The CFPB’s Final Rule on prepaid cards includes, in addition to the long form disclosure requirements discussed in our November 21st blog post, highly detailed requirements for providing “preacquisition” disclosures to consumers of the basic terms of the prepaid card account. These “Know Before You Owe” disclosures are set to go into force on October 1, 2017. For consumers who pick up a prepaid card at a retail storefront, these disclosures will appear on the packaging of the card itself, while for consumers who obtain their cards or accounts online, the disclosures will be provided to them electronically. Unlike the long form disclosures, there are no major exceptions to the requirement to provide the short form disclosures prior to opening a prepaid account. And whereas the long form disclosures are intended as a full accounting of the fee programs applicable to an account, the short form disclosures are carefully designed by regulation to highlight what the CFPB has deemed to be the most important fees for consumers in comparing prepaid products.
The short form disclosures can be roughly broken up into two groups: top line and below the line disclosures. The top line disclosures are presented in large text and represent the four key groups of fees that must be disclosed, regardless of whether any fee is being charged. These top line fee disclosures are the “periodic fees” or fees charged on a recurring basis, fees charged on purchases, any fees associated with making ATM withdrawals, and “cash reload” fees. The “cash reload” fee must include all charges imposed by both the financial institution and any third parties.
Below these disclosures are a listing of a few other fees that must also be disclosed, regardless of whether a fee is charged. These second grouping of fees are ATM balance inquiry fees, customer service fees, and inactivity fees.
Next, are a distinct class of “incidental fees.” The disclosure must include a statement of how many other fee types exist for the prepaid account. Although all the remaining fee types need not be listed, the two fee types not already disclosed that generate the highest revenue from the consumer must be, so long as they generate at least 5% of revenue for the prepaid account program.
Whenever the amount of a fee may vary, the rule generally requires that the highest price for that service be disclosed, but the disclosure may include a symbol, like an asterisk, to indicate that the fee may vary. That indication must consist of a statement substantially similar to the phrase “This fee can be lower depending on how and where the card is used.” Similarly, the “periodic fee” may separately include a different symbol indicating what may cause that fee to vary.
Underlying the “incidental fee” disclosure requirement is a 24-month “look-back” assessment period for determining the highest revenue-generating fees, over which the business must renew its calculations for all programs. The revenue calculations may group together types of fees that shared the same schedule. When a program has not been in effect for 24 months at the time the initial assessment must be performed, businesses are expected to make a reasonable projection of future fee generation.
The short form disclosure must also include FDIC insurance disclosure and registration statements. Although the rules go into effect October 1, 2017 with respect to both long and short form disclosures, for cards sold in retail stores, packaging produced “in the normal course of business” prior to that date need not be pulled and replaced, so long as consumers are provided with the disclosures within 30 days of obtaining their account information.