  1005.18(b)(2)(ix)(E)(2) or 
prior to a fee schedule change pursuant to Sec.  
1005.18(b)(2)(ix)(E)(3). For prepaid accounts sold in retail locations, 
for example, Sec.  1005.18(b)(2)(ix)(E)(4) permits a financial 
institution to implement any necessary updates to the listing of the 
additional fee types on the short form disclosure that appear on its 
physical prepaid account packaging materials at the time the financial 
institution prints new materials. Section 1005.18(b)(2)(ix)(E)(4) does 
not require financial institutions 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, to comply with this requirement. For example, a financial 
institution determines that an additional fee type listed on a short 
form disclosure in a retail location no longer qualifies as an 
additional fee type pursuant to Sec.  1005.18(b)(2)(ix). The financial 
institution must update any electronic and oral short form disclosures 
pursuant to the timing requirements set forth in Sec.  
1005.18(b)(2)(ix)(E). Pursuant to Sec.  1005.18(b)(2)(ix)(E)(4), the 
financial institution may continue selling any previously printed 
prepaid account packages that contain the prior listing of additional 
fee types; prepaid account packages printed after that time must 
contain the updated listing of additional fee types.
18(b)(2)(x) Statement Regarding Overdraft Credit Features
    1. Short form disclosure when overdraft credit feature may be 
offered. Section 1005.18(b)(2)(x) requires disclosure of a statement if 
a covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined in Regulation Z, 12 CFR 1026.61, may be offered at any 
point to a consumer in connection with the prepaid account. This 
statement must be provided on the short form disclosures for all 
prepaid

[[Page 6430]]

accounts that may offer such a feature, regardless of whether some 
consumers may never be solicited or qualify to enroll in such a 
feature.
18(b)(2)(xi) Statement Regarding Registration and FDIC or NCUA 
Insurance
    1. Disclosure of FDIC or NCUA insurance. Section 1005.18(b)(2)(xi) 
requires a statement regarding the prepaid account program's 
eligibility for FDIC deposit insurance or NCUA share insurance, as 
appropriate, and directing the consumer to register the prepaid account 
for insurance and other account protections, where applicable. If the 
consumer's prepaid account funds are held at a credit union, the 
disclosure must indicate NCUA insurance eligibility. If the consumer's 
prepaid account funds are held at a financial institution other than a 
credit union, the disclosure must indicate FDIC insurance eligibility.
    2. Consumer identification and verification processes. For 
additional guidance on the timing of consumer identification and 
verification processes, and on prepaid account programs for which there 
is no consumer identification and verification process for any prepaid 
accounts within the prepaid account program, see Sec.  1005.18(e)(3) 
and comments 18(e)-4 through 6.
18(b)(2)(xiii) Statement Regarding Information on All Fees and Services
    1. Financial institution's telephone number. For a financial 
institution offering prepaid accounts at a retail location pursuant to 
the retail location exception in Sec.  1005.18(b)(1)(ii), the statement 
required by Sec.  1005.18(b)(2)(xiii) must also include a telephone 
number (and the website URL) that a consumer may use to directly access 
an oral version of the long form disclosure. To provide the long form 
disclosure by telephone, a financial institution could use a live 
customer service agent or an interactive voice response system. The 
financial institution could use a telephone number specifically 
dedicated to providing the long form disclosure or a more general 
customer service telephone number for the prepaid account program. For 
example, a financial institution would be deemed to provide direct 
access pursuant to Sec.  1005.18(b)(2)(xiii) if a consumer navigates 
one or two prompts to reach the oral long form disclosure via a live 
customer service agent or an interactive voice response system using 
either a specifically dedicated telephone number of a more general 
customer service telephone number.
    2. Financial institution's website. For a financial institution 
offering prepaid accounts at a retail location pursuant to the retail 
location exception in Sec.  1005.18(b)(1)(ii), the statement required 
by Sec.  1005.18(b)(2)(xiii) must also include a website URL (and a 
telephone number) that a consumer may use to directly access an 
electronic version of the long form disclosure. For example, a 
financial institution that requires a consumer to navigate various 
other web pages before viewing the long form disclosure would not be 
deemed to provide direct access pursuant to Sec.  1005.18(b)(2)(xiii). 
Trademark and product names and their commonly accepted or readily 
understandable abbreviations comply with the requirement in Sec.  
1005.18(b)(2)(xiii) that the URL be meaningfully named. For example, 
ABC or ABCard would be readily understandable abbreviations for a 
prepaid account program named the Alpha Beta Card.
18(b)(2)(xiv) Additional Content for Payroll Card Accounts
18(b)(2)(xiv)(A) Statement Regarding Wage or Salary Payment Options
    1. Statement options for payroll card accounts. Section 
1005.18(b)(2)(xiv)(A) requires a financial institution to include at 
the top of the short form disclosure for payroll card accounts, above 
the information required by Sec.  1005.18(b)(2)(i) through (iv), one of 
two statements regarding wage payment options. Financial institutions 
offering payroll card accounts may choose which of the two statements 
required by Sec.  1005.18(b)(2)(xiv)(A) to use in the short form 
disclosure. The list of other options required in the second statement 
might include the following, as applicable: Direct deposit to the 
consumer's bank account, direct deposit to the consumer's own prepaid 
account, paper check, or cash. A financial institution may, but is not 
required to, provide more specificity as to whom consumers must ask or 
inform of their choice of wage payment method, such as specifying the 
employer's Human Resources Department.
    2. Statement options for government benefit accounts. See Sec.  
1005.15(c)(2)(i) for statement options for government benefit accounts.
    3. Statement permitted for other prepaid accounts. A financial 
institution offering a prepaid account other than a payroll card 
account or government benefit account may, but is not required to, 
include a statement in the short form disclosure regarding payment 
options that is similar to either of the statements required for 
payroll card accounts pursuant to Sec.  1005.18(b)(2)(xiv)(A) or 
government benefit accounts pursuant to Sec.  1005.15(c)(2)(i). For 
example, a financial institution issuing a prepaid account to disburse 
student financial aid proceeds may disclose a statement such as the 
following: ``You have several options to receive your financial aid 
payments: Direct deposit to your bank account, direct deposit to your 
own prepaid card, paper check, or this prepaid card. Tell your school 
which option you choose.''
18(b)(2)(xiv)(B) Statement Regarding State-Required Information or 
Other Fee Discounts and Waivers
    1. Statement options for state-required information or other fee 
discounts or waivers. Section 1005.18(b)(2)(xiv)(B) permits, but does 
not require, a financial institution to include in the short form 
disclosure for payroll card accounts one additional line of text 
directing the consumer to a particular location outside the short form 
disclosure for information on ways the consumer may access payroll card 
account funds and balance information for free or for a reduced fee. 
For example, a financial institution might include the following line 
of text in the short form disclosure: ``See below for free ways to 
access your funds and balance information'' and then list below, but on 
the same page as, the short form disclosure several ways consumers can 
access their prepaid account funds and balance information for free. 
Alternatively, the financial institution might direct the consumer to 
another location for that information, such as by stating ``See the 
cardholder agreement for free ways to access your funds and balance 
information.'' A similar statement is permitted for government benefit 
accounts pursuant to Sec.  1005.15(c)(2)(ii).
* * * * *
18(b)(4) Long Form Disclosure Content
18(b)(4)(ii) Fees
    1. Disclosure of all fees. Section 1005.18(b)(4)(ii) requires a 
financial institution to disclose in the long form all fees that may be 
imposed in connection with a prepaid account, not just fees for 
electronic fund transfers or the right to make transfers. The 
requirement to disclose all fees in the long form includes any finance 
charges imposed on the prepaid account as described in Regulation Z, 12 
CFR 1026.4(b)(11)(ii), in connection with a covered separate credit 
feature accessible by a hybrid prepaid-credit

[[Page 6431]]

card as defined in 12 CFR 1026.61 but does not include finance charges 
imposed on the covered separate credit feature as described in 12 CFR 
1026.4(b)(11)(i). See comment 18(b)(7)(i)(B)-2 for guidance on 
disclosure of finance charges as part of the Sec.  1005.18(b)(4)(ii) 
fee disclosure in the long form. A financial institution may also be 
required to include finance charges in the Regulation Z disclosures 
required pursuant to Sec.  1005.18(b)(4)(vii).
    2. Disclosure of conditions. Section 1005.18(b)(4)(ii) requires a 
financial institution to disclose the amount of each fee and the 
conditions, if any, under which the fee may be imposed, waived, or 
reduced. For example, if a financial institution charges a cash reload 
fee, the financial institution must list the amount of the cash reload 
fee and also specify any circumstances under which a consumer can 
qualify for a lower fee. Similarly, if a financial institution 
discloses both a periodic fee and an inactivity fee, it must indicate 
whether the inactivity fee will be charged in addition to, or instead 
of, the periodic fee. A financial institution may, but is not required 
to, also include on the long form disclosure additional information or 
limitations related to the service or feature for which a fee is 
charged, such as, for cash reloads, any limit on the amount of cash a 
consumer may load into the prepaid account in a single transaction or 
during a particular time period. The general requirement in Sec.  
1005.18(b)(4)(ii) does not apply to individual fee waivers or 
reductions granted to a particular consumer or group of consumers on a 
discretionary or case-by-case basis.
    3. Disclosure of a service or feature without a charge. Pursuant to 
Sec.  1005.18(b)(4)(ii), a financial institution may, but is not 
required to, list in the long form disclosure any service or feature it 
provides or offers at no charge to the consumer. For example, a 
financial institution may list ``online bill pay'' in its long form 
disclosure and indicate a fee amount of ``$0'' when the financial 
institution does not charge consumers a fee for that feature. By 
contrast, where a fee is waived or reduced under certain circumstances 
or where a service or feature is available for an introductory period 
without a fee, the financial institution may not list the fee amount as 
``$0''. Rather, the financial institution must list the highest fee, 
accompanied by an explanation of the waived or reduced fee amount and 
any conditions for the waiver or discount. For example, if a financial 
institution waives its monthly fee for any consumer who receives direct 
deposit payments into the prepaid account or conducts 30 or more 
transactions in a given month, the long form disclosure must list the 
regular monthly fee amount along with an explanation that the monthly 
fee is waived if the consumer receives direct deposit or conducts 30 or 
more transactions each month. Similarly, for an introductory fee, the 
financial institution would list the highest fee, and explain the 
introductory fee amount, the duration of the introductory period, and 
any conditions that apply during the introductory period.
    4. Third-party fees. Section 1005.18(b)(4)(ii) requires disclosure 
in the long form of any third-party fee amounts known to the financial 
institution that may apply. Fees imposed by another party, such as a 
program manager, for services performed on behalf of the financial 
institution are not third-party fees and therefore must be disclosed on 
the long form pursuant to Sec.  1005.18(b)(4)(ii). Also pursuant to 
Sec.  1005.18(b)(4)(ii), for any third-party fee disclosed, a financial 
institution may, but is not required to, include either or both a 
statement that the fee is accurate as of or through a specific date or 
that the third-party fee is subject to change. For example, a financial 
institution that contracts with a third-party remote deposit capture 
service must include in the long form disclosure the amount of the fee 
known to the financial institution that is charged by the third party 
for remote deposit capture services. The financial institution may, but 
is not required to, also state that the third-party remote deposit 
capture fee is accurate as of or through a specific date, such as the 
date the financial institution prints the long form disclosure. The 
financial institution may also state that the fee is subject to change. 
Section 1005.18(b)(4)(ii) also provides that, if a third-party fee may 
apply but the amount of the fee is not known by the financial 
institution, it must include a statement indicating that a third-party 
fee may apply without specifying the fee amount. For example, a 
financial institution that permits out-of-network ATM withdrawals would 
disclose that, for ATM withdrawals that occur outside the financial 
institution's network, the ATM operator may charge the consumer a fee 
for the withdrawal, but the financial institution is not required to 
disclose the out-of-network ATM operator's fee amount if it does not 
know the amount of the fee.
18(b)(4)(iii) Statement Regarding Registration and FDIC or NCUA 
Insurance
    1. Statement regarding registration and FDIC or NCUA insurance, 
including implications thereof. Section 1005.18(b)(4)(iii) requires 
that the long form disclosure include the same statement regarding 
prepaid account registration and FDIC or NCUA insurance eligibility 
required by Sec.  1005.18(b)(2)(xi) in the short form disclosure, 
together with an explanation of FDIC or NCUA insurance coverage and the 
benefit of such coverage or the consequence of the lack of such 
coverage, as applicable.
    i. Bank disclosure of FDIC insurance. For example, XYZ Bank offers 
a prepaid account program for sale at retail locations that is set up 
to be eligible for FDIC deposit insurance, but does not conduct 
consumer identification and verification before consumers purchase the 
prepaid account. XYZ Bank may disclose the required statements as 
``Register your card for FDIC insurance eligibility and other 
protections. Your funds will be held at or transferred to XYZ Bank, an 
FDIC-insured institution. Once there, your funds are insured up to 
$250,000 by the FDIC in the event XYZ Bank fails, if specific deposit 
insurance requirements are met and your card is registered. See 
fdic.gov/deposit/deposits/prepaid.html for details.'' Conversely, if 
XYZ Bank offers another prepaid account program for sale at retail 
locations for which it conducts consumer identification and 
verification after purchase of the prepaid account, but the program is 
not set up to be eligible for FDIC insurance, XYZ Bank may disclose the 
required statements as ``Not FDIC insured. Your funds will be held at 
or transferred to XYZ Bank. If XYZ Bank fails, you are not protected by 
FDIC deposit insurance and could lose some or all of your money. 
Register your card for other protections.''
    ii. Credit union disclosure of NCUA insurance. For example, ABC 
Credit Union offers a prepaid account program for sale at its own 
branches that is set up to be eligible for NCUA share insurance, but 
does not conduct consumer identification and verification before 
consumers purchase the prepaid account. ABC Credit Union may disclose 
the requirement statements as ``Register your card for NCUA insurance, 
if eligible, and other protections. Your funds will be held at or 
transferred to ABC Credit Union, an NCUA-insured institution. Once 
there, if specific share insurance requirements are met and your card 
is registered, your

