The Consumer Financial Protection Bureau on Thursday said it would delay, by one year, the implementation of new rules for prepaid payment cards and the agency said it will add more flexibility to the regulations to address industry concerns.
The move comes as acting director Mick Mulvaney overhauls the agency’s approach and mission. Republicans and business groups have long complained the CFPB, which was created in the wake of the global financial crisis, was too aggressive. In a memo to his staff this week, Mulvaney said the agency would act with “humility and prudence” and no longer “push the envelope.”
The agency’s rule on the prepaid market, which took nearly six years to finalize, has been among its most criticized.
The prepaid card market has exploded in recent years. Consumers uploaded $65 billion to the cards in 2013, up from nearly $1 billion a decade earlier, according to the CFPB. By 2020, consumers are projected to hold prepaid cards worth $116 billion, the agency said.
Consumer advocates argue the market has been lightly regulated and offers few protections for consumers, particularly those who are victims of fraud. The CFPB finalized rules last year that require companies to clearly disclose any fees and cooperate with consumers who discover unauthorized charges or errors in their accounts.
The industry complained that the rule was too broad and could leave them on the hook for fraudulent losses.
Now, the CFPB says it will give the industry more flexibility on cards linked to digital wallets, such as PayPal and Google Wallet. It will also give prepaid card providers more time to investigate claims before refunding money customers say they have lost to fraud. The CFPB, citing concerns that the industry needs more time to comply, said the rules would now go into effect in April 2019.
The industry applauded the changes. “By making adjustments to the prepaid accounts rule, including providing additional time for compliance, the CFPB has taken a step to protect consumer access to prepaid products,” Brian Tate, president of the Network Branded Prepaid Card Association, said in a statement.
“The NBPCA looks forward to working with the CFPB and industry stakeholders to make sure the changes to the Final Rule are implemented in a thoughtful manner that benefits consumers by causing as little disruption as possible.”