The result will be the suppression of a promising option to move people without bank accounts into financial products offered by insured depository institutions. Thus, rather than creating guardrails, the proposed overdraft services treatment, coupled with other onerous provisions, will create regulatory potholes and barriers to needed and valuable financial products.”
In a news release, the American Bankers Association commented on the CFPB’s proposed rulemaking regarding prepaid cards:
“The CFPB’s proposed rules for prepaid products include some onerous provisions that could create insurmountable compliance barriers for banks offering the cards, ABA said in a comment letter. This would be particularly harmful for “underbanked” individuals, many of whom rely on prepaid accounts as an alternative to traditional deposit products.One barrier is the CFPB’s proposed treatment of overdrafts, which “effectively prohibits linking prepaid cards to overdraft services … and prohibits imposing any fee when an account is in overdraft status,” ABA said. Without a penalty for overdrawing the account, underbanked prepaid customers would lose an opportunity to learn how to prudently manage their finances. ABA explained: