Magazine article American Banker

Fed Sets Rules on Prepaid Card Fees

Magazine article American Banker

Fed Sets Rules on Prepaid Card Fees

Article excerpt

Byline: Will Hernandez, PaymentsSource

The Federal Reserve Board has issued a set of final rules regarding the fees that prepaid card companies can impose for certain prepaid products.

Most of the changes affect open- and closed-loop gift cards, and have been addressed in other new regulations.

The gift card provisions fall under the Credit Card Accountability, Responsibility and Disclosure Act and are part of Regulation E of the Electronic Funds Transfer Act.

"This is just the affirmation of what was already in the act," said Brian Riley, the research director in the bankcards practice at TowerGroup Inc., a Needham, Mass., consulting firm.

The Fed's final rules, released Tuesday, prohibit dormancy, inactivity and service fees on gift cards unused for at least one year. The rules also say that issuers may charge no more than one fee per month, starting a year after the cards are issued.

Other parts of the new rules stipulate that cards cannot expire within five years from being issued and that the terms of expiration must be clear and conspicuous.

The final rules take effect Aug. 22. Fee transparency is the most significant new rule, Riley said. "There was a lot of public outcry about it," he said.

Many gift and prepaid card providers are already complying with the new regulations.

Prepaid companies such asGreen Dot Corp. and nFinanSe Inc., for example, have changed their packaging to better highlight fees and expiration dates. …

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