Federal Government Participation in the Automated Clearing House, 80335-80340 [2010-32114]
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
emcdonald on DSK2BSOYB1PROD with RULES
payments by check through February
28, 2013;
(iii) Was born prior to May 1, 1921,
and is receiving payment by check on
March 1, 2013;
(iv) Receives a type of payment that
is not eligible for deposit to a Direct
Express® card account. In such cases,
those payments are not required to be
made by electronic funds transfer,
unless and until such payments become
eligible for deposit to a Direct Express®
card account;
(v) Is ineligible for a Direct Express®
card because of suspension or
cancellation of the individual’s card by
the Financial Agent;
(vi) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to a mental
impairment, and Treasury has not
rejected the request; or
(vii) Has filed a waiver request with
Treasury certifying that payment by
electronic funds transfer would impose
a hardship because of the individual’s
inability to manage an account at a
financial institution or a Direct Express®
card account due to the individual
living in a remote geographic location
lacking the infrastructure to support
electronic financial transactions, and
Treasury has not rejected the request.
*
*
*
*
*
(6) Where the agency does not expect
to make payments to the same recipient
within a one-year period on a regular,
recurring basis and remittance data
explaining the purpose of the payment
is not readily available from the
recipient’s financial institution
receiving the payment by electronic
funds transfer; and
*
*
*
*
*
(b) An individual who requests a
waiver under paragraphs (a)(1)(vi) and
(vii) of this section shall provide, in
writing, to Treasury a certification
supporting that request, in such form
that Treasury may prescribe. The
individual shall attest to the
certification before a notary public, or
otherwise file the certification in such
form that Treasury may prescribe.
■ 4. Revise § 208.6 to read as follows:
§ 208.6
Card.
Availability of the Direct Express®
An individual who receives a Federal
benefit, wage, salary, or retirement
payment shall be eligible to open a
Direct Express® card account. The
offering of a Direct Express® card
account shall constitute the provision of
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EBT services within the meaning of
Public Law 104–208.
■ 5. Revise § 208.7 to read as follows:
§ 208.7
Agency responsibilities.
An agency shall put into place
procedures that allow recipients to
provide the information necessary for
the delivery of payments to the recipient
by electronic funds transfer to an
account at the recipient’s financial
institution or a Direct Express® card
account.
■ 6. Revise § 208.8 to read as follows:
§ 208.8
Recipient responsibilities.
Each recipient who is required to
receive payment by electronic funds
transfer shall provide the information
necessary to effect payment by
electronic funds transfer.
■ 7. Revise the third sentence in
§ 208.11 to read as follows:
§ 208.11
Accounts for disaster victims.
* * * Treasury may deliver payments
to these accounts notwithstanding any
other payment instructions from the
recipient and without regard to the
requirements of §§ 208.4 and 208.7 of
this part and § 210.5 of this chapter.
* * *
■ 8. Remove Appendix A and Appendix
B to Part 208.
Dated: December 16, 2010.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2010–32117 Filed 12–21–10; 8:45 am]
BILLING CODE 4810–35–P
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN 1510–AB24
Federal Government Participation in
the Automated Clearing House
Financial Management Service,
Fiscal Service, Treasury.
ACTION: Interim final rule.
AGENCY:
The Department of the
Treasury, Financial Management
Service (FMS) is amending its
regulation governing the use of the
Automated Clearing House (ACH)
system by Federal agencies to permit the
delivery of Federal payments to prepaid
debit cards that meet certain criteria. To
be eligible to receive Federal payments,
a card must provide the cardholder with
pass-through deposit or share insurance
and the card account must not have an
attached line of credit or loan feature
SUMMARY:
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80335
that triggers automatic repayment from
the card account. In addition, the issuer
of the card account must provide the
cardholder with all of the consumer
protections that apply to a payroll card
under the Federal Reserve Board’s
Regulation E.
DATES: This interim final rule is
effective January 21, 2011. Comments
must be received on or before February
22, 2011.
ADDRESSES: You can download this
interim final rule at the following Web
site: https://www.fms.treas.gov/ach. You
may also inspect and copy this interim
final rule at: Treasury Department
Library, Freedom of Information Act
(FOIA) Collection, Room 1428, Main
Treasury Building, 1500 Pennsylvania
Avenue, NW., Washington, DC 20220.
