Worried About the Prepaid Rule?
by LSC
CUAD CAP Executive Partner

What is the Prepaid Rule?

The Prepaid Rule will amend Regulation E and Regulation Z to create federal regulatory requirements for general purpose reloadable prepaid cards that can be used at multiple, unaffiliated merchants (for example, a Visa-branded card that can be used anywhere that accepts Visa cards). It will also apply to prepaid payroll card accounts and government benefit card accounts.

Does the Prepaid Rule apply to all Prepaid Cards?

No. The Prepaid Rule does not apply to gift cards, as long as they are marketed and labeled as gift cards. Those still will be governed by Section 1005.20 of Reg E (the current “Gift Card Rule”). The Prepaid Rule also does not apply to health savings accounts or flexible spending accounts. Also, the Prepaid Rule does not apply to prepaid cards used primarily for a business or commercial purpose.

What does the Prepaid Rule require?

For general purpose reloadable cards, the new requirements include a new “Short Form” disclosure and “Long Form” disclosure, Regulation E Initial Disclosure, periodic statements, Regulation E error resolution procedures and limitations on consumer liability, and submission of prepaid account agreements to the CFPB.

What do credit unions need to do to comply with the Prepaid Rule?

If your credit union sells general purpose reloadable cards covered by the Prepaid Rule, then most of the requirements will be handled by your prepaid issuer and/or program manager if you use a third party issuer or manager. Check with your issuer or program manager to confirm.

Where can I read more about the Prepaid Rule? 

You can read the Rule and CFPB guidance on the CFPB website here: https://www.consumerfinance.gov/policy-compliance/guidance/prepaid-rule/


At LSC, our philosophy is simple- we help our credit unions compete. We are your comprehensive, one-stop shop for payment services. Our team works directly with your credit union to create a new game plan to make you stronger and increase your wins. The bottom line is it's our job to see credit unions succeed. Visit our website to learn more or contact Dave Fitzgerald at 630-983-2917.


 For general questions about LSC or any of the CUAD Partners, contact George McDonald.



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