[[Page 6432]]

funds are insured up to $250,000 by the NCUA in the event ABC Credit 
Union fails.'' See comment 18(b)(2)(xi)-1 for guidance as to when NCUA 
insurance coverage should be disclosed instead of FDIC insurance 
coverage.
18(b)(4)(vii) Regulation Z Disclosures for Overdraft Credit Features
    1. Long form Regulation Z disclosure of overdraft credit features. 
Section 1005.18(b)(4)(vii) requires that the long form include the 
disclosures described in Regulation Z, 12 CFR 1026.60(e)(1), in 
accordance with the requirements for such disclosures in 12 CFR 
1026.60, if, at any point, a covered separate credit feature accessible 
by a hybrid prepaid-credit card as defined in Regulation Z, 12 CFR 
1026.61, may be offered to a consumer in connection with the prepaid 
account. If the financial institution includes the disclosures 
described in Regulation Z, 12 CFR 1026.60(e)(1), pursuant to Sec.  
1005.18(b)(7)(i)(B), such disclosures must appear below the statements 
required by Sec.  1005.18(b)(4)(vi). If the disclosures provided 
pursuant to Regulation Z, 12 CFR 1026.60(e)(1), are provided in 
writing, these disclosures must be provided in the form required by 12 
CFR 1026.60(a)(2), and to the extent possible, on the same page as the 
other disclosures required by Sec.  1005.18(b)(4).
    2. Updates to the long form for changes to the Regulation Z 
disclosures. Pursuant to Sec.  1005.18(b)(4)(vii), a financial 
institution is not required to revise the disclosure required by that 
paragraph to reflect a change in the fees or other terms disclosed 
therein until such time as the financial institution manufactures, 
prints, or otherwise produces new prepaid account packaging materials 
or otherwise updates the long form disclosure. This exception does not 
extend to any finance charges imposed on the prepaid account as 
described in Regulation Z, 12 CFR 1026.4(b)(11)(ii), in connection with 
a covered separate credit feature accessible by a hybrid prepaid-credit 
card as defined in 12 CFR 1026.61 that are required to be disclosed on 
the long form pursuant to Sec.  1005.18(b)(4)(ii). See comment 
18(b)(4)(ii)-1.
18(b)(5) Disclosure Requirements Outside the Short Form Disclosure
    1. Content of disclosure. Section 1005.18(b)(5) requires that the 
name of the financial institution, the name of the prepaid account 
program, and any purchase price or activation fee for the prepaid 
account be disclosed outside the short form disclosure. A financial 
institution may, but is not required to, also disclose the name of the 
program manager or other service provider involved in the prepaid 
account program.
    2. Location of disclosure. In addition to setting forth the 
required content for disclosures outside the short form disclosure, 
Sec.  1005.18(b)(5) requires that, in a setting other than a retail 
location, the information required by Sec.  1005.18(b)(5) must be 
disclosed in close proximity to the short form. For example, if the 
financial institution provides the short form disclosure online, the 
information required by Sec.  1005.18(b)(5) is deemed disclosed in 
close proximity to the short form if it appears on the same web page as 
the short form disclosure. If the financial institution offers the 
prepaid account in its own branch locations and provides the short form 
disclosure on the exterior of its preprinted packaging materials, the 
information required by Sec.  1005.18(b)(5) is deemed disclosed in 
close proximity to the short form disclosure if it appears on the 
exterior of the packaging. If the financial institution provides a 
written short form disclosure in a manner other than on preprinted 
packaging materials, such as on paper, the information required by 
Sec.  1005.18(b)(5) is deemed disclosed in close proximity if it 
appears on the same piece of paper as the short form disclosure. If the 
financial institution provides the short form disclosure orally, the 
information required by Sec.  1005.18(b)(5) is deemed disclosed in 
close proximity to the short form disclosure if it is provided 
immediately before or after disclosing the fees and information 
required pursuant to Sec.  1005.18(b)(2). For prepaid accounts sold in 
a retail location pursuant to the retail location exception in Sec.  
1005.18(b)(1)(ii), Sec.  1005.18(b)(5) requires the information other 
than purchase price be disclosed on the exterior of the access device's 
packaging material. If the purchase price, if any, is not also 
disclosed on the exterior of the packaging, disclosure of the purchase 
price on or near the sales rack or display for the packaging material 
is deemed in close proximity to the access device's packaging material.
18(b)(6) Form of Pre-Acquisition Disclosures
18(b)(6)(i) General
    1. Written pre-acquisition disclosures. If a financial institution 
provides the disclosures required by Sec.  1005.18(b) in written form 
prior to acquisition pursuant to Sec.  1005.18(b)(1)(i), they need not 
also be provided electronically or orally. For example, an employer 
distributes to new employees printed copies of the disclosures required 
by Sec.  1005.18(b) for a payroll card account, together with 
instructions to complete the payroll card account acquisition process 
online if the employee wishes to be paid via a payroll card account. 
The financial institution is not required to provide the Sec.  
1005.18(b) disclosures electronically via the website because the 
consumer has already received the disclosures pre-acquisition in 
written form.
18(b)(6)(i)(B) Electronic Disclosures
    1. Providing pre-acquisition disclosures electronically. Unless 
provided in written form prior to acquisition pursuant to Sec.  
1005.18(b)(1)(i), Sec.  1005.18(b)(6)(i)(B) requires electronic 
delivery of the disclosures required by Sec.  1005.18(b) when a 
consumer acquires a prepaid account through electronic means, including 
via a website or mobile application, and, among other things, in a 
manner which is reasonably expected to be accessible in light of how a 
consumer is acquiring the prepaid account. For example, if a consumer 
is acquiring a prepaid account via a website or mobile application, it 
would be reasonable to expect that a consumer would be able to access 
the disclosures required by Sec.  1005.18(b) on the first page or via a 
direct link from the first page of the website or mobile application or 
on the first page that discloses the details about the specific prepaid 
account program. See comment 18(b)(1)(i)-2 for additional guidance on 
placement of the short form and long form disclosures on a web page.
    2. Disclosures responsive to smaller screens. In accordance with 
the requirement in Sec.  1005.18(b)(6)(i)(B) that electronic 
disclosures be provided in a responsive form, electronic disclosures 
provided pursuant to Sec.  1005.18(b) must be provided in a way that 
responds to different screen sizes, for example, by stacking elements 
of the disclosures in a manner that accommodates consumer viewing on 
smaller screens, while still meeting the other formatting requirements 
set forth in Sec.  1005.18(b)(7). For example, the disclosures 
permitted by Sec.  1005.18(b)(2)(xiv)(B) or (b)(3)(ii) must take up no 
more than one additional line of text in the short form disclosure. If 
a consumer is acquiring a prepaid account using a mobile device with a 
screen too small to accommodate these disclosures on one line of text 
in accordance with the size requirements set forth in Sec.  
1005.18(b)(7)(ii)(B), a financial institution is permitted to display 
the disclosures permitted by Sec.  1005.18(b)(2)(xiv)(B) and 
(b)(3)(ii), for

[[Page 6433]]

example, by stacking those disclosures in a way that responds to 
smaller screen sizes, while still meeting the other formatting 
requirements in Sec.  1005.18(b)(7).
    3. Machine-readable text. Section 1005.18(b)(6)(i)(B) requires that 
electronic disclosures must be provided using machine-readable text 
that is accessible via both Web browsers (or mobile applications, as 
applicable) and screen readers. A disclosure would not be deemed to 
comply with this requirement if it was not provided in a form that can 
be read automatically by internet search engines or other computer 
systems.
18(b)(6)(i)(C) Oral Disclosures
    1. Disclosures for prepaid accounts acquired by telephone. Unless 
it provides disclosures in written form prior to acquisition pursuant 
to Sec.  1005.18(b)(1)(i), a financial institution must disclose the 
information required by Sec.  1005.18(b)(2) and (5) orally before a 
consumer acquires a prepaid account orally by telephone pursuant to the 
exception in Sec.  1005.18(b)(1)(iii). A financial institution may, for 
example, provide these disclosures by using an interactive voice 
response or similar system or by using a customer service agent, after 
the consumer has initiated the purchase of a prepaid account by 
telephone, but before the consumer acquires the prepaid account. In 
addition, a financial institution must provide the initial disclosures 
required by Sec.  1005.7, as modified by Sec.  1005.18(f)(1), before 
the first electronic fund transfer is made involving the prepaid 
account.
* * * * *
18(b)(7) Specific Formatting Requirements for Pre-Acquisition 
Disclosures
* * * * *
    18(b)(7)(ii) Prominence and Size
    1. Minimum type size. Section 1005.18(b)(7)(ii) sets forth minimum 
point/pixel size requirements for each element of the disclosures 
required by Sec.  1005.18(b)(2), (b)(3)(i) and (ii), and (b)(4). A 
financial institution may provide disclosures in a type size larger 
than the required minimum to enhance consumer comprehension in any 
acquisition scenario, as long as the financial institution complies 
with the point/pixel size hierarchy set forth in Sec.  
1005.18(b)(7)(ii).
    2. ``Point'' refers to printed disclosures and ``pixel'' refers to 
electronic disclosures. References in Sec.  1005.18(b)(7)(ii) to 
``point'' size correspond to printed disclosures and references to 
``pixel'' size correspond to disclosures provided via electronic means.
18(b)(7)(ii)(A) General
    1. Contrast required between type color and background of 
disclosures. Section Sec.  1005.18(b)(7)(ii)(A) requires that all text 
used to disclose information in the short form or in the long form 
disclosure pursuant to Sec.  1005.18(b)(2), (b)(3)(i) and (ii), and 
(b)(4) must be in a single, easy-to-read type that is all black or one 
color and printed on a background that provides a clear contrast. A 
financial institution complies with the color requirements if, for 
example, it provides the disclosures required by Sec.  1005.18(b)(2), 
(b)(3)(i) and (ii), and (b)(4) printed in black type on a white 
background or white type on a black background. Also, pursuant to Sec.  
1005.18(b)(7)(ii)(A), the type and color may differ between the short 
form disclosure and the long form disclosure provided for a particular 
prepaid account program. For example, a financial institution may use 
one font/type style for the short form disclosure for a particular 
prepaid account program and use a different font/type style for the 
long form disclosure for that same prepaid account program. Similarly, 
a financial institution may use black type for the short form 
disclosure for a particular prepaid account program and use blue type 
for the long form disclosure for that same prepaid account program.
* * * * *
18(b)(9) Prepaid Accounts Acquired in Foreign Languages
    1. Prepaid accounts acquired in foreign languages. Section 
1005.18(b)(9)(i) requires a financial institution to provide the pre-
acquisition disclosures required by Sec.  1005.18(b) in a foreign 
language in certain circumstances.
    i. Examples of situations in which foreign language disclosures are 
required. The following examples illustrate situations in which a 
financial institution must provide the pre-acquisition disclosures in a 
foreign language in connection with the acquisition of that prepaid 
account:
    A. The financial institution principally uses a foreign language on 
the packaging material of a prepaid account sold in a retail location 
or distributed at a bank or credit union branch, even though a few 
words appear in English on the packaging.
    B. The financial institution principally uses a foreign language in 
a television advertisement for a prepaid account. That advertisement 
includes a telephone number a consumer can call to acquire the prepaid 
account, whether by speaking to a customer service representative or 
interacting with an interactive voice response (IVR) system.
    C. The financial institution principally uses a foreign language in 
an online advertisement for a prepaid account. That advertisement 
includes a website URL through which a consumer can acquire the prepaid 
account.
    D. The financial institution principally uses a foreign language on 
a printed advertisement for a prepaid account. That advertisement 
includes a telephone number or a website URL a consumer can call or 
visit to acquire the prepaid account. The pre-acquisition disclosures 
must be provided to the consumer in that same foreign language prior to 
the consumer acquiring the prepaid account.
    E. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market a prepaid 
account. A consumer calls the financial institution and has the option 
to proceed with the prepaid account acquisition process in a foreign 
language, whether by speaking to a customer service representative or 
interacting with an IVR system. (But see Sec.  1005.18(b)(9)(i)(C), 
which limits the obligation to provide foreign language disclosures for 
payroll card accounts and government benefit accounts acquired orally 
by telephone in certain circumstances.)
    F. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market a prepaid 
account. A consumer visits the financial institution's website. On that 
website, the consumer has the option to proceed with the prepaid 
account acquisition process in a foreign language.
    ii. Examples of situations in which foreign language disclosures 
are not required. The following examples illustrate situations in which 
a financial institution is not required to provide the pre-acquisition 
disclosures in a foreign language:
    A. A consumer visits the financial institution's branch location in 
person and speaks to an employee in a foreign language about acquiring 
a prepaid account. The consumer proceeds with the acquisition process 
in that foreign language.
    B. The financial institution does not principally use a foreign 
language on prepaid account packaging material nor does it principally 
use a foreign language to advertise, solicit, or market

[[Page 6434]]

a prepaid account. A consumer calls the financial institution's 
customer service line and speaks to a customer service representative 
in a foreign language. However, if the customer service representative 
proceeds with the prepaid account acquisition process over the 
telephone, the financial institution would be required to provide the 
pre-acquisition disclosures in that foreign language. (But see Sec.  
1005.18(b)(9)(i)(C), which limits the obligation to provide foreign 
language disclosures for payroll card accounts and government benefit 
accounts acquired orally by telephone in certain circumstances.)
    C. The financial institution principally uses a foreign language in 
an advertisement for a prepaid account. That advertisement includes a 
telephone number a consumer can call to acquire the prepaid account. 
The consumer calls the telephone number provided on the advertisement 
and has the option to proceed with the prepaid account acquisition 
process in English or in a foreign language. The consumer chooses to 
proceed with the acquisition process in English.
    D. A consumer calls a government agency to enroll in a government 
benefits program. The government agency does not offer through its 
telephone system an option for consumers to proceed in a foreign 
language. An employee of the government agency assists the consumer 
with the enrollment process, including helping the consumer acquire a 
government benefits account. The employee also happens to speak the 
foreign language in which the consumer is most comfortable 
communicating, and chooses to communicate with the consumer in that 
language to facilitate the enrollment process. In this case, the 
employee offered language interpretation assistance on an informal or 
ad hoc basis to accommodate the prospective government benefits account 
holder.
    2. Principally used. All relevant facts and circumstances determine 
whether a foreign language is principally used by the financial 
institution to advertise, solicit, or market under Sec.  1005.18(b)(9). 
Whether a foreign language is principally used is determined at the 
packaging material, advertisement, solicitation, or marketing 
communication level, not at the prepaid account program level or across 
the financial institution's activities as a whole. A financial 
institution that advertises a prepaid account program in multiple 
languages would evaluate its use of foreign language in each 
advertisement to determine whether it has principally used a foreign 
language therein.
    3. Advertise, solicit, or market a prepaid account. Any commercial 
message, appearing in any medium, that promotes directly or indirectly 
the availability of prepaid accounts constitutes advertising, 
soliciting, or marketing for purposes of Sec.  1005.18(b)(9). Examples 
illustrating advertising, soliciting, or marketing include, but are not 
limited to:
    i. Messages in a leaflet, promotional flyer, newspaper, or 
magazine.
    ii. Electronic messages, such as on a website or mobile 
application.
    iii. Telephone solicitations.
    iv. Solicitations sent to the consumer by mail or email.
    v. Television or radio commercials.
    4. Information in the long form disclosure in English. Section 
1005.18(b)(9)(ii) states that a financial institution required to 
provide pre-acquisition disclosures in a foreign language pursuant to 
Sec.  1005.18(b)(9)(i) must also provide the information required to be 
disclosed in its pre-acquisition long form disclosure pursuant to Sec.  
1005.18(b)(4) in English upon a consumer's request and on any part of 
the website where it discloses this information in a foreign language. 
A financial institution may, but is not required to, provide the 
English version of the information required by Sec.  1005.18(b)(4) in 
accordance with the formatting, grouping, size and other requirements 
set forth in Sec.  1005.18(b) for the long form disclosure.
18(c) Access to Prepaid Account Information
    1. Posted transactions. The electronic and written history of the 
consumer's account transactions provided under Sec.  1005.18(c)(1)(ii) 
and (iii), respectively, shall reflect transfers once they have been 
posted to the account. Thus, a financial institution does not need to 
include transactions that have been authorized but that have not yet 
posted to the account.
    2. Electronic history. The electronic history required under Sec.  
1005.18(c)(1)(ii) must be made available in a form that the consumer 
may keep, as required under Sec.  1005.4(a)(1). Financial institutions 
may satisfy this requirement if they make the electronic history 
available in a format that is capable of being retained. For example, a 
financial institution satisfies the requirement if it provides 
electronic history on a website in a format that is capable of being 
printed or stored electronically using a web browser.
    3. Written history. Requests that exceed the requirements of Sec.  
1005.18(c)(1)(iii) for providing written account transaction history, 
and which therefore a financial institution may charge a fee, include 
the following:
    i. A financial institution may assess a fee or charge to a consumer 
for responding to subsequent requests for written account transaction 
history made in a single calendar month. For example, if a consumer 
requests written account transaction history on June 1 and makes 
another request on August 5, the financial institution may not assess a 
fee or charge to the consumer for responding to either request. 
However, if the consumer requests written account transaction history 
on June 1 and then makes another request on June 15, the financial 
institution may assess a fee or charge to the consumer for responding 
to the request made on June 15, as this is the second response in the 
same month.
    ii. If a financial institution maintains more than 24 months of 
written account transaction history, it may assess a fee or charge to 
the consumer for providing a written history for transactions occurring 
more than 24 months preceding the date the financial institution 
receives the consumer's request, provided the consumer specifically 
requests the written account transaction history for that time period.
    iii. If a financial institution offers a consumer the ability to 
request automatic mailings of written account transaction history on a 
monthly or other periodic basis, it may assess a fee or charge for such 
automatic mailings but not for the written account transaction history 
requested pursuant to Sec.  1005.18(c)(1)(iii). See comment 18(c)-6.
    4. 12 months of electronic account transaction history. Section 
1005.18(c)(1)(ii) requires a financial institution to make available at 
least 12 months of account transaction history electronically. If a 
prepaid account has been opened for fewer than 12 months, the financial 
institution need only provide electronic account transaction history 
pursuant to Sec.  1005.18(c)(1)(ii) since the time of account opening. 
If a prepaid account is closed or becomes inactive, as defined by the 
financial institution, the financial institution need not make 
available electronic account transaction history. See comment 9(b)-3. 
If an inactive account becomes active, the financial institution must 
again make available 12 months of electronic account transaction 
history.
    5. 24 months of written account transaction history. Section 
1005.18(c)(1)(iii) requires a financial