Before visiting, you must call (202) 622–
0990 for an appointment.
In accordance with the U.S.
government’s eRulemaking Initiative,
FMS publishes rulemaking information
on https://www.regulations.gov.
Regulations.gov offers the public the
ability to comment on, search, and view
publicly available rulemaking materials,
including comments received on rules.
Comments on this rule, identified by
docket FISCAL–FMS–2010–0003,
should only be submitted using the
following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions on the Web site for
submitting comments.
• Mail: Walt Henderson, Financial
Management Service, 401 14th Street,
SW., Room 337, Washington, DC 20227.
The fax and e-mail methods of
submitting comments on rules to FMS
have been decommissioned.
Instructions: All submissions received
must include the agency name
(‘‘Financial Management Service’’) and
docket number FISCAL–FMS–2010–
0003 for this rulemaking. In general,
comments received will be published on
Regulations.gov without change,
including any business or personal
information provided. Comments
received, including attachments and
other supporting materials, are part of
the public record and subject to public
disclosure. Do not disclose any
information in your comment or
supporting materials that you consider
confidential or inappropriate for public
disclosure.
FOR FURTHER INFORMATION CONTACT: Walt
Henderson, Director of the EFT Strategy
Division, at (202) 874–6619 or
walt.henderson@fms.treas.gov; or
Natalie H. Diana, Senior Counsel, at
(202) 874–6680 or
natalie.diana@fms.treas.gov.
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
On May
14, 2010, we published in the Federal
Register, at 75 FR 27239, a Notice of
Proposed Rulemaking (NPRM)
requesting comment on a number of
proposed amendments to 31 CFR part
210 (part 210). One of the proposed
amendments was to allow Federal
payments to be delivered to prepaid
debit card or similar card accounts
meeting certain consumer protection
requirements. The NPRM also proposed
to allow Federal payments to be
delivered to certain kinds of accounts
established by nursing facilities or
religious orders. In addition, the NPRM
addressed a number of other issues,
including requirements adopted by
NACHA—The Electronic Payments
Association in 2009 to identify
international payment transactions
using a new Standard Entry Class and
proposed changes to the process for
reclaiming post-death benefit payments
from financial institutions.
In this Interim Final Rule, we are
finalizing the proposal in the NPRM to
allow Federal payments to be delivered
to prepaid card accounts meeting
certain consumer protection
requirements, with a number of changes
reflecting the comments that we
received. Although we previously
requested and received comment on the
prepaid card proposal, we are issuing
this rule as an interim final rule in order
to provide the public with an additional
opportunity to comment. This interim
final rule does not address any of the
other proposed amendments to part 210
that were published in the NPRM. The
final rule relating to those proposed
amendments will be issued separately.
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SUPPLEMENTARY INFORMATION:
I. Background and Summary of Prepaid
Card Proposal
Title 31 CFR 210.5(a) generally
requires that a Federal direct deposit
payment be delivered to a deposit
account at a financial institution. For all
payments other than vendor payments,
the account at the financial institution
must be in the name of the recipient,
unless one of the exceptions listed in
the regulation applies. As explained in
the NPRM, our long-standing
interpretation of the words ‘‘in the name
of the recipient’’ has been that the
payment recipient’s name must appear
in the account title. See, e.g., 64 FR
17480, referring to discussion at 63 FR
51490, 51499. The purpose of this
requirement is to ensure that the
payment reaches the intended recipient
through delivery to a deposit account
that the recipient owns and to which he
or she has unfettered access, so that the
payment is not diverted to a creditor or
another third party before it reaches the
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recipient and comes under the
recipient’s control.
The ‘‘in the name of the recipient’’
requirement has the effect of prohibiting
payments to pooled accounts in which
the recipient’s ownership interest is
reflected in subacccount records.
