Regulation for the prepaid card market is “a real front-burner issue for the CFPB,” the agency’s Director Richard Cordray told the Washington Post on Sept. 11.
The CFPB is “moving forward to write rules to make sure they are protected under the [Electronic Fund Transfer Act],” he said. There “is a compelling need for us to write regulations to get them covered.”
The bureau began its move toward laws for prepaid cards in May 2012 when it issued an advance notice of proposed rulemaking which requested public input on how to regulate prepaid cards. “The people who use prepaid cards are, in many instances, the most vulnerable among us,” Cordray said at the time. “Right now prepaid cards have far fewer regulatory protections than bank accounts or debit or credit cards.” The bureau placed prepaid cards on its rulemaking agenda, released in July.
The CFPB’s list of common questions answers 159 questions about prepaid cards. If, according to the bureau, the consumer has this many questions that need answering, it signals an increase in the depth required of prepaid disclosures.
In his interview with the Post, Cordray also said the bureau is analyzing ability-to-repay standards outside the mortgage industry. “It’s something we are thinking about,” he said.
Cordray clarified that an ability-to-repay approach outside of mortgage would be done in a product-by-product fashion. Ability-to-repay rules for the mortgage market are arguable because mortgages are large transactions, he said. “In the credit card context, there is an ability-to-repay provision but it operates in a somewhat different way than for mortgages,” he said. “They are different kinds of transactions, different size, different scope.”
In general, ability-to-repay is the basis for making common sense loans, Cordray said. Mortgages needed ability-to-repay rules because they can be sold into the secondary market. This is not true of most other loan categories in which lenders care about the borrower’s ability to repay because they’re the ones lending the money, he said.
Cordray said that consumer groups have been pushing for ability-to-repay standards as a broad principle across markets. “There is quite a bit to what they’re saying,” he said. “How it would apply from one market to another is worth further analysis.”