[[Page 6435]]

institution to provide at least 24 months of account transaction 
history in writing upon the consumer's request. A financial institution 
may provide fewer than 24 months of written account transaction history 
if the consumer requests a shorter period of time. If a prepaid account 
has been opened for fewer than 24 months, the financial institution 
need only provide written account transaction history pursuant to Sec.  
1005.18(c)(1)(iii) since the time of account opening. Even if a prepaid 
account is closed or becomes inactive, the financial institution must 
continue to provide upon request at least 24 months of written account 
transaction history preceding the date the request is received. When a 
prepaid account has been closed or inactive for 24 months or longer, 
the financial institution is no longer required to provide any written 
account transaction history pursuant to Sec.  1005.18(c)(1)(iii).
    6. Periodic statement alternative for unverified prepaid accounts. 
For prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to provide a 
written history of the consumer's account transactions for any prepaid 
account for which the financial institution has not completed its 
consumer identification and verification process as described in Sec.  
1005.18(e)(3)(ii)(A) through (C). If a prepaid account is verified, a 
financial institution must provide written account transaction history 
upon the consumer's request that includes the period during which the 
account was not verified, provided that the period is within the 24-
month time frame specified in Sec.  1005.18(c)(1)(iii).
    7. Inclusion of all fees charged. A financial institution that 
furnishes a periodic statement pursuant to Sec.  1005.9(b) for a 
prepaid account must disclose the amount of any fees assessed against 
the account, whether for electronic fund transfers or otherwise, on the 
periodic statement as well as on any electronic or written account 
transaction history the financial institution makes available or 
provides to the consumer. For example, if a financial institution sends 
periodic statements and also makes available the consumer's electronic 
account transaction history on its website, the financial institution 
must disclose the amount of any fees assessed against the account, 
whether for electronic fund transfers or otherwise, on the periodic 
statement and on the consumer's electronic account transaction history 
made available on its website. Likewise, a financial institution that 
follows the periodic statement alternative in Sec.  1005.18(c)(1) must 
disclose the amount of any fees assessed against the account, whether 
for electronic fund transfers or otherwise, on the electronic history 
of the consumer's account transactions made available pursuant to Sec.  
1005.18(c)(1)(ii) and any written history of the consumer's account 
transactions provided pursuant to Sec.  1005.18(c)(1)(iii).
    8. Summary totals of fees. Section 1005.18(c)(5) requires a 
financial institution to disclose a summary total of the amount of all 
fees assessed by the financial institution against a prepaid account 
for the prior calendar month and for the calendar year to date.
    i. Generally. A financial institution that furnishes a periodic 
statement pursuant to Sec.  1005.9(b) for a prepaid account must 
display the monthly and annual fee totals on the periodic statement as 
well as on any electronic or written account transaction history the 
financial institution makes available or provides to the consumer. For 
example, if a financial institution sends periodic statements and also 
makes available the consumer's electronic account transaction history 
on its website, the financial institution must display the monthly and 
annual fee totals on the periodic statement and on the consumer's 
electronic account transaction history made available on its website. 
Likewise, a financial institution that follows the periodic statement 
alternative in Sec.  1005.18(c)(1) must display the monthly and annual 
fee totals on the electronic history of the consumer's account 
transactions made available pursuant to Sec.  1005.18(c)(1)(ii) and any 
written history of the consumer's account transactions provided 
pursuant to Sec.  1005.18(c)(1)(iii). If a financial institution 
provides periodic statements pursuant to Sec.  1005.9(b), fee totals 
may be disclosed for each statement period rather than each calendar 
month, if different. The summary totals of fees should be net of any 
fee reversals.
    ii. Third-party fees. A financial institution may, but is not 
required to, include third-party fees in its summary totals of fees 
provided pursuant to Sec.  1005.18(c)(5). For example, a financial 
institution must include in the summary totals of fees the fee it 
charges a consumer for using an out-of-network ATM, but it need not 
include any fee charged by an ATM operator, with whom the financial 
institution has no relationship, for the consumer's use of that 
operator's ATM. Similarly, a financial institution need not include in 
the summary totals of fees the fee charged by a third-party reload 
network for the service of adding cash to a prepaid account at a point-
of-sale terminal. A financial institution may, but is not required to, 
inform consumers of third-party fees such as by providing a disclaimer 
to indicate that the summary totals do not include certain third-party 
fees or to explain when third-party fees may occur or through some 
other method.
    9. Display of summary totals of fees. A financial institution may, 
but is not required to, also include sub-totals of the types of fees 
that make up the summary totals of fees as required by Sec.  
1005.18(c)(5). For example, if a financial institution distinguishes 
optional fees (e.g., custom card design fees) from fees to use the 
account, in displaying the summary totals of fees, the financial 
institution may include sub-totals of those fees, provided the 
financial institution also presents the combined totals of all fees.
18(e) Modified Limitations on Liability and Error Resolution 
Requirements
    1. Error resolution safe harbor provision. Institutions that choose 
to investigate notices of error provided up to 120 days from the date a 
transaction has posted to a consumer's account may still disclose the 
error resolution time period required by the regulation (as set forth 
in the model clause in paragraph (b) of appendix A-7 of this part). 
Specifically, an institution may disclose to prepaid account holders 
that the institution will investigate any notice of error provided 
within 60 days of the consumer electronically accessing an account or 
receiving a written history upon request that reflects the error, even 
if, for some or all transactions, the institution investigates any 
notice of error provided up to 120 days from the date that the 
transaction alleged to be in error has posted to the consumer's 
account. Similarly, an institution's summary of the consumer's 
liability (as required under Sec.  1005.7(b)(1)) may disclose that 
liability is based on the consumer providing notice of error within 60 
days of the consumer electronically accessing an account or receiving a 
written history reflecting the error, even if, for some or all 
transactions, the institution allows a consumer to assert a notice of 
error up to 120 days from the date of posting of the alleged error.
    2. Electronic access. A consumer is deemed to have accessed a 
prepaid account electronically when the consumer enters a user 
identification code or password or otherwise complies with a security 
procedure used by an institution to verify the consumer's identity and 
to provide access to a website or mobile application through

[[Page 6436]]

which account information can be viewed. An institution is not required 
to determine whether a consumer has in fact accessed information about 
specific transactions to trigger the beginning of the 60-day periods 
for liability limits and error resolution under Sec. Sec.  1005.6 and 
1005.11. A consumer is not deemed to have accessed a prepaid account 
electronically when the consumer receives an automated text message or 
other automated account alert, or checks the account balance by 
telephone.
    3. Untimely notice of error. An institution that provides a 
transaction history under Sec.  1005.18(c)(1) is not required to comply 
with the requirements of Sec.  1005.11 for any notice of error from the 
consumer received more than 60 days after the earlier of the date the 
consumer electronically accesses the account transaction history or the 
date the financial institution sends a written account transaction 
history upon the consumer's request. (Alternatively, as provided in 
Sec.  1005.18(e)(2)(ii), an institution need not comply with the 
requirements of Sec.  1005.11 with respect to any notice of error 
received from the consumer more than 120 days after the date of posting 
of the transfer allegedly in error.) Where the consumer's assertion of 
error involves an unauthorized EFT, however, the institution must 
comply with Sec.  1005.6 (including the extension of time limits in 
Sec.  1005.6(b)(4)) before it may impose any liability on the consumer.
    4. Verification of accounts. Section 1005.18(e)(3)(i) provides that 
for prepaid accounts that are not payroll card accounts or government 
benefit accounts, a financial institution is not required to comply 
with the liability limits and error resolution requirements in 
Sec. Sec.  1005.6 and 1005.11 for any prepaid account for which it has 
not successfully completed its consumer identification and verification 
process. Consumer identifying information may include the consumer's 
full name, address, date of birth, and Social Security number or other 
government-issued identification number. Section 1005.18(e)(3)(iii) 
provides that once a financial institution successfully completes its 
consumer identification and verification process with respect to a 
prepaid account, the financial institution must limit the consumer's 
liability for unauthorized transfers and resolve errors that occur 
following verification in accordance with Sec.  1005.6 or Sec.  
1005.11, or the modified timing requirements in Sec.  1005.18(e), as 
applicable. A financial institution is not required to limit a 
consumer's liability for unauthorized transfers or resolve errors that 
occur prior to the financial institution's successful completion of its 
consumer identification and verification process with respect to a 
prepaid account.
    5. Financial institution has not successfully completed 
verification. Section 1005.18(e)(3)(ii)(A) states that, provided it 
discloses to the consumer the risks of not registering and verifying a 
prepaid account, a financial institution has not successfully completed 
its consumer identification and verification process where it has not 
concluded the process with respect to a particular prepaid account. For 
example, a financial institution initiates its consumer identification 
and verification process by collecting identifying information about a 
consumer, and attempts to verify the consumer's identity. The financial 
institution is unable to conclude the process because of conflicting 
information about the consumer's current address. The financial 
institution informs the consumer about the nature of the information at 
issue and requests additional documentation, but the consumer does not 
provide the requested documentation. As long as the information needed 
to complete the verification process remains outstanding, the financial 
institution has not concluded its consumer identification and 
verification process with respect to that consumer. A financial 
institution may not delay completing its consumer identification and 
verification process or refuse to verify a consumer's identity based on 
the consumer's assertion of an error.
    6. Account verification prior to acquisition. A financial 
institution that collects and verifies consumer identifying 
information, or that obtains such information after it has been 
collected and verified by a third party, prior to or as part of the 
account acquisition process, is deemed to have successfully completed 
its consumer identification and verification process with respect to 
that account. For example, a university contracts with a financial 
institution to disburse financial aid to students via the financial 
institution's prepaid accounts. To facilitate the accurate disbursal of 
aid awards, the university provides the financial institution with 
identifying information about the university's students, whose 
identities the university had previously verified. The financial 
institution is deemed to have successfully completed its consumer 
identification and verification process with respect to those accounts.
* * * * *
18(h) Effective Date and Special Transition Rules for Disclosure 
Provisions
    1. Disclosures not on prepaid account access devices and prepaid 
account packaging materials. Section 1005.18(h)(1) provides that, 
except as provided in Sec.  1005.18(h)(2) and (3), the disclosure 
requirements of subpart A, as modified by Sec.  1005.18, apply to 
prepaid accounts as defined in Sec.  1005.2(b)(3), including government 
benefit accounts subject to Sec.  1005.15, beginning April 1, 2019. 
This effective date applies to disclosures made available or provided 
to consumers electronically, orally by telephone, or in a form other 
than on pre-printed materials, such as disclosures printed on paper by 
a financial institution upon a consumer's request.
    2. Disclosures on prepaid account access devices and prepaid 
account packaging materials. Section 1005.18(h)(2)(i) provides that the 
disclosure requirements of subpart A, as modified by Sec.  1005.18, do 
not apply to any disclosures that are provided, or that would otherwise 
be required to be provided, on prepaid account access devices, or on, 
in, or with prepaid account packaging materials that were manufactured, 
printed, or otherwise produced in the normal course of business prior 
to April 1, 2019. This includes, for example, disclosures contained on 
or in packages for prepaid accounts sold at retail, or disclosures for 
payroll card accounts or government benefit accounts that are 
distributed to employees or benefits recipients in packages or 
envelopes. Disclosures on, in, or with access devices or packaging 
materials that are manufactured, printed, or otherwise produced on or 
after April 1, 2019 must comply with all the requirements of subpart A.
    3. Form of notice to consumers. A financial institution that is 
required to notify consumers of a change in terms and conditions 
pursuant to Sec.  1005.18(h)(2)(ii) or (iii), or that otherwise 
provides updated initial disclosures as a result of Sec.  1005.18(h)(1) 
taking effect, may provide the notice or disclosures either as a 
separate document or included in another notice or mailing that the 
consumer receives regarding the prepaid account to the extent permitted 
by other laws and regulations.
    4. Ability to contact the consumer. A financial institution that 
has not obtained the consumer's contact information is not required to 
comply with the requirements set forth in Sec.  1005.18(h)(2)(ii) or 
(iii). A financial institution is able to contact the

[[Page 6437]]

consumer when, for example, it has the consumer's mailing address or 
email address.
    5. Closed and inactive prepaid accounts. The requirements of Sec.  
1005.18(h)(2)(iii) do not apply to prepaid accounts that are closed or 
inactive, as defined by the financial institution. However, if an 
inactive account becomes active, the financial institution must comply 
with the requirements of Sec.  1005.18(h)(2)(ii) within 30 days of the 
account becoming active again in order to avail itself of the timing 
requirements and accommodations set forth in Sec.  1005.18(h)(2)(iii) 
and (iv).
    6. Account information not available on April 1, 2019. i. 
Electronic and written account transaction history. A financial 
institution following the periodic statement alternative in Sec.  
1005.18(c) must make available 12 months of electronic account 
transaction history pursuant to Sec.  1005.18(c)(1)(ii) and must 
provide 24 months of written account transaction history upon request 
pursuant to Sec.  1005.18(c)(1)(iii) beginning April 1, 2019. If, on 
April 1, 2019, the financial institution does not have readily 
accessible the data necessary to make available or provide the account 
histories for the required time periods, the financial institution may 
make available or provide such histories using the data for the time 
period it has until the financial institution has accumulated the data 
necessary to comply in full with the requirements set forth in Sec.  
1005.18(c)(1)(ii) and (iii). For example, a financial institution that 
had been retaining only 60 days of account history before April 1, 2019 
would provide 60 days of written account transaction history upon a 
consumer's request on April 1, 2019. If, on May 1, 2019, the consumer 
made another request for written account transaction history, the 
financial institution would be required to provide three months of 
account history. The financial institution must continue to provide as 
much account history as it has accumulated at the time of a consumer's 
request until it has accumulated 24 months of account history. Thus, 
all financial institutions must fully comply with the electronic 
account transaction history requirement set forth in Sec.  
1005.18(c)(1)(ii) no later than April 1, 2020 and must fully comply 
with the written account transaction history requirement set forth in 
Sec.  1005.18(c)(1)(iii) no later than April 1, 2021.
    ii. Summary totals of fees. A financial institution must display a 
summary total of the amount of all fees assessed by the financial 
institution on the consumer's prepaid account for the prior calendar 
month and for the calendar year to date pursuant to Sec.  1005.18(c)(5) 
beginning April 1, 2019. If, on April 1, 2019, the financial 
institution does not have readily accessible the data necessary to 
calculate the summary totals of fees for the prior calendar month or 
the calendar year to date, the financial institution may provide the 
summary totals using the data it has until the financial institution 
has accumulated the data necessary to display the summary totals as 
required by Sec.  1005.18(c)(5). That is, the financial institution 
would first display the monthly fee total beginning on May 1, 2019 for 
the month of April, and the year-to-date fee total beginning on April 
1, 2019, provided the financial institution discloses that it is 
displaying the year-to-date total beginning on April 1, 2019 rather 
than for the entire calendar year 2019. On January 1, 2020, financial 
institutions must begin displaying year-to-date fee totals for calendar 
year 2020.

