Today the Consumer Financial Protection Bureau (Bureau) took steps to make it easier for consumers to receive pandemic-relief payments, including the economic impact payments authorized in the CARES Act, through prepaid accounts. Federal, State, and local governments are considering a variety of approaches to providing consumers relief from the economic impacts of the COVID-19 pandemic.
“In these unprecedented times, policymakers are acting swiftly to provide consumers with needed financial support through new mechanisms and for new purposes outside of existing government benefit programs,” said CFPB Director Kathleen L. Kraninger. “The steps we are taking today ensure that consumers can receive these payments in a fast, secure, and efficient manner.”
Government agencies may not always be able to use direct deposit to distribute funds because they do not have access to consumers’ account information, such as account and routing numbers, and because some consumers receiving payments do not have a pre-existing account that can accept direct deposits.
In such cases, the disbursement of funds via alternative means, such as a newly-issued prepaid account, may be faster, more secure, more convenient, and less expensive—for both the government agency and the consumer—than making disbursements through other methods such as paper check.
Government agencies are prohibited by the Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E, from requiring consumers to establish accounts for receipt of electronic fund transfers with a particular financial institution as a condition of receipt of a government benefit (known as the compulsory use prohibition).
To get pandemic relief payments to consumers in a fast, secure, and efficient manner if direct deposit is unavailable, the interpretive rule the Bureau is issuing today concludes that, if certain conditions are met, certain pandemic-relief payments are not “government benefits” for purposes of Regulation E and thus these payments are not subject to the compulsory use prohibition in EFTA and Regulation E.
Specifically, government benefits do not include payments from federal, state, or local governments if those payments: (1) are made to provide assistance to consumers in response to the COVID-19 pandemic or its economic impacts; (2) are not part of an already-established government benefit program; (3) are made on a one-time or otherwise limited basis; and (4) are distributed without a general requirement that consumers apply to the agency to receive funds.
The Interpretive Rule on Treatment of Pandemic Relief Payments under Regulation E and Application of the Compulsory Use Prohibition is available at: https://files.consumerfinance.gov/f/documents/cfpb_interpretive-rule_pandemic-relief-payments-reg-e.pdf