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The Consumer Financial
Protection Bureau has begun the process of issuing new rules to govern the
booming, multi-billion dollar market in certain reloadable debit cards. On May
24, 2012, the Bureau issued an Advanced Notice of Proposed Rule-making (the
"Advanced Notice") to solicit public comments on several aspects of
potential future regulation of general use prepaid reloadable cards. By the
time the comment period closed on July 23, 2012, the Bureau received over 200
comments from trade associations, consumer groups, and individuals.
In the Advanced Notice, the Bureau indicated that it will focus new rules on a
particular type of prepaid card, called a "general purpose reloadable
card" (or "GPR card"). The Advance Notice explained how these
A GPR card is issued for a set amount in exchange for payment made by a
consumer. A GPR card is reloadable, meaning the consumer can add funds to the
Although the Bureau uses the term "card", the proposed rules may
cover other devices with this same functionality, including key fobs or cell
phone apps used to access a customer's financial account.
The Advanced Notice did not solicit comments on the following: "'closed
loop' cards, debit cards linked to a traditional checking account,
non-reloadable cards, payroll cards, electronic benefit transfers (EBTs), or
gift cards." This signals that the forthcoming rules will not cover these
products. The Bureau explained the difference between closed loop cards (which
are not covered by the Advance Notice) and "open loop" cards (which
are covered). Closed-loop cards can only be used by consumers, at a specific
merchant or group of merchants. Other cards are "open-loop cards,"
which a consumer can use anywhere that accepts payment from a retail electronic
payments network, such as Visa, MasterCard, American Express, or Discover.
In the Advanced Notice, the Bureau noted that GPR cards are not currently
covered by Regulation E. The Advanced Notice highlighted several regulatory
concerns of the Bureau with respect to these products in light of this relative
lack of regulation. [footnotes omitted]
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