Section 1005.19--Internet Posting of Prepaid Account Agreements

19(a) Definitions
19(a)(1) Agreement
    1. Provisions contained in separate documents included. Section 
1005.19(a)(1) defines a prepaid account agreement, for purposes of 
Sec.  1005.19, as the written document or documents evidencing the 
terms of the legal obligation, or the prospective legal obligation, 
between a prepaid account issuer and a consumer for a prepaid account. 
An agreement may consist of several documents that, taken together, 
define the legal obligation between the issuer and consumer.
19(a)(2) Amends
    1. Substantive changes. A change to an agreement is substantive, 
and therefore is deemed an amendment of the agreement, if it alters the 
rights or obligations of the parties. Section 1005.19(a)(2) provides 
that any change in the fee information, as defined in Sec.  
1005.19(a)(3), is deemed to be substantive. Examples of other changes 
that generally would be considered substantive include:
    i. Addition or deletion of a provision giving the issuer or 
consumer a right under the agreement, such as a clause that allows an 
issuer to unilaterally change the terms of an agreement.
    ii. Addition or deletion of a provision giving the issuer or 
consumer an obligation under the agreement, such as a clause requiring 
the consumer to pay an additional fee.
    iii. Changes that may affect the cost of the prepaid account to the 
consumer, such as changes in a provision describing how the prepaid 
account's monthly fee will be calculated.
    iv. Changes that may affect how the terms of the agreement are 
construed or applied, such as changes to a choice of law provision.
    v. Changes that may affect the parties to whom the agreement may 
apply, such as changes to provisions regarding authorized users or 
assignment of the agreement.
    vi. Changes to the corporate name of the issuer or program manager, 
or to the issuer's address or identifying number, such as its RSSD ID 
number or tax identification number.
    vii. Changes to the list of names of other relevant parties, such 
as the employer for a payroll card program or the agency for a 
government benefit program. But see Sec.  1005.19(b)(2)(ii) regarding 
the timing of submitting such changes to the Bureau.
    viii. Changes to the name of the prepaid account program to which 
the agreement applies.
    2. Non-substantive changes. Changes that generally would not be 
considered substantive include, for example:
    i. Correction of typographical errors that do not affect the 
meaning of any terms of the agreement.
    ii. Changes to the issuer's corporate logo or tagline.
    iii. Changes to the format of the agreement, such as conversion to 
a booklet from a full-sheet format, changes in font, or changes in 
margins.
    iv. Reordering sections of the agreement without affecting the 
meaning of any terms of the agreement.
    v. Adding, removing, or modifying a table of contents or index.
    vi. Changes to titles, headings, section numbers, or captions.
19(a)(4) Issuer
    1. Issuer. Section 1005.19(a)(4) provides that, for purposes of 
Sec.  1005.19, issuer or prepaid account issuer means the entity to 
which a consumer is legally obligated, or would be legally obligated, 
under the terms of a prepaid account agreement. For example, Bank X and 
Bank Y work together to issue prepaid accounts. A consumer that obtains 
a prepaid account issued pursuant to this arrangement between Bank X 
and Bank Y is subject to an agreement that states ``This is an 
agreement between you, the consumer, and Bank X that governs the terms 
of your Bank Y Prepaid Account.'' The prepaid account issuer in this 
example is Bank X, because the

[[Page 6438]]

agreement creates a legally enforceable obligation between the consumer 
and Bank X. Bank X is the issuer even if the consumer applied for the 
prepaid account through a link on Bank Y's website and the cards 
prominently feature the Bank Y logo on the front of the card.
    2. Use of third-party service providers. An issuer has a legal 
obligation to comply with the requirements of Sec.  1005.19. However, 
an issuer generally may use a third-party service provider to satisfy 
its obligations under Sec.  1005.19, provided that the issuer acts in 
accordance with regulatory guidance regarding use of third-party 
service providers and other applicable regulatory guidance. In some 
cases, an issuer may wish to arrange for the entity with which it 
partners to issue prepaid accounts to fulfill the requirements of Sec.  
1005.19 on the issuer's behalf. For example, Program Manager and Bank 
work together to issue prepaid accounts. Under the Sec.  1005.19(a)(4) 
definition of issuer, Bank is the issuer of these prepaid accounts for 
purposes of Sec.  1005.19. However, Program Manager services the 
prepaid accounts, including mailing to consumers account opening 
materials and making available to consumers their electronic account 
transaction history, pursuant to Sec.  1005.18(c)(1)(ii). While Bank is 
responsible for ensuring compliance with Sec.  1005.19, Bank may 
arrange for Program Manager (or another appropriate third-party service 
provider) to make submissions of prepaid account agreements to the 
Bureau under Sec.  1005.19 on Bank's behalf. Bank must comply with 
regulatory guidance regarding use of third-party service providers and 
other applicable regulatory guidance.
    3. Third-party websites. As explained in comment 19(c)-2, if an 
issuer provides consumers with access to specific information about 
their individual accounts, such as making available to consumers their 
electronic account transaction history, pursuant to Sec.  
1005.18(c)(1)(ii), through a third-party website, the issuer is deemed 
to maintain that website for purposes of Sec.  1005.19. Such a website 
is deemed to be maintained by the issuer for purposes of Sec.  1005.19 
even where, for example, an unaffiliated entity designs the website and 
owns and maintains the information technology infrastructure that 
supports the website, consumers with prepaid accounts from multiple 
issuers can access individual account information through the same 
website, and the website is not labeled, branded, or otherwise held out 
to the public as belonging to the issuer. A partner institution's 
website is an example of a third-party website that may be deemed to be 
maintained by the issuer for purposes of Sec.  1005.19. For example, 
Program Manager and Bank work together to issue prepaid accounts. Under 
the Sec.  1005.19(a)(4) definition of issuer, Bank is the issuer of 
these prepaid accounts for purposes of Sec.  1005.19. Bank does not 
maintain a website specifically related to prepaid accounts. However, 
consumers can access information about their individual accounts, such 
as an electronic account transaction history, through a website 
maintained by Program Manager. Program Manager designs the website and 
owns and maintains the information technology infrastructure that 
supports the website. The website is branded and held out to the public 
as belonging to Program Manager. Because consumers can access 
information about their individual accounts through this website, the 
website is deemed to be maintained by Bank for purposes of Sec.  
1005.19. Bank therefore may comply with Sec.  1005.19(c) or (d)(1) by 
ensuring that agreements offered by Bank are posted on Program 
Manager's website in accordance with Sec.  1005.19(c) or (d)(1), 
respectively. Bank need not create and maintain a website branded and 
held out to the public as belonging to Bank in order to comply with 
Sec.  1005.19(c) and (d) as long as Bank ensures that Program Manager's 
website complies with these sections.
19(a)(6) Offers to the General Public
    1. Prepaid accounts offered to limited groups. An issuer is deemed 
to offer a prepaid account agreement to the general public even if the 
issuer markets, solicits applications for, or otherwise makes available 
prepaid accounts only to a limited group of persons. For example, an 
issuer may solicit only residents of a specific geographic location for 
a particular prepaid account; in this case, the agreement would be 
considered to be offered to the general public. Similarly, agreements 
for prepaid accounts issued by a credit union are considered to be 
offered to the general public even though such prepaid accounts are 
available only to credit union members.
    2. Prepaid account agreements not offered to the general public. A 
prepaid account agreement is not offered to the general public when a 
consumer is offered the agreement only by virtue of the consumer's 
relationship with a third party. Examples of agreements not offered to 
the general public include agreements for payroll card accounts, 
government benefit accounts, or for prepaid accounts used to distribute 
student financial aid disbursements, or property and casualty insurance 
payouts, and other similar programs.
19(a)(7) Open Account
    1. Open account. A prepaid account is an open account if (i) there 
is an outstanding balance in the account; (ii) the consumer can load 
more funds to the account even if the account does not currently hold a 
balance; or (iii) the consumer can access credit from a covered 
separate credit feature accessible by a hybrid prepaid-credit card as 
defined in Regulation Z, 12 CFR 1026.61, in connection with a prepaid 
account. Under this definition, an account that meets any of these 
criteria is considered to be open even if the account is deemed 
inactive by the issuer.
19(a)(8) Prepaid Account
    1. Prepaid account. Section 1005.19(a)(7) provides that, for 
purposes of Sec.  1005.19, the term prepaid account means a prepaid 
account as defined in Sec.  1005.2(b)(3). Therefore, for purposes of 
Sec.  1005.19, a prepaid account includes, among other things, a 
payroll card account as defined in Sec.  1005.2(b)(3)(iii) and a 
government benefit account as defined in Sec. Sec.  1005.2(b)(3)(iii) 
and 1005.15(a)(2).
19(b) Submission of Agreements to the Bureau
19(b)(1) Submissions on a Rolling Basis
    1. Rolling submission requirement. Section 1005.19(b)(1) requires 
issuers to send submissions to the Bureau no later than 30 days after 
offering, amending, or ceasing to offer any prepaid account agreement, 
as described in Sec.  1005.19(b)(1)(ii) through (iv). For example, if 
on July 1 an issuer offers a prepaid account agreement that has not 
been previously submitted to the Bureau, it must submit that agreement 
to the Bureau by July 31 of the same year. Similarly, if on August 1 an 
issuer amends a prepaid account agreement previously submitted to the 
Bureau, and the change becomes effective on September 15, the issuer 
must submit the entire amended agreement as required by Sec.  
1005.19(b)(2)(i) by October 15 of the same year. Furthermore, if on 
December 31 an issuer ceases to offer a prepaid account agreement that 
was previously submitted to the Bureau, it must submit notification to 
the Bureau that it is withdrawing that agreement as required by Sec.  
1005.19(b)(3) by January 30 of the following year.
    2. Prepaid accounts offered in conjunction with multiple issuers. 
If a program manager offers prepaid account agreements in conjunction 
with

[[Page 6439]]

multiple issuers, each issuer must submit its own agreement to the 
Bureau. Alternatively, each issuer may use the program manager to 
submit the agreement on its behalf, in accordance with comment 
19(a)(4)-2.
19(b)(2) Amended Agreements
    1. Change-in-terms notices not permissible. Section 
1005.19(b)(2)(i) requires that if an agreement previously submitted to 
the Bureau is amended, the issuer must submit the entire revised 
agreement to the Bureau. An issuer may not fulfill this requirement by 
submitting a change-in-terms or similar notice covering only the terms 
that have changed. Amendments must be integrated into the text of the 
agreement (or the optional addenda described in Sec.  1005.19(b)(6)), 
not provided as separate riders.
    2. Updates to the list of names of other relevant parties to an 
agreement. Section 1005.19(b)(2)(ii) permits an issuer to delay making 
a submission to the Bureau regarding a change in the list of other 
relevant parties to a particular agreement until the earlier of such 
time as the issuer is otherwise submitting an amended agreement or 
changes to other identifying information about the issuer and its 
submitted agreements pursuant to Sec.  1005.19(b)(1)(i); or May 1 of 
each year, for any updates to the list of names of other relevant 
parties that occurred between the issuer's last submission of relevant 
party information for that agreement and April 1 of that year. Section 
1005.19(b)(2)(ii) thus ensures that the Bureau has a list of names of 
other relevant parties for all submitted agreements that is up-to-date 
as of April 1 of each year. The following examples illustrate these 
requirements:
    i. An issuer first submits to the Bureau a payroll card agreement, 
along with a list of names of the other relevant parties (i.e., 
employers) to that agreement, on May 1, 2019. On July 1, 2020, the 
issuer adds four new employers under the agreement. The issuer is not 
required to make a submission to the Bureau regarding the addition of 
other relevant parties to that agreement at that time.
    ii. On January 1, 2020, a change to the payroll card agreement 
becomes effective reflecting a new feature and accompanying fee that 
the issuer has added to the program. The issuer is required, by January 
31, 2020, to submit to the Bureau its entire revised agreement and an 
updated list of the names of other relevant parties to that agreement.
    iii. If the issuer has not added any other employers to the 
agreement by April 1, 2020, the issuer is not required to submit to the 
Bureau an updated list of names of other relevant parties to that 
agreement, because the list it previously submitted to the Bureau 
remains current.
    iv. If, however, on March 1, 2020, the issuer adds two new 
employers under the agreement but makes no other changes to the 
agreement, then as of April 1 there are new relevant parties to the 
agreement that the issuer has not submitted to the Bureau. The issuer 
is required, by May 1, 2020, to submit to the Bureau an updated list of 
names of other relevant parties to that agreement reflecting the two 
employers it added in March. Because the issuer has not made any other 
changes to the agreement since it was submitted in January, the issuer 
is not required to re-submit the agreement itself by May 1, 2020.
* * * * *
19(b)(6) Form and Content of Agreements Submitted to the Bureau
    1. Agreements currently in effect. Agreements submitted to the 
Bureau must contain the provisions of the agreement and fee information 
currently in effect. For example, on June 1, an issuer decides to 
decrease the out-of-network ATM withdrawal fee associated with one of 
the agreements it offers. The change in that fee will become effective 
on August 1. The issuer must submit and post the amended agreement with 
the decreased out-of-network ATM withdrawal fee to the Bureau by August 
31 as required by Sec.  1005.19(b)(2)(i) and (c).
    2. Fee information variations do not constitute separate 
agreements. Fee information that may vary from one consumer to another 
depending on the consumer's state of residence or other factors must be 
disclosed by setting forth all the possible variations. For example, an 
issuer offers a prepaid account with a monthly fee of $4.95 or $0 if 
the consumer regularly receives direct deposit to the prepaid account. 
The issuer must submit to the Bureau one agreement with fee information 
listing the possible monthly fees of $4.95 or $0 and including the 
explanation that the latter fee is dependent upon the consumer 
regularly receiving direct deposit.
    3. Integrated agreement requirement. Issuers may not submit 
provisions of the agreement or fee information in the form of change-
in-terms notices or riders. The only addenda that may be submitted as 
part of an agreement are the optional fee information addenda described 
in Sec.  1005.19(b)(6)(ii). Changes in provisions or fee information 
must be integrated into the body of the agreement or the optional fee 
information addenda. For example, it would be impermissible for an 
issuer to submit to the Bureau an agreement in the form of a terms and 
conditions document on January 1 and subsequently submit a change-in-
terms notice to indicate amendments to the previously submitted 
agreement. Instead, the issuer must submit a document that integrates 
the changes made by each of the change-in-terms notices into the body 
of the original terms and conditions document and the optional addenda 
displaying variations in fee information.
* * * * *

PART 1026--TRUTH IN LENDING (REGULATION Z)

0
8. The authority citation for part 1026 continues to read as follows:

    Authority:  12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353, 
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.

Subpart G--Special Rules Applicable to Credit Card Accounts and 
Open-End Credit Offered to College Students

0
9. Amend Sec.  1026.61 by revising paragraphs (a)(1)(iii), (a)(3)(ii), 
(a)(4) introductory text, (a)(4)(i), and (a)(5)(iii) to read as 
follows:


Sec.  1026.61  Hybrid prepaid-credit cards.

