Posted October, 7 2016U.S. Court of Appeals Rules CFPB Structure Unconstitutional
On Oct. 11, 2016, the U.S. Court of Appeals for the D.C. Circuit ruled 2-1 that the structure of the Consumer Financial Protection Bureau (CFPB) is constitutionally flawed. Stating that “[n]ever before has an independent agency exercising substantial executive authority been headed by just one person," the court found that the agency’s structure “represents a gross departure from settled historical practice” of independent agencies being kept in check by having multi-member commissions.
While the ruling will not affect CFPB’s current operations, it does raise questions about the future of the bureau as well as its director, who can now be removed by the President at will.
CFPB Issues Final Prepaid Card Rule
On Oct. 5, 2016, The Consumer Financial Protection Bureau issued the final prepaid card rule which amends Regulation E, which implements the Electronic Fund Transfer Act (“EFTA”); Regulation Z, which implements the Truth in Lending Act (“TILA”); and the official interpretations to the regulations. The regulation created comprehensive consumer protections for certain prepaid financial products. NACHA filed comments to CFPB’s 2014 Notice of Proposed Regulation and our response was limited to those matters that may have impacted the ACH Network.
The regulation extends existing Regulation E protections for payroll cards to prepaid accounts, with some modifications. NACHA applauds the Bureau’s efforts to extend comprehensive consumer protections to various forms of prepaid products, including cards, codes, or other devices capable of being loaded with funds. NACHA and its members have long recognized the important role Regulation E plays in protecting consumers. The NACHA Operating Rules incorporate by reference, Regulation E and often extend consumer protections beyond those required under the regulation. To the extent the ACH Network is used to fund and/or debit prepaid accounts, NACHA supports protecting the consumers that rely on prepaid products and services. NACHA largely supported the Bureau’s efforts to extend Regulation E protections to General Purpose Reloadable cards.
The final regulation (over 1,600 pages) and executive summaries, can be found at CFPB’s implementation web page.
GAO Releases Long-Awaited Report
On Sept. 29, 2016, The General Accountability Office (GAO) released their long-awaited report, “Payment Services: Federal Reserve's Competition with Other Providers Benefits Customers, but Additional Reviews Could Increase Assurance of Cost Accuracy”. The report looked at the Federal Reserve potential conflict as a payment system operator and a regulator. NACHA and our members provided insights to GAO as they compiled their research for the report. Although the full report does not indicate “anything newsworthy”, it is worth reading for details pertaining to the following:
- Federal Reserve cost recovery by payment system
- Inter-operator fees
- Comments by Fed on the need for two ACH Operators
- Data pertaining to Fed banks ACH origination & receipt
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