CFPB Includes Mobile Wallets in Final Prepaid Rule
The U.S. Consumer Financial Protection Bureau (CFPB) on Oct. 5 released its final rule on prepaid accounts, and the agency’s requirements, which go into effect Oct. 1, 2017, go well beyond plastic.
“The new rule applies to traditional prepaid cards as well as mobile wallets, person-to-person payment products and other electronic accounts that can store funds,” CFPB Director Richard Cordray said during a press conference Oct. 4. Kristine Andreassen, senior counsel in the CFPB’s office of regulations, expanded on this by explaining that mobile wallets that can store funds are covered under the final rule, while those that act simply as a “pass-through” are not covered.
This means mobile wallets, such as Google Wallet and PayPal’s Venmo, must meet the rule’s requirements, while wallets like Apple Pay won’t because they only store payment credentials. After the proposed rule had been released, PayPal and Google objected to the CFPB potentially including their mobile wallets because they are capable of P2P transfers and storing funds, according to The Wall Street Journal. Google in 2015 submitted a comment to the bureau stressing that “overregulation would unnecessarily stifle this emerging market” for mobile wallets, requesting that the CFPB “tread lightly” in regulating them, the WSJ noted.
The CFPB, however, didn’t budge in its final rule despite the objections.
“The Bureau continues to believe that digital wallets that can hold funds operate in large part in a similar manner to physical or online prepaid accounts—a consumer can load funds into the account, spend the funds at multiple, unaffiliated merchants or conduct P2P transfers, and reload the account once the funds are depleted,” according to the final rule. “Accordingly, the bureau believes that consumers who transact using digital wallets deserve the same protections as consumers who use other prepaid accounts. Indeed, as with other prepaid accounts, a consumer’s digital wallet could fall victim to erroneous or fraudulent transactions.”
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