    (a) * * *
    (1) * * *
    (iii) With respect to a credit feature structured as a negative 
balance on the asset feature of the prepaid account as described in 
paragraph (a)(3) of this section, a prepaid card is not a hybrid 
prepaid-credit card or a credit card for purposes of this regulation if 
the conditions set forth in paragraph (a)(4) of this section are met.
* * * * *
    (3) * * *
    (ii) Negative asset balances. Notwithstanding paragraph (a)(3)(i) 
of this section with regard to coverage under this regulation, 
structuring a hybrid prepaid-credit card to access credit through a 
negative balance on the asset feature violates paragraph (b) of this 
section. A prepaid account issuer can use a negative asset balance 
structure to extend credit on an asset feature of a prepaid account 
only if the prepaid card is not a hybrid prepaid-credit card with 
respect to that credit as described in paragraph (a)(4) of this 
section.
    (4) Exception for credit extended through a negative balance. A 
prepaid card is not a hybrid prepaid-credit card with respect to credit 
extended through a negative balance on the asset feature

[[Page 6440]]

of the prepaid account and is not a credit card for purposes of this 
regulation with respect to that credit where:
    (i) The prepaid card cannot access credit from a covered separate 
credit feature as described in paragraph (a)(2)(i) of this section that 
is offered by a prepaid account issuer or its affiliate; and
* * * * *
    (5) * * *
    (iii) Business partner means a person (other than the prepaid 
account issuer or its affiliates) that can extend credit through a 
separate credit feature where the person or its affiliate has an 
arrangement with a prepaid account issuer or its affiliate except as 
provided in paragraph (a)(5)(iii)(D) of this section.
    (A) Arrangement defined. For purposes of paragraph (a)(5)(iii) of 
this section, a person that can extend credit through a separate credit 
feature or the person's affiliate has an arrangement with a prepaid 
account issuer or its affiliate if the circumstances in either 
paragraph (a)(5)(iii)(B) or (C) of this section are met.
    (B) Arrangement by agreement. A person that can extend credit 
through a separate credit feature or its affiliate has an arrangement 
with a prepaid account issuer or its affiliate if the parties have an 
agreement that allows the prepaid card from time to time to draw, 
transfer, or authorize a draw or transfer of credit in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers.
    (C) Marketing arrangement. A person that can extend credit through 
a separate credit feature or its affiliate has an arrangement with a 
prepaid account issuer or its affiliate if:
    (1) The parties have a business, marketing, or promotional 
agreement or other arrangement which provides that prepaid accounts 
offered by the prepaid account issuer will be marketed to the customers 
of the person that can extend credit; or the separate credit feature 
offered by the person who can extend credit will be marketed to the 
holders of prepaid accounts offered by the prepaid account issuer 
(including any marketing to customers to encourage them to authorize 
the prepaid card to access the separate credit feature as described in 
paragraph (a)(5)(iii)(C)(2) of this section); and
    (2) At the time of the marketing agreement or arrangement described 
in paragraph (a)(5)(iii)(C)(1) of this section, or at any time 
afterwards, the prepaid card from time to time can draw, transfer, or 
authorize the draw or transfer of credit from the separate credit 
feature offered by the person that can extend credit in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers. This requirement is satisfied even if there 
is no specific agreement between the parties that the card can access 
the credit feature, as described in paragraph (a)(5)(iii)(B) of this 
section.
    (D) Exception for certain credit card account arrangements. For 
purposes of paragraph (a)(5)(iii) of this section, a person that can 
extend credit through a credit card account is not a business partner 
of a prepaid account issuer with which it has an arrangement as defined 
in paragraphs (a)(5)(iii)(A) through (C) of this section with regard to 
such credit card account if all of the following conditions are met:
    (1) The credit card account is a credit card account under an open-
end (not home-secured) consumer credit plan that a consumer can access 
through a traditional credit card.
    (2) The prepaid account issuer and the card issuer do not allow the 
prepaid card to draw, transfer, or authorize the draw or transfer of 
credit from the credit card account from time to time in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers, except where the prepaid account issuer or 
the card issuer has received from the consumer a written request that 
is separately signed or initialized to authorize the prepaid card to 
access the credit card account as described above. If the credit card 
account is linked to the prepaid account prior to April 1, 2019, or 
prior to the arrangement between the prepaid account issuer and the 
card issuer as described in paragraphs (a)(5)(iii)(A) through (C) of 
this section, the prepaid account issuer and the card issuer will be 
deemed to have satisfied this condition even if they have not received 
from the consumer a written request that is separately signed or 
initialized to authorize the prepaid card to access the credit card 
account as described in this paragraph.
    (3) The prepaid account issuer and the card issuer do not condition 
the acquisition or retention of the prepaid account or the credit card 
account on whether a consumer authorizes the prepaid card to access the 
credit card account as described in paragraph (a)(5)(iii)(D)(2) of this 
section. If the credit card account is linked to the prepaid account 
prior to April 1, 2019, this condition only applies to the retention of 
the prepaid account and the credit card account on or after April 1, 
2019.
    (4) The prepaid account issuer applies the same terms, conditions, 
or features to the prepaid account when a consumer authorizes linking 
the prepaid card to the credit card account as described in paragraph 
(a)(5)(iii)(D)(2) of this section as it applies to the consumer's 
prepaid account when the consumer does not authorize such a linkage. In 
addition, the prepaid account issuer applies the same fees to load 
funds from the credit card account that is linked to the prepaid 
account as described above as it charges for a comparable load on the 
consumer's prepaid account to access a credit feature offered by a 
person that is not the prepaid account issuer, its affiliate, or a 
person with which the prepaid account issuer has an arrangement as 
described in paragraphs (a)(5)(iii)(A) through (C) of this section.
    (5) The card issuer applies the same specified terms and conditions 
to the credit card account when a consumer authorizes linking the 
prepaid card to the credit card account as described in paragraph 
(a)(5)(iii)(D)(2) of this section as it applies to the consumer's 
credit card account when the consumer does not authorize such a 
linkage. In addition, the card issuer applies the same specified terms 
and conditions to extensions of credit accessed by the prepaid card 
from the credit card account as it applies to extensions of credit 
accessed by the traditional credit card. For purposes of this 
paragraph, ``specified terms and conditions'' means the terms and 
conditions required to be disclosed under Sec.  1026.6(b), any 
repayment terms and conditions, and the limits on liability for 
unauthorized credit transactions.
* * * * *

0
10. In supplement I to part 1026:
0
a. Under Section 1026.4--Finance Charge, revise Paragraph 4(b)(11).
0
b. Under Section 1026.6--Account-Opening Disclosures, revise Paragraph 
6(b)(3)(iii)(D).
0
c. Under Section 1026.52--Limitations on Fees, revise 52(b)(2)(i) Fees 
That Exceed Dollar Amount Associated With Violation.
0
d. Under Section 1026.61--Hybrid Prepaid-Credit Cards, revise 61(a)(3) 
Prepaid Card Can Access Credit Extended Through a Negative Balance on 
the Asset Feature, 61(a)(4) Exception (including the heading), 
Paragraph 61(a)(5)(iii), and 61(b) Structure of

[[Page 6441]]

Credit Features Accessible by Hybrid Prepaid-Credit Cards.
    The revisions read as follows:

Supplement I to Part 1026--Official Interpretations

* * * * *

Subpart A--General

* * * * *

Section 1026.4--Finance Charge

* * * * *
4(b) Examples of Finance Charges
* * * * *
Paragraph 4(b)(11)
    1. Credit in connection with a prepaid card. Section 1026.61 
governs credit offered in connection with a prepaid card.
    i. A separate credit feature that meets the conditions of Sec.  
1026.61(a)(2)(i) is defined as a covered separate credit feature 
accessible by a hybrid prepaid-credit card. See Sec.  1026.61(a)(2)(i) 
and comment 61(a)(2)-4. In this case, the hybrid prepaid-credit card 
can access both the covered separate credit feature and the asset 
feature of the prepaid account. The rules for classification of fees or 
charges as finance charges with respect to the covered separate credit 
feature are specified in Sec.  1026.4(b)(11) and related commentary.
    ii. If a prepaid card can access a non-covered separate credit 
feature as described in Sec.  1026.61(a)(2)(ii), the card is not a 
hybrid prepaid-credit card with respect to that credit feature. In that 
case:
    A. Section 1026.4(b)(11) and related commentary do not apply to 
fees or charges imposed on the non-covered separate credit feature; 
instead, the general rules set forth in Sec.  1026.4 determine whether 
these fees or charges are finance charges; and
    B. Fees or charges on the asset feature of the prepaid account are 
not finance charges under Sec.  1026.4 with respect to the non-covered 
separate credit feature. See comment 61(a)(2)-5.iii for guidance on the 
applicability of this regulation in connection with non-covered credit 
features accessible by prepaid cards.
    iii. If the prepaid card is not a hybrid prepaid-credit card with 
respect to credit extended through a negative balance on the asset 
feature of the prepaid account pursuant to Sec.  1026.61(a)(4), with 
regard to that credit, fees charged on the asset feature of the prepaid 
account in accordance with Sec.  1026.61(a)(4)(ii)(B) are not finance 
charges.
Paragraph 4(b)(11)(i)
    1. Transaction fees imposed on the covered separate credit feature. 
Consistent with comment 4(a)-4, any transaction charge imposed on a 
cardholder by a card issuer on a covered separate credit feature 
accessible by a hybrid prepaid-credit card is a finance charge. 
Transaction charges that are imposed on the asset feature of a prepaid 
account are subject to Sec.  1026.4(b)(11)(ii) and related commentary, 
instead of Sec.  1026.4(b)(11)(i).
Paragraph 4(b)(11)(ii)
    1. Fees or charges imposed on the asset feature of a prepaid 
account. i. Under Sec.  1026.4(b)(11)(ii), with regard to a covered 
separate credit feature and an asset feature of a prepaid account that 
are both accessible by a hybrid prepaid-credit card as defined Sec.  
1026.61, any fee or charge imposed on the asset feature of the prepaid 
account is a finance charge to the extent that the amount of the fee or 
charge exceeds comparable fees or charges imposed on prepaid accounts 
in the same prepaid account program that do not have a covered separate 
credit feature accessible by a hybrid prepaid-credit card. This comment 
provides guidance with respect to comparable fees under Sec.  
1026.4(b)(11)(ii) for the two types of credit extensions on a covered 
separate credit feature. See Sec.  1026.61(a)(2)(i)(B) and comment 
61(a)(2)-4.ii. Comment 4(b)(11)(ii)-1.ii provides guidance for credit 
extensions where the hybrid prepaid-credit card accesses credit from 
the covered separate credit feature in the course of authorizing, 
settling, or otherwise completing a transaction conducted with the card 
to obtain goods or services, obtain cash, or conduct person-to-person 
transfers. Comment 4(b)(11)(ii)-1.iii provides guidance for credit 
extensions where a consumer draws or transfers credit from the covered 
separate credit feature outside the course of a transaction conducted 
with the card to obtain goods or services, obtain cash, or conduct 
person-to-person transfers.
    ii. Where the hybrid prepaid-credit card accesses credit from a 
covered separate credit feature in the course of authorizing, settling, 
or otherwise completing a transaction conducted with the card to obtain 
goods or services, obtain cash, or conduct person-to-person transfers, 
any per transaction fees imposed on the asset feature of prepaid 
accounts, including load and transfer fees, for such credit from the 
credit feature are comparable only to per transaction fees for each 
transaction to access funds in the asset feature of a prepaid account 
that are imposed on prepaid accounts in the same prepaid account 
program that does not have such a credit feature. Per transaction fees 
for a transaction that is conducted to load or draw funds into a 
prepaid account from some other source are not comparable for purposes 
of Sec.  1026.4(b)(11)(ii). To illustrate:
    A. Assume a prepaid account issuer charges $0.50 on prepaid 
accounts without a covered separate credit feature for each transaction 
that accesses funds in the asset feature of the prepaid accounts. Also, 
assume that the prepaid account issuer charges $0.50 per transaction on 
the asset feature of prepaid accounts in the same prepaid program where 
the hybrid prepaid-credit card accesses credit from a covered separate 
credit feature in the course of a transaction. In this case, the $0.50 
per transaction fee imposed on the asset feature of the prepaid account 
with a covered separate credit feature is not a finance charge.
    B. Assume same facts as in paragraph A above, except that assume 
the prepaid account issuer charges $1.25 on the asset feature of a 
prepaid account for each transaction where the hybrid prepaid-credit 
card accesses credit from the covered separate credit feature in the 
course of the transaction. In this case, the additional $0.75 is a 
finance charge.
    C. Assume a prepaid account issuer charges $0.50 on prepaid 
accounts without a covered separate credit feature for each transaction 
that accesses funds in the asset feature of the prepaid accounts. 
Assume also that the prepaid account issuer charges both a $0.50 per 
transaction fee and a $1.25 transfer fee on the asset feature of 
prepaid accounts in the same prepaid program where the hybrid prepaid-
credit card accesses credit from a covered separate credit feature in 
the course of a transaction. In this case, both fees charged on a per-
transaction basis for the credit transaction (i.e., a combined fee of 
$1.75 per transaction) must be compared to the $0.50 per transaction 
fee to access funds in the asset feature of the prepaid account without 
a covered separate credit feature. Accordingly, the $1.25 excess is a 
finance charge.
    D. Assume same facts as in paragraph C above, except that assume 
the prepaid account issuer also charges a load fee of $1.25 whenever 
funds are transferred or loaded from a separate asset account, such as 
from a deposit account via a debit card, in the course of a transaction 
on prepaid accounts without a covered separate credit feature, in 
addition to charging a $0.50 per transaction fee. The

[[Page 6442]]

$1.25 excess in paragraph C is still a finance charge because load or 
transfer fees that are charged on the asset feature of prepaid account 
for credit from the covered separate credit feature are compared only 
to per transaction fees imposed for accessing funds in the asset 
feature of the prepaid account for prepaid accounts without such a 
credit feature. Per transaction fees for a transaction that is 
conducted to load or draw funds into a prepaid account from some other 
source are not comparable for purposes of Sec.  1026.4(b)(11)(ii).
    iii. A consumer may choose in a particular circumstance to draw or 
transfer credit from the covered separate credit feature outside the 
course of a transaction conducted with the card to obtain goods or 
services, obtain cash, or conduct person-to-person transfers. For 
example, a consumer may use the prepaid card at the prepaid account 
issuer's website to load funds from the covered separate credit feature 
outside the course of a transaction conducted with the card to obtain 
goods or services, obtain cash, or conduct person-to-person transfers. 
See Sec.  1026.61(a)(2)(i)(B) and comment 61(a)(2)-4.ii. In these 
situations, load or transfer fees imposed for draws or transfers of 
credit from the covered separate credit feature outside the course of a 
transaction are compared only with fees, if any, to load funds as a 
direct deposit of salary from an employer or a direct deposit of 
government benefits that are charged on prepaid accounts without a 
covered separate credit feature. Fees imposed on prepaid accounts 
without a covered separate credit feature for a one-time load or 
transfer of funds from a separate asset account or from a non-covered 
separate credit feature are not comparable for purposes of Sec.  
1026.4(b)(11)(ii). To illustrate:
    A. Assume a prepaid account issuer charges a $1.25 load fee to 
transfer funds from a non-covered separate credit feature, such as a 
non-covered separate credit card account, into prepaid accounts that do 
not have a covered separate credit feature and does not charge a fee 
for a direct deposit of salary from an employer or a direct deposit of 
government benefits on those prepaid accounts. Assume the prepaid 
account issuer charges $1.25 on the asset feature of a prepaid account 
with a covered separate credit feature to load funds from the covered 
separate credit feature outside the course of a transaction. In this 
case, the $1.25 fee imposed on the asset feature of the prepaid account 
with a covered separate credit feature is a finance charge because no 
fee is charged for a direct deposit of salary from an employer or a 
direct deposit of government benefits on prepaid accounts without such 
a credit feature. Fees imposed on prepaid accounts without a covered 
separate credit feature for a one-time load or transfer of funds from a 
non-covered separate credit feature are not comparable for purposes of 
Sec.  1026.4(b)(11)(ii).
    B. Assume that a prepaid account issuer charges a $1.25 load fee 
for a one-time transfer of funds from a separate asset account, such as 
from a deposit account via a debit card, to a prepaid account without a 
covered separate credit feature and does not charge a fee for a direct 
deposit of salary from an employer or a direct deposit of government 
benefits on those prepaid accounts. Assume the prepaid account issuer 
charges $1.25 on the asset feature of a prepaid account with a covered 
separate credit feature to load funds from the covered separate credit 
feature outside the course of a transaction. In this case, the $1.25 
fee imposed on the asset feature of the prepaid account with a covered 
separate credit feature is a finance charge because no fee is charged 
for a direct deposit of salary from an employer or a direct deposit of 
government benefits on prepaid accounts without a covered separate 
credit feature. Fees imposed on prepaid accounts without a covered 
separate credit feature for a one-time load or transfer of funds from a 
separate asset account are not comparable for purposes of Sec.  
1026.4(b)(11)(ii).
    2. Relation to Regulation E. See Regulation E, 12 CFR 1005.18(g), 
which only permits a financial institution to charge the same or higher 
fees on the asset feature of a prepaid account with a covered separate 
credit feature accessible by a hybrid prepaid-credit card than the 
amount of a comparable fee it charges on prepaid accounts in the same 
prepaid account program without such a credit feature. Under that 
provision, a financial institution cannot charge a lower fee on the 
asset feature of a prepaid account with a covered separate credit 
feature accessible by a hybrid prepaid-credit card than the amount of a 
comparable fee it charges on prepaid accounts without such a credit 
feature in the same prepaid account program.
* * * * *

Subpart B--Open-End Credit

* * * * *

Section 1026.6--Account-Opening Disclosures

* * * * *
6(b) Rules Affecting Open-End (Not Home-Secured) Plans
* * * * *
6(b)(3) Disclosure of Charges Imposed as Part of Open-End (Not Home-
Secured) Plans
* * * * *
Paragraph 6(b)(3)(iii)
* * * * *
Paragraph 6(b)(3)(iii)(D)
    1. Fees imposed on the asset feature of the prepaid account in 
connection with a covered separate credit feature accessible by a 
hybrid prepaid-credit card. Under Sec.  1026.6(b)(3)(iii)(D), with 
regard to a covered separate credit feature and an asset feature on a 
prepaid account that are both accessible by a hybrid prepaid-credit 
card as defined in Sec.  1026.61, a fee or charge imposed on the asset 
feature of the prepaid account is not a charge imposed as part of the 
plan under Sec.  1026.6(b)(3) with respect to a covered separate credit 
feature to the extent that the amount of the fee or charge does not 
exceed comparable fees or charges imposed on prepaid accounts in the 
same prepaid account program that do not have a covered separate credit 
feature accessed by a hybrid prepaid-credit card. To illustrate:
    i. Assume a prepaid account issuer charges a $0.50 per transaction 
fee on an asset feature of the prepaid account for purchases when a 
hybrid prepaid-credit card accesses a covered separate credit feature 
in the course of authorizing, settling, or otherwise completing 
purchase transactions conducted with the card and a $0.50 transaction 
fee for purchases that access funds in the asset feature of a prepaid 
account in the same program without such a credit feature. The $0.50 
fees are comparable fees and the $0.50 fee for purchases when a hybrid 
prepaid-credit card accesses a covered separate credit feature in the 
course of authorizing, settling, or otherwise completing purchase 
transactions conducted with the card is not a charge imposed as part of 
the plan. However, if in this example, the prepaid account issuer 
imposes a $1.25 per transaction fee on an asset feature of the prepaid 
account for purchases when a hybrid prepaid-credit card accesses a 
covered separate credit feature in the course of authorizing, settling, 
or otherwise completing purchase transactions conducted with the card, 
the $0.75 excess is a charge imposed as part of the plan. This $0.75 
excess also is a finance charge under Sec.  1026.4(b)(11)(ii).
    ii. See comment 4(b)(11)(ii)-1 for additional illustrations of when 
a

[[Page 6443]]

prepaid account issuer is charging comparable per transaction fees or 
load or transfer fees on the prepaid account.
* * * * *

Subpart G--Special Rules Applicable to Credit Card Accounts and Open-
End Credit Offered to College Students

* * * * *

Section 1026.52--Limitations on Fees

* * * * *
52(b) Limitations on Penalty Fees
* * * * *
52(b)(2) Prohibited Fees
* * * * *
52(b)(2)(i) Fees That Exceed Dollar Amount Associated With Violation
    1. Late payment fees. For purposes of Sec.  1026.52(b)(2)(i), the 
dollar amount associated with a late payment is the amount of the 
required minimum periodic payment due immediately prior to assessment 
of the late payment fee. Thus, Sec.  1026.52(b)(2)(i)(A) prohibits a 
card issuer from imposing a late payment fee that exceeds the amount of 
that required minimum periodic payment. For example:
    i. Assume that a $15 required minimum periodic payment is due on 
September 25. The card issuer does not receive any payment on or before 
September 25. On September 26, the card issuer imposes a late payment 
fee. For purposes of Sec.  1026.52(b)(2)(i), the dollar amount 
associated with the late payment is the amount of the required minimum 
periodic payment due on September 25 ($15). Thus, under Sec.  
1026.52(b)(2)(i)(A), the amount of that fee cannot exceed $15 (even if 
a higher fee would be permitted under Sec.  1026.52(b)(1)).
    ii. Same facts as above except that, on September 25, the card 
issuer receives a $10 payment. No further payments are received. On 
September 26, the card issuer imposes a late payment fee. For purposes 
of Sec.  1026.52(b)(2)(i), the dollar amount associated with the late 
payment is the full amount of the required minimum periodic payment due 
on September 25 ($15), rather than the unpaid portion of that payment 
($5). Thus, under Sec.  1026.52(b)(2)(i)(A), the amount of the late 
payment fee cannot exceed $15 (even if a higher fee would be permitted 
under Sec.  1026.52(b)(1)).
    iii. Assume that a $15 required minimum periodic payment is due on 
October 28 and the billing cycle for the account closes on October 31. 
The card issuer does not receive any payment on or before November 3. 
On November 3, the card issuer determines that the required minimum 
periodic payment due on November 28 is $50. On November 5, the card 
issuer imposes a late payment fee. For purposes of Sec.  
1026.52(b)(2)(i), the dollar amount associated with the late payment is 
the amount of the required minimum periodic payment due on October 28 
($15), rather than the amount of the required minimum periodic payment 
due on November 28 ($50). Thus, under Sec.  1026.52(b)(2)(i)(A), the 
amount of that fee cannot exceed $15 (even if a higher fee would be 
permitted under Sec.  1026.52(b)(1)).
    2. Returned payment fees. For purposes of Sec.  1026.52(b)(2)(i), 
the dollar amount associated with a returned payment is the amount of 
the required minimum periodic payment due immediately prior to the date 
on which the payment is returned to the card issuer. Thus, Sec.  
1026.52(b)(2)(i)(A) prohibits a card issuer from imposing a returned 
payment fee that exceeds the amount of that required minimum periodic 
payment. However, if a payment has been returned and is submitted again 
for payment by the card issuer, there is no additional dollar amount 
associated with a subsequent return of that payment and Sec.  
1026.52(b)(2)(i)(B) prohibits the card issuer from imposing an 
additional returned payment fee. For example:
    i. Assume that the billing cycles for an account begin on the first 
day of the month and end on the last day of the month and that the 
payment due date is the twenty-fifth day of the month. A minimum 
payment of $15 is due on March 25. The card issuer receives a check for 
$100 on March 23, which is returned to the card issuer for insufficient 
funds on March 26. For purposes of Sec.  1026.52(b)(2)(i), the dollar 
amount associated with the returned payment is the amount of the 
required minimum periodic payment due on March 25 ($15). Thus, Sec.  
1026.52(b)(2)(i)(A) prohibits the card issuer from imposing a returned 
payment fee that exceeds $15 (even if a higher fee would be permitted 
under Sec.  1026.52(b)(1)). Furthermore, Sec.  1026.52(b)(2)(ii) 
prohibits the card issuer from assessing both a late payment fee and a 
returned payment fee in these circumstances. See comment 52(b)(2)(ii)-
1.
    ii. Same facts as above except that the card issuer receives the 
$100 check on March 31 and the check is returned for insufficient funds 
on April 2. The minimum payment due on April 25 is $30. For purposes of 
Sec.  1026.52(b)(2)(i), the dollar amount associated with the returned 
payment is the amount of the required minimum periodic payment due on 
March 25 ($15), rather than the amount of the required minimum periodic 
payment due on April 25 ($30). Thus, Sec.  1026.52(b)(2)(i)(A) 
prohibits the card issuer from imposing a returned payment fee that 
exceeds $15 (even if a higher fee would be permitted under Sec.  
1026.52(b)(1)). Furthermore, Sec.  1026.52(b)(2)(ii) prohibits the card 
issuer from assessing both a late payment fee and a returned payment 
fee in these circumstances. See comment 52(b)(2)(ii)-1.
    iii. Same facts as paragraph i above except that, on March 28, the 
card issuer presents the $100 check for payment a second time. On April 
1, the check is again returned for insufficient funds. Section 
1026.52(b)(2)(i)(B) prohibits the card issuer from imposing a returned 
payment fee based on the return of the payment on April 1.
    iv. Assume that the billing cycles for an account begin on the 
first day of the month and end on the last day of the month and that 
the payment due date is the twenty-fifth day of the month. A minimum 
payment of $15 is due on August 25. The card issuer receives a check 
for $15 on August 23, which is not returned. The card issuer receives a 
check for $50 on September 5, which is returned to the card issuer for 
insufficient funds on September 7. Section 1026.52(b)(2)(i)(B) does not 
prohibit the card issuer from imposing a returned payment fee in these 
circumstances. Instead, for purposes of Sec.  1026.52(b)(2)(i), the 
dollar amount associated with the returned payment is the amount of the 
required minimum periodic payment due on August 25 ($15). Thus, Sec.  
1026.52(b)(2)(i)(A) prohibits the card issuer from imposing a returned 
payment fee that exceeds $15 (even if a higher fee would be permitted 
under Sec.  1026.52(b)(1)).
    3. Over-the-limit fees. For purposes of Sec.  1026.52(b)(2)(i), the 
dollar amount associated with extensions of credit in excess of the 
credit limit for an account is the total amount of credit extended by 
the card issuer in excess of the credit limit during the billing cycle 
in which the over-the-limit fee is imposed. Thus, Sec.  
1026.52(b)(2)(i)(A) prohibits a card issuer from imposing an over-the-
limit fee that exceeds that amount. Nothing in Sec.  1026.52(b) permits 
a card issuer to impose an over-the-limit fee if imposition of the fee 
is inconsistent with Sec.  1026.56. The following examples illustrate 
the application of Sec.  1026.52(b)(2)(i)(A) to over-the-limit fees:
    i. Assume that the billing cycles for a credit card account with a 
credit limit of $5,000 begin on the first day of the month and end on 
the last day of the

[[Page 6444]]

month. Assume also that, consistent with Sec.  1026.56, the consumer 
has affirmatively consented to the payment of transactions that exceed 
the credit limit. On March 1, the account has a $4,950 balance. On 
March 6, a $60 transaction is charged to the account, increasing the 
balance to $5,010. On March 25, a $5 transaction is charged to the 
account, increasing the balance to $5,015. On the last day of the 
billing cycle (March 31), the card issuer imposes an over-the-limit 
fee. For purposes of Sec.  1026.52(b)(2)(i), the dollar amount 
associated with the extensions of credit in excess of the credit limit 
is the total amount of credit extended by the card issuer in excess of 
the credit limit during the March billing cycle ($15). Thus, Sec.  
1026.52(b)(2)(i)(A) prohibits the card issuer from imposing an over-
the-limit fee that exceeds $15 (even if a higher fee would be permitted 
under Sec.  1026.52(b)(1)).
    ii. Same facts as above except that, on March 26, the card issuer 
receives a payment of $20, reducing the balance below the credit limit 
to $4,995. Nevertheless, for purposes of Sec.  1026.52(b)(2)(i), the 
dollar amount associated with the extensions of credit in excess of the 
credit limit is the total amount of credit extended by the card issuer 
in excess of the credit limit during the March billing cycle ($15). 
Thus, consistent with Sec.  1026.52(b)(2)(i)(A), the card issuer may 
impose an over-the-limit fee of $15.
    4. Declined access check fees. For purposes of Sec.  
1026.52(b)(2)(i), the dollar amount associated with declining payment 
on a check that accesses a credit card account is the amount of the 
check. Thus, when a check that accesses a credit card account is 
declined, Sec.  1026.52(b)(2)(i)(A) prohibits a card issuer from 
imposing a fee that exceeds the amount of that check. For example, 
assume that a check that accesses a credit card account is used as 
payment for a $50 transaction, but payment on the check is declined by 
the card issuer because the transaction would have exceeded the credit 
limit for the account. For purposes of Sec.  1026.52(b)(2)(i), the 
dollar amount associated with the declined check is the amount of the 
check ($50). Thus, Sec.  1026.52(b)(2)(i)(A) prohibits the card issuer 
from imposing a fee that exceeds $50. However, the amount of this fee 
must also comply with Sec.  1026.52(b)(1)(i) or (b)(1)(ii).
    5. Inactivity fees. Section 1026.52(b)(2)(i)(B)(2) prohibits a card 
issuer from imposing a fee with respect to a credit card account under 
an open-end (not home-secured) consumer credit plan based on inactivity 
on that account (including the consumer's failure to use the account 
for a particular number or dollar amount of transactions or a 
particular type of transaction). For example, Sec.  
1026.52(b)(2)(i)(B)(2) prohibits a card issuer from imposing a $50 fee 
when a credit card account under an open-end (not home-secured) 
consumer credit plan is not used for at least $2,000 in purchases over 
the course of a year. Similarly, Sec.  1026.52(b)(2)(i)(B)(2) prohibits 
a card issuer from imposing a $50 annual fee on all accounts of a 
particular type but waiving the fee on any account that is used for at 
least $2,000 in purchases over the course of a year if the card issuer 
promotes the waiver or rebate of the annual fee for purposes of Sec.  
1026.55(e). However, if the card issuer does not promote the waiver or 
rebate of the annual fee for purposes of Sec.  1026.55(e), Sec.  
1026.52(b)(2)(i)(B)(2) does not prohibit a card issuer from considering 
account activity along with other factors when deciding whether to 
waive or rebate annual fees on individual accounts (such as in response 
to a consumer's request).
    6. Closed account fees. Section 1026.52(b)(2)(i)(B)(3) prohibits a 
card issuer from imposing a fee based on the closure or termination of 
an account. For example, Sec.  1026.52(b)(2)(i)(B)(3) prohibits a card 
issuer from:
    i. Imposing a one-time fee to consumers who close their accounts.
    ii. Imposing a periodic fee (such as an annual fee, a monthly 
maintenance fee, or a closed account fee) after an account is closed or 
terminated if that fee was not imposed prior to closure or termination. 
This prohibition applies even if the fee was disclosed prior to closure 
or termination. See also comment 55(d)-1.
    iii. Increasing a periodic fee (such as an annual fee or a monthly 
maintenance fee) after an account is closed or terminated. However, a 
card issuer is not prohibited from continuing to impose a periodic fee 
that was imposed before the account was closed or terminated.
    7. Declined transaction fees. Section 1026.52(b)(2)(i)(B)(1) states 
that card issuers must not impose a fee when there is no dollar amount 
associated with the violation, such as for transactions that the card 
issuer declines to authorize. With regard to a covered separate credit 
feature and an asset feature on a prepaid account that are both 
accessible by a hybrid prepaid-credit card as defined in Sec.  1026.61 
where the credit feature is a credit card account under an open-end 
(not home-secured) consumer credit plan, Sec.  1026.52(b)(2)(i)(B)(1) 
prohibits a card issuer from imposing declined transaction fees in 
connection with the credit feature, regardless of whether the declined 
transaction fee is imposed on the credit feature or on the asset 
feature of the prepaid account. For example, if the prepaid card 
attempts to access credit from the covered separate credit feature 
accessible by the hybrid prepaid-credit card and the transaction is 
declined, Sec.  1026.52(b)(2)(i)(B)(1) prohibits the card issuer from 
imposing a declined transaction fee, regardless of whether the fee is 
imposed on the credit feature or on the asset feature of the prepaid 
account. Fees imposed for declining a transaction that would have only 
accessed the asset feature of the prepaid account and would not have 
accessed the covered separate credit feature accessible by the hybrid 
prepaid-credit are not covered by Sec.  1026.52(b)(2)(i)(B)(1).
* * * * *

Section 1026.61--Hybrid Prepaid-Credit Cards

61(a) Hybrid Prepaid-Credit Card
* * * * *
61(a)(3) Prepaid Card Can Access Credit Extended Through a Negative 
Balance on the Asset Feature
61(a)(3)(i) In General
    1. Credit accessed on an asset feature of a prepaid account. i. See 
comment 2(a)(14)-3 for examples of when transactions authorized or paid 
on the asset feature of a prepaid account meet the definition of credit 
under Sec.  1026.2(a)(14).
    ii. Except as provided in Sec.  1026.61(a)(4), a prepaid card would 
trigger coverage as a hybrid prepaid-credit card if it is a single 
device that can be used from time to time to access credit that can be 
extended through a negative balance on the asset feature of the prepaid 
account. (However, unless the credit extended through a negative 
balance on the asset feature of the prepaid account meets the 
requirements of Sec.  1026.61(a)(4), such a product structure would 
violate the rules under Sec.  1026.61(b).) A credit extension through a 
negative balance on the asset feature of a prepaid account can occur 
during the authorization phase of the transaction as discussed in 
comment 61(a)(3)(i)-1.iii or in later periods up to the settlement of 
the transaction, as discussed in comment 61(a)(3)(i)-1.iv.
    iii. The following example illustrates transactions where a credit 
extension occurs during the course of authorizing a transaction.
    A. A transaction initiated using a prepaid card when there are 
insufficient

[[Page 6445]]

or unavailable funds in the asset feature of the prepaid account at the 
time the transaction is initiated and credit is extended through a 
negative balance on the asset feature of the prepaid account when the 
transaction is authorized.
    iv. The following examples illustrate transactions where a credit 
extension occurs at settlement.
    A. Transactions that occur when there are sufficient or available 
funds in the asset feature of the prepaid account at the time of 
authorization to cover the amount of the transaction but where the 
consumer does not have sufficient or available funds in the asset 
feature to cover the transaction at the time of settlement. Credit is 
extended through a negative balance on the asset feature at settlement 
to pay those transactions.
    B. Transactions that settle even though they were not authorized in 
advance where credit is extended through a negative balance on the 
asset feature at settlement to pay those transactions.
61(a)(3)(ii) Negative Asset Balances
    1. Credit extended on the asset feature of the prepaid account. 
Section 1026.61(a)(3)(i) determines whether a prepaid card triggers 
coverage as a hybrid prepaid-credit card under Sec.  1026.61(a), and 
thus, whether a prepaid account issuer is a card issuer under Sec.  
1026.2(a)(7) subject to this regulation, including Sec.  1026.61(b). 
However, Sec.  1026.61(b) requires that any credit feature accessible 
by a hybrid prepaid-credit card must be structured as a separate credit 
feature using either a credit subaccount of the prepaid account or a 
separate credit account. Unless Sec.  1026.61(a)(4) applies, a card 
issuer would violate Sec.  1026.61(b) if it structures a credit feature 
as a negative balance on the asset feature of the prepaid account. A 
prepaid account issuer can use a negative asset balance structure to 
extend credit on a prepaid account if the prepaid card is not a hybrid 
prepaid-credit card with respect to that credit as described in Sec.  
1026.61(a)(4).
61(a)(4) Exception for Credit Extended Through a Negative Balance
    1. Prepaid card that is not a hybrid prepaid-credit card. i. A 
prepaid card that is not a hybrid prepaid-credit card as described in 
Sec.  1026.61(a)(4) with respect to credit extended through a negative 
balance on the asset feature of the prepaid account is not a credit 
card under this regulation with respect to that credit. A prepaid card 
is not a hybrid prepaid-credit card with respect to credit extended 
through a negative balance on the asset feature of the prepaid account 
if:
    A. The card cannot access credit from a covered separate credit 
feature under Sec.  1026.61(a)(2)(i) that is offered by the prepaid 
account issuer or its affiliate, though it is permissible for it to 
access credit from a covered separate credit feature offered by a 
business partner or from a non-covered separate credit feature as 
described under Sec.  1026.61(a)(2)(ii); and
    B. The card can only access credit extended through a negative 
balance on the asset feature of the prepaid account in accordance with 
both the conditions set forth in Sec.  1026.61(a)(4)(ii)(A) and (B).
    ii. If the conditions of Sec.  1026.61(a)(4) are met and the 
prepaid card can access credit from a covered separate credit feature 
as defined in Sec.  1026.61(a)(2)(i) that is offered by a business 
partner, the prepaid card is a hybrid prepaid-credit card with respect 
to the covered separate credit feature pursuant to Sec.  
1026.61(a)(2)(i) but is not a hybrid prepaid-credit card with respect 
to credit extended by a prepaid account issuer through a negative 
balance on the asset feature of the prepaid account that meets the 
conditions of Sec.  1026.61(a)(4) or with respect to any non-covered 
separate credit feature pursuant to Sec.  1026.61(a)(2)(ii). If the 
conditions of Sec.  1026.61(a)(4) are met and the prepaid card cannot 
access credit from any covered separate credit feature as defined in 
Sec.  1026.61(a)(2)(i), the prepaid card is not a hybrid prepaid-credit 
card with respect to credit extended by a prepaid account issuer 
through a negative balance on the asset feature of the prepaid account 
that meets the conditions of Sec.  1026.61(a)(4) or with respect to any 
non-covered separate credit feature pursuant to Sec.  
1026.61(a)(2)(ii).
    iii. Below is an example of when a prepaid card is not a hybrid 
prepaid-credit card with respect to credit extended through a negative 
balance on the asset feature of the prepaid account because the 
conditions set forth in Sec.  1026.61(a)(4) have been met.
    A. The prepaid card can only access credit extended through a 
negative balance on the asset feature of the prepaid account in 
accordance with both the conditions set forth in Sec.  
1026.61(a)(4)(ii)(A) and (B). The card can access credit from a non-
covered separate credit feature as defined in Sec.  1026.61(a)(2)(ii) 
and from a covered separate credit feature as defined in Sec.  
1026.61(a)(2)(i) offered by a business partner, but cannot access 
credit for a covered separate credit feature that is offered by a 
prepaid account issuer or its affiliate.
    iv. Below is an example of when a prepaid card is a hybrid prepaid-
credit card with respect to credit extended through a negative balance 
on the asset feature of the prepaid account because the conditions set 
forth in Sec.  1026.61(a)(4) have not been met.
    A. When there are insufficient or unavailable funds in the asset 
feature of the prepaid account at the time a transaction is initiated, 
the card can be used to draw, transfer, or authorize the draw or 
transfer of credit from a covered separate credit feature offered by 
the prepaid account issuer or its affiliate during the authorization 
phase to complete the transaction so that credit is not extended on the 
asset feature of the prepaid account. The exception in Sec.  
1026.61(a)(4) does not apply because the prepaid card can be used to 
draw, transfer, or authorize the draw or transfer of credit from a 
covered separate credit feature defined in Sec.  1026.61(a)(2)(i) that 
is offered by the prepaid account issuer or its affiliate. The card is 
a hybrid prepaid-credit card with respect to credit extended through a 
negative balance on the asset feature of the prepaid account pursuant 
to Sec.  1026.61(a)(3) and with respect to the covered separate credit 
feature pursuant to Sec.  1026.61(a)(2)(i). In that case, a card issuer 
has violated Sec.  1026.61(b) because it has structured the credit 
feature as a negative balance on the asset feature of the prepaid 
account. See Sec.  1026.61(a)(3)(ii) and (b).
    v. In the case where a prepaid card is not a hybrid prepaid-credit 
card with respect to credit extended through a negative balance on the 
asset feature of the prepaid account because the conditions set forth 
in Sec.  1026.61(a)(4) are met:
    A. The prepaid account issuer is not a card issuer under Sec.  
1026.2(a)(7) with respect to the prepaid card when it accesses credit 
extended through the negative balance on the asset feature of the 
prepaid account. The prepaid account issuer also is not a creditor 
under Sec.  1026.2(a)(17)(iii) or (iv) because it is not a card issuer 
under Sec.  1026.2(a)(7) with respect to the prepaid card when it 
accesses credit extended through the negative balance on the asset 
feature of the prepaid account. The prepaid account issuer also is not 
a creditor under Sec.  1026.2(a)(17)(i) with respect to credit extended 
through the negative balance on the asset feature of the prepaid 
account as a result of imposing fees on the prepaid account because 
those fees are not finance charges with respect to that credit. See 
comment 4(b)(11)-1.iii.

[[Page 6446]]

Paragraph 61(a)(4)(ii)
Paragraph 61(a)(4)(ii)(A)
    1. Authorization not required for every transaction. The prepaid 
account issuer is not required to receive an authorization request for 
each transaction to comply with Sec.  1026.61(a)(4)(ii)(A). 
Nonetheless, the prepaid account issuer generally must establish an 
authorization policy as described in Sec.  1026.61(a)(4)(ii)(A) and 
have reasonable practices in place to comply with its established 
policy with respect to the authorization requests it receives. In that 
case, a prepaid account issuer is deemed to satisfy Sec.  
1026.61(a)(4)(ii)(A) even if a negative balance results on the prepaid 
account when a transaction is settled.
    2. Provisional credit. A prepaid account issuer may still satisfy 
the requirements set forth in Sec.  1026.61(a)(4)(ii)(A) even if a 
negative balance results on the asset feature of the prepaid account 
because the prepaid account issuer debits the amount of any provisional 
credit that was previously granted on the prepaid account as specified 
in Regulation E, 12 CFR 1005.11, so long as the prepaid account issuer 
otherwise complies with the conditions set forth in Sec.  
1026.61(a)(4). For example, under Sec.  1026.61(a)(4), a prepaid 
account issuer may not impose a fee or charge enumerated under Sec.  
1026.61(a)(4)(ii)(B) with respect to this negative balance.
    3. Delayed load cushion. i. Incoming fund transfers. For purposes 
of Sec.  1026.61(a)(4)(ii)(A)(2), cases where the prepaid account 
issuer has received an instruction or confirmation for an incoming 
electronic fund transfer originated from a separate asset account to 
load funds to the prepaid account include a direct deposit of salary 
from an employer and a direct deposit of government benefits.
    ii. Consumer requests. For purposes of Sec.  
1026.61(a)(4)(ii)(A)(2), cases where the prepaid account issuer has 
received a request from the consumer to load funds to the prepaid 
account from a separate asset account include where the consumer, in 
the course of a transaction, requests a load from a deposit account or 
uses a debit card to cover the amount of the transaction if there are 
insufficient funds in the asset feature of the prepaid account to pay 
for the transaction.
    4. Permitted authorization circumstances are not mutually 
exclusive. The two circumstances set forth in Sec.  
1026.61(a)(4)(ii)(A)(1) and (2) are not mutually exclusive. For 
example, assume a prepaid account issuer has adopted the $10 cushion 
described in Sec.  1026.61(a)(4)(ii)(A)(1), and the delayed load 
cushion described in Sec.  1026.61(a)(4)(ii)(A)(2). Also, assume the 
prepaid account issuer has received an instruction or confirmation for 
an incoming electronic fund transfer originated from a separate asset 
account to load funds to the prepaid account but the prepaid account 
issuer has not received the funds from the separate asset account. In 
this case, a prepaid account issuer satisfies Sec.  
1026.61(a)(4)(ii)(A) if the amount of a transaction at authorization 
will not cause the prepaid account balance to become negative at the 
time of the authorization by more than the requested load amount plus 
the $10 cushion.
Paragraph 61(a)(4)(ii)(B)
    1. Different terms on different prepaid account programs. Section 
1026.61(a)(4)(ii)(B) does not prohibit a prepaid account issuer from 
charging different terms on different prepaid account programs. For 
example, the terms may differ between a prepaid account program where a 
covered separate credit feature accessible by a hybrid prepaid-credit 
card is not offered in connection with any prepaid accounts within the 
prepaid account program, and a prepaid account program where a covered 
separate credit feature accessible by a hybrid prepaid-credit card may 
be offered to some consumers in connection with their prepaid accounts.
Paragraph 61(a)(4)(ii)(B)(1)
    1. Fees or charges covered by Sec.  1026.61(a)(4)(ii)(B)(1). To 
qualify for the exception in Sec.  1026.61(a)(4)(ii)(B), the prepaid 
account issuer may not impose any fees or charges for opening, issuing, 
or holding a negative balance on the asset feature, or for the 
availability of credit, whether imposed on a one-time or periodic 
basis. Section 1026.61(a)(4)(ii)(B)(1) does not include fees or charges 
to open, issue, or hold the prepaid account where the amount of the fee 
or charge imposed on the asset feature is not higher based on whether 
credit might be offered or has been accepted, whether or how much 
credit the consumer has accessed, or the amount of credit available.
    i. The types of fees or charges prohibited by Sec.  
1026.61(a)(4)(ii)(B)(1) include:
    A. A daily, weekly, monthly, or other periodic fee assessed each 
period a prepaid account has a negative balance or is in ``overdraft'' 
status; and
    B. A daily, weekly, monthly or other periodic fee to hold the 
prepaid account where the amount of the fee that applies each period is 
higher if the consumer is enrolled in a purchase cushion as described 
in Sec.  1026.61(a)(4)(ii)(A)(1) or a delayed load cushion as described 
in Sec.  1026.61(a)(4)(ii)(A)(2) during that period. For example, 
assume that a consumer will pay a fee to hold the prepaid account of 
$10 if the consumer is not enrolled in a purchase cushion as described 
in Sec.  1026.61(a)(4)(ii)(A)(1) or a delayed load cushion as described 
in Sec.  1026.61(a)(4)(ii)(A)(2) during that month, and will pay a fee 
to hold the prepaid account of $15 if the consumer is enrolled in a 
purchase cushion or delayed load cushion that period. The $15 charge is 
a charge described in Sec.  1026.61(a)(4)(ii)(B)(1) because the amount 
of the fee to hold the prepaid account is higher based on whether the 
consumer is participating in the payment cushion or delayed load 
cushion during that period.
    ii. Fees or charges described in Sec.  1026.61(a)(4)(ii)(B) do not 
include:
    A. A daily, weekly, monthly, or other periodic fee to hold the 
prepaid account where the amount of the fee is not higher based on 
whether the consumer is enrolled in a purchase cushion as described in 
Sec.  1026.61(a)(4)(ii)(A)(1) or a delayed load cushion as described in 
Sec.  1026.61(a)(4)(ii)(A)(2) during that period, whether or how much 
credit has been extended during that period, or the amount of credit 
that is available during that period.
Paragraph 61(a)(4)(ii)(B)(2)
    1. Fees or charges covered by Sec.  1026.61(a)(4)(ii)(B)(2). To 
qualify for the exception in Sec.  1026.61(a)(4)(ii)(B), the prepaid 
account issuer may not impose any fees or charges on the asset feature 
of the prepaid account that will be imposed only when credit is 
extended on the asset feature or when there is a negative balance on 
the asset feature.
    i. These types of fees or charges include:
    A. A fee imposed because the balance on the prepaid account becomes 
negative;
    B. Interest charges attributable to a periodic rate that applies to 
the negative balance;
    C. Any fees for delinquency, default, or a similar occurrences that 
result from the prepaid account having a negative balance or being in 
``overdraft'' status, except that the actual costs to collect the 
credit may be imposed if otherwise permitted by law; and
    D. Late payment fees.
    ii. Fees or charges described in Sec.  1026.61(a)(4)(ii)(B) do not 
include:
    A. Fees for actual collection costs, including attorney's fees, to 
collect any

[[Page 6447]]

credit extended on the prepaid account if otherwise permitted by law. 
Late payment fees are not considered fees imposed for actual collection 
costs. See comment 61(a)(4)(ii)(B)(2)-1.i.D.
Paragraph 61(a)(4)(ii)(B)(3)
    1. Fees or charges covered by Sec.  1026.61(a)(4)(ii)(B)(3). i. To 
qualify for the exception in Sec.  1026.61(a)(4)(ii)(B), the prepaid 
account issuer may not impose any fees or charges on the asset feature 
of the prepaid account that are higher when credit is extended on the 
asset feature or when there is a negative balance on the asset feature. 
These types of fees or charges include:
    A. Transaction fees where the amount of the fee is higher based on 
whether the transaction accesses only asset funds in the asset feature 
or accesses credit. For example, a $15 transaction charge is imposed on 
the asset feature each time a transaction is authorized or paid when 
there are insufficient or unavailable funds in the asset feature at the 
time of the authorization or settlement. A $1.50 fee is imposed each 
time a transaction only accesses funds in the asset feature. The $15 
charge is a charge described in Sec.  1026.61(a)(4)(ii)(B)(3) because 
the amount of the transaction fee is higher when the transaction 
accesses credit than the amount of the fee that applies when the 
transaction accesses only asset funds in the asset feature; and
    B. A fee for a service on the prepaid account where the amount of 
the fee is higher based on whether the service is requested when the 
asset feature has a negative balance. For example, if a prepaid account 
issuer charges a higher fee for an ATM balance inquiry requested on the 
prepaid account if the balance inquiry is requested when there is a 
negative balance on the asset feature than the amount of fee imposed 
when there is a positive balance on the asset feature, the balance 
inquiry fee is a fee described in Sec.  1026.61(a)(4)(ii)(B)(3) because 
the amount of the fee is higher based on whether it is imposed when 
there is a negative balance on the asset feature.
    ii. Fees or charges described in Sec.  1026.61(a)(4)(ii)(B) do not 
include:
    A. Transaction fees on the prepaid account where the amount of the 
fee imposed when the transaction accesses credit does not exceed the 
amount of the fee imposed when the transaction only accesses asset 
funds in the prepaid account. For example, assume a $1.50 transaction 
charge is imposed on the prepaid account for each paid transaction that 
is made with the prepaid card, including transactions that only access 
asset funds, transactions that take the account balance negative, and 
transactions that occur when the account balance is already negative. 
The $1.50 transaction charge imposed on the prepaid account is not a 
fee described in Sec.  1026.61(a)(4)(ii)(B); and
    B. A fee for a service on the prepaid account where the amount of 
the fee is not higher based on whether the service is requested when 
the asset feature has a negative balance. For example, if a prepaid 
account issuer charges the same amount of fee for an ATM balance 
inquiry regardless of whether there is a positive or negative balance 
on the asset feature, the balance inquiry fee is not a fee described in 
Sec.  1026.61(a)(4)(ii)(B).
Paragraph 61(a)(4)(ii)(C)
    1. Fees or charges not covered by Sec.  1026.61(a)(4)(ii)(B). Under 
Sec.  1026.61(a)(4)(ii)(C), a prepaid account issuer may still satisfy 
the exception in Sec.  1026.61(a)(4) even if it debits fees or charges 
from the prepaid account when there are insufficient or unavailable 
funds in the asset feature of the prepaid account to cover those fees 
or charges at the time they are imposed, so long as those fees or 
charges are not the type of fees or charges enumerated in Sec.  
1026.61(a)(4)(ii)(B). A fee or charge not otherwise covered by Sec.  
1026.61(a)(4)(ii)(B) does not become covered by that provision simply 
because there are insufficient or unavailable funds in the asset 
feature of the prepaid account to pay the fee when it is imposed. For 
example, assume that a prepaid account issuer imposes a fee for an ATM 
balance inquiry and the amount of the fee is not higher based on 
whether credit is extended or whether there is a negative balance on 
the prepaid account. Also assume that when the fee is imposed, there 
are insufficient or unavailable funds in the asset feature of the 
prepaid account to pay the fee. The ATM balance inquiry fee does not 
become a fee covered by Sec.  1026.61(a)(4)(ii)(B) because the fee is 
debited from the prepaid account balance when there are insufficient or 
unavailable funds in the asset feature of the prepaid account to cover 
the fee at the time it is imposed.
61(a)(5) Definitions
Paragraph 61(a)(5)(iii)
    1. Card network or payment network agreements. A draw, transfer, or 
authorization of the draw or transfer from a credit feature may be 
effectuated through a card network or a payment network. However, for 
purposes of Sec.  1026.61(a)(5)(iii), agreements to participate in a 
card network or payment network themselves do not constitute an 
``agreement'' or a ``business, marketing, or promotional agreement or 
other arrangement'' described in Sec.  1026.61(a)(5)(iii)(B) or (C), 
respectively.
    2. Relationship to prepaid account issuer. A person (other than a 
prepaid account issuer or its affiliates) that can extend credit 
through a separate credit feature will be deemed to have an arrangement 
with the prepaid account issuer if the person that can extend credit, 
its service provider, or the person's affiliate has an arrangement with 
the prepaid account issuer, its service provider such as a program 
manager, or the issuer's affiliate. In that case, the person that can 
extend credit will be a business partner of the prepaid account issuer. 
For example, if the affiliate of the person that can extend credit has 
an arrangement with the prepaid account issuer's affiliate, the person 
that can extend credit will be the business partner of the prepaid 
account issuer.
61(a)(5)(iii)(D) Exception for Certain Credit Card Account Arrangements
    1. When the exception applies. If the exception in Sec.  
1026.61(a)(5)(iii)(D) applies, a person that can extend credit through 
the credit card account is not a business partner of a prepaid account 
issuer with which it has an arrangement as defined in Sec.  
1026.61(a)(5)(iii)(A) through (C). Accordingly, where a consumer has 
authorized his or her prepaid card in accordance with Sec.  
1026.61(a)(5)(iii)(D) to be linked to the credit card account in such a 
way as to allow the prepaid card to access the credit card account as 
described in Sec.  1026.61(a)(5)(iii)(D)(2), the linked prepaid card is 
not a hybrid prepaid-credit card with respect to the linked credit card 
account. Rather, the linked credit card account is a non-covered 
separate credit feature as discussed in Sec.  1026.61(a)(2)(ii). See 
comment 61(a)(2)-5. In this case, by definition, the linked credit card 
account will be subject to the credit card rules in this regulation in 
its own right because it is a credit card account under an open-end 
(not home-secured) consumer credit plan, pursuant to the condition set 
forth in Sec.  1026.61(a)(5)(iii)(D)(1).
Paragraph 61(a)(5)(iii)(D)(1)
    1. Traditional credit card. For purposes of Sec.  
1026.61(a)(5)(iii)(D), ``traditional credit card'' means a credit card 
that is not a hybrid prepaid-credit card. Thus, the condition in Sec.  
1026.61(a)(5)(iii)(D)(1) is not satisfied if the only credit card that 
a consumer can use to access the credit card account under an open-end 
(not home-secured)

[[Page 6448]]

consumer credit plan is a hybrid prepaid-credit card.
Paragraph 61(a)(5)(iii)(D)(2)
    1. Written request. Under Sec.  1026.61(a)(5)(iii)(D)(2), any 
accountholder on either the prepaid account or the credit card account 
may make the written request.
Paragraph 61(a)(5)(iii)(D)(4)
    1. Account terms, conditions, or features. Account terms, 
conditions, and features subject to Sec.  1026.61(a)(5)(iii)(D)(4) 
include, but are not limited to:
    i. Interest paid on funds deposited into the prepaid account, if 
any;
    ii. Fees or charges imposed on the prepaid account (see comment 
61(a)(5)(iii)(D)(4)-3 for additional guidance on this element with 
regard to load fees);
    iii. The type of access device provided to the consumer;
    iv. Minimum balance requirements on the prepaid account; or
    v. Account features offered in connection with the prepaid account, 
such as online bill payment services.
    2. The same terms, conditions, and features apply to the consumer's 
prepaid account. For the exception in Sec.  1026.61(a)(5)(iii)(D) to 
apply, under Sec.  1026.61(a)(5)(iii)(D)(4), the prepaid account issuer 
must not vary the terms, conditions, and features on the consumer's 
prepaid account depending on whether the consumer has authorized 
linking the prepaid card to the credit card account as described in 
Sec.  1026.61(a)(5)(iii)(D)(2). For example, a prepaid account issuer 
would not satisfy this condition of Sec.  1026.61(a)(5)(iii)(D)(4) if 
it provides on a consumer's prepaid account rewards points or cash back 
on purchases with the prepaid card where the consumer has authorized a 
link to the credit card account as discussed above while not providing 
such rewards points or cash back on the consumer's account if the 
consumer has not authorized such a linkage.
    3. Example of impermissible variations in load fees. For the 
exception in Sec.  1026.61(a)(5)(iii)(D) to apply, under Sec.  
1026.61(a)(5)(iii)(D)(4), the prepaid account issuer must apply the 
same fees to load funds from the credit card account that is linked to 
the prepaid account as described in Sec.  1026.61(a)(5)(iii)(D)(2) as 
it charges for a comparable load on the consumer's prepaid account to 
access a credit feature offered by a person that is not the prepaid 
account issuer, its affiliates, or a person with which the prepaid 
account issuer has an arrangement as described in Sec.  
1026.61(a)(5)(iii)(A) through (C). For example, a prepaid account 
issuer would not satisfy this condition of Sec.  
1026.61(a)(5)(iii)(D)(4) if it charges on the consumer's prepaid 
account $0.50 to load funds in the course of a transaction from a 
credit card account offered by a card issuer with which the prepaid 
account issuer has an arrangement, but $1.00 to load funds in the 
course of a transaction from a credit card account offered by a card 
issuer with which it does not have an arrangement.
Paragraph 61(a)(5)(iii)(D)(5)
    1. Specified terms and conditions. For purposes of Sec.  
1026.61(a)(5)(iii)(D), ``specified terms and conditions'' on a credit 
card account means:
    i. The terms and conditions required to be disclosed under Sec.  
1026.6(b), which include pricing terms, such as periodic rates, annual 
percentage rates, and fees and charges imposed on the credit card 
account; any security interests acquired under the credit account; 
claims and defenses rights under Sec.  1026.12(c); and error resolution 
rights under Sec.  1026.13;
    ii. Any repayment terms and conditions, including the length of the 
billing cycle, the payment due date, any grace period on the 
transactions on the account, the minimum payment formula, and the 
required or permitted methods for making conforming payments on the 
credit feature; and
    iii. The limits on liability for unauthorized credit transactions.
    2. Same specified terms and conditions regardless of whether the 
credit card account is linked to the prepaid account. For the exception 
in Sec.  1026.61(a)(5)(iii)(D) to apply, under Sec.  
1026.61(a)(5)(iii)(D)(5), the card issuer must not vary the specified 
terms and conditions on the consumer's credit card account depending on 
whether the consumer has authorized linking the prepaid card to the 
credit card account as described in Sec.  1026.61(a)(5)(iii)(D)(2). The 
following are examples of circumstances in which a card issuer would 
not meet the condition described above:
    i. The card issuer structures the credit card account as a ``charge 
card account'' (where no periodic rate is used to compute a finance 
charge on the credit card account) if the credit feature is linked to 
the prepaid card as described in Sec.  1026.61(a)(5)(iii)(D)(2), but 
applies a periodic rate to compute a finance charge on the consumer's 
account (and thus does not use a charge card account structure) if 
there is no such link. See Sec.  1026.2(a)(15)(iii) for the definition 
of ``charge card.''
    ii. The card issuer imposes a $50 annual fee on a consumer's credit 
card account if the credit feature is linked to the prepaid card as 
described in Sec.  1026.61(a)(5)(iii)(D)(2), but does not impose an 
annual fee on the consumer's credit card account if there is no such 
link.
    3. Same specified terms and conditions regardless of whether credit 
is accessed by the prepaid card or the traditional credit card. To 
satisfy the condition of Sec.  1026.61(a)(5)(iii)(D)(1), the credit 
card account must be a credit card account under an open-end (not home-
secured) consumer credit plan that a consumer can access through a 
traditional credit card. As explained in comment 61(a)(5)(iii)(D)(1)-1, 
for purposes of Sec.  1026.61(a)(5)(iii)(D), ``traditional credit 
card'' means a credit card that is not a hybrid prepaid-credit card. 
For the exception in Sec.  1026.61(a)(5)(iii)(D) to apply, under Sec.  
1026.61(a)(5)(iii)(D)(5), a card issuer must not vary the specified 
terms and conditions on the credit card account when a consumer 
authorizes linking the account with the prepaid card as described in 
Sec.  1026.61(a)(5)(iii)(D)(2) depending on whether a particular credit 
extension from the credit card account is accessed by the prepaid card 
or by the traditional credit card.
    i. The following examples are circumstances in which a card issuer 
would not meet the condition of Sec.  1026.61(a)(5)(iii)(D)(5) 
described above:
    A. The card issuer considers transactions using the traditional 
credit card to obtain goods or services from an unaffiliated merchant 
of the card issuer as purchase transactions with certain annual 
percentage rates (APRs), fees, and a grace period that applies to those 
purchase transactions, but treats credit extensions as cash advances 
that are subject to different APRs, fees, grace periods, and other 
specified terms and conditions where the prepaid card is used to draw, 
transfer, or authorize the draw or transfer of credit from the linked 
credit card account in the course of authorizing, settling, or 
otherwise completing transactions conducted with the prepaid card to 
obtain goods or services from an unaffiliated merchant of the card 
issuer.
    B. The card issuer generally treats one-time transfers of credit 
using the credit card account number to asset accounts as cash advance 
transactions with certain APRs and fees, but treats one-time transfers 
of credit using the prepaid card to the prepaid account as purchase 
transactions that are subject to different APRs and fees.

[[Page 6449]]

    ii. To apply the same rights under Sec.  1026.12(c) regarding 
claims and defenses applicable to use of a credit card to purchase 
property or services, the card issuer must treat an extension of credit 
as a credit card transaction to purchase property or services where a 
prepaid card is used to draw, transfer, or authorize the draw or 
transfer of credit from the linked credit card account in the course of 
authorizing, settling, or otherwise completing transactions conducted 
with the prepaid card to purchase property or services and provide the 
same rights under Sec.  1026.12(c) as it applies to property or 
services purchased with the traditional credit card. This includes 
situations where a consumer uses a prepaid card to make a purchase to 
obtain property or services from a merchant and credit is transferred 
from the linked credit card account in the course of authorizing, 
settling, or otherwise completing the prepaid transaction to make the 
purchase. For a transaction where a prepaid card is used to obtain 
property or services from a merchant and the transaction is partially 
paid with funds from the asset feature of the prepaid account, and 
partially paid with credit from the linked credit card account, the 
amount of the purchase transaction that is funded by credit would be 
subject to this guidance. A card issuer is not required to provide the 
rights under Sec.  1026.12(c) with respect to the amount of the 
transaction funded from the prepaid account.
    iii. To apply the same limits on liability for unauthorized 
extensions of credit from the credit card account using the prepaid 
card as it applies to unauthorized extensions of credit from the credit 
card account using the traditional credit card, the card issuer must 
treat an extension of credit accessed by the prepaid card as a credit 
card transaction for purposes of the limits on liability for 
unauthorized extensions of credit set forth in Sec.  1026.12(b) and 
impose the same liability under Sec.  1026.12(b) to this credit 
extension as it applies to unauthorized transactions using the 
traditional credit card.
* * * * *
61(b) Structure of Credit Features Accessible by Hybrid Prepaid-Credit 
Cards
    1. Credit subaccount on a prepaid account. If a credit feature that 
is accessible by a hybrid prepaid-credit card is structured as a 
subaccount of the prepaid account, the credit feature 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.
    2. Credit extended on a credit subaccount or a separate credit 
account. Under Sec.  1026.61(b), with respect to a credit feature that 
is accessed by a hybrid prepaid-credit card, a card issuer at its 
option may structure the credit feature as a separate credit feature, 
either as a subaccount on the prepaid account that is separate from the 
asset feature or as a separate credit account. The separate credit 
feature would be a covered separate credit feature accessible by a 
hybrid prepaid-credit card under Sec.  1026.61(a)(2)(i). Regardless of 
whether the card issuer is structuring its covered separate credit 
feature as a subaccount of the prepaid account or as a separate credit 
account:
    i. If at the time a prepaid card transaction is initiated there are 
insufficient or unavailable funds in the asset feature of the prepaid 
account to complete the transaction, credit must be drawn, transferred 
or authorized to be drawn or transferred, from the covered separate 
credit feature at the time the transaction is authorized. The card 
issuer may not allow the asset feature on the prepaid account to become 
negative and draw or transfer the credit from the covered separate 
credit feature at a later time, such as at the end of the day. The card 
issuer must comply with the applicable provisions of this regulation 
with respect to the credit extension from the time the prepaid card 
transaction is authorized.
    ii. For transactions where there are insufficient or unavailable 
funds in the asset feature of the prepaid account to cover that 
transaction at the time it settles and the prepaid transaction either 
was not authorized in advance or the transaction was authorized and 
there were sufficient or available funds in the prepaid account at the 
time of authorization to cover the transaction, credit must be drawn 
from the covered separate credit feature to settle these transactions. 
The card issuer may not allow the asset feature on the prepaid account 
to become negative. The card issuer must comply with the applicable 
provisions of this regulation from the time the transaction is settled.
    iii. If a negative balance would result on the asset feature in 
circumstances other than those described in comment 61(b)-2.i and ii, 
credit must be drawn from the covered separate credit feature to avoid 
the negative balance. The card issuer may not allow the asset feature 
on the prepaid account to become negative. The card issuer must comply 
with the applicable provisions in this regulation from the time credit 
is drawn from the covered separate credit feature. For example, assume 
that a fee for an ATM balance inquiry is imposed on the prepaid account 
when there are insufficient or unavailable funds to cover the amount of 
the fee when it is imposed. Credit must be drawn from the covered 
separate credit feature to avoid a negative balance.
* * * * *

    Dated: January 9, 2018.
Mick Mulvaney,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2018-01305 Filed 2-12-18; 8:45 am]
BILLING CODE 4810-AM-P