Because prepaid card programs are
generally set up using this kind of
structure, the delivery of non-vendor
Federal payments to these types of cards
currently is prohibited. We indicated in
the NPRM that we believed that the ‘‘in
the name of the recipient’’ requirement
may be impeding the use of prepaid
card programs that may be beneficial to
the unbanked and underbanked
populations. We therefore requested
comment on a proposal to create an
exception to the ‘‘in the name of the
recipient’’ requirement in order to allow
the delivery of Federal payments to
accounts accessed by prepaid and stored
value cards, provided that the card bears
the cardholder’s name and meets the
following requirements:
• The account accessed by the card is
held at an insured depository institution
and meets the requirements for passthrough insurance under 12 CFR part
330 such that the cardholder’s balance
is FDIC insured to the extent permitted
by law; and
• The card account constitutes an
‘‘account’’ as defined in 12 CFR 205.2(b)
such that the consumer protections of
Regulation E (12 CFR part 205), the rule
prescribed by the Board of Governors of
the Federal Reserve System (Board) to
implement the Electronic Fund Transfer
Act, apply to the cardholder.
We requested comment on the
implications of allowing delivery of
Federal benefit and other non-vendor
payments to accounts that meet the
requirements listed above. We further
noted that we are mindful of concerns
that account arrangements may be
structured to facilitate automatic third
party debits to a direct deposit account
(known in some States as payday
lending) and similar arrangements that
are inappropriate for Federal benefit
recipients, and we particularly solicited
comment on whether the consumer
protections required in the proposed
exception are adequate to prevent
potential abuses.
II. Summary of Comments
We received 12 comments in response
to the NPRM. The commenters
represented a variety of perspectives.
Comments were submitted by financial
institutions, consumer advocacy groups,
industry associations, the Senate
Committee on Finance and the House
Committee on Ways and Means. Most
commenters commented on our
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proposal to allow Federal payments to
be deposited to prepaid card accounts.
Several commenters, including
financial institutions and a nonprofit
organization focusing on financial
services for underserved consumers,
supported the proposed prepaid card
exception to the ‘‘in the name of the
recipient’’ requirement. Those
supporting the exception noted that
prepaid products can benefit Federal
payment recipients by expanding their
options to receive Federal payments.
They pointed out that underbanked
Federal benefit recipients currently may
use a variety of high cost financial
service providers to cash their benefit
checks and pay their bills. These
commenters also noted that
underbanked individuals may tend to
hold significant amounts of cash, which
may pose a security risk. According to
these commenters, expanding Federal
benefit recipients’ ability to use prepaid
cards could alleviate many of these
concerns.
Most commenters supported our
proposed requirement that the prepaid
cardholder’s balance be FDIC-insured
via the FDIC’s requirements for passthrough insurance. Comments regarding
the proposed requirement that card
accounts constitute ‘‘accounts’’ subject
to Regulation E were mixed. Several
commenters urged us to clarify the
proposed requirement that the
consumer protections of Regulation E
apply to the cardholder. Some
commenters noted that currently the
only type of prepaid cards to which
Regulation E applies are payroll cards.
Since Regulation E does not currently
apply to general use prepaid cards,
some commenters were uncertain as to
whether only payroll cards would be
eligible for the proposed exception.
Therefore, commenters requested that
the final rule clarify whether a prepaid
card that would fit within the exception
proposed by Treasury must: (a) Actually
be subject to Regulation E (which, under
current law, would eliminate many or
all general use prepaid products from
eligibility under the proposed
exception); or (b) provide protections
similar or identical to those contained
in Regulation E.
Other commenters suggested that
Regulation E should be extended to
cover all prepaid cards. We note that
FMS does not have the authority to
amend Regulation E to cover prepaid
cards. That authority is assigned to the
Board.1 One commenter, referring to
1 See 15 U.S.C. 1693b(a). This authority will be
transferred to the Bureau of Consumer Financial
Protection (CFPB) pursuant to Public Law 111–203,
§ 1084.
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
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Regulation E, recommended that
‘‘Treasury ensure that these protections
are in place prior to allowing benefits to
be deposited onto any cards.’’ It is
unclear whether the commenter
intended to suggest that we delay
finalizing the prepaid card proposal
until the Board amends Regulation E to
address general use prepaid cards.
Some financial institutions
commented that requiring issuers to
voluntarily provide cardholders with
the protections of Regulation E would
increase costs to cardholders and
adversely impact innovation in the
prepaid card industry. Several financial
institutions suggested that FMS should
require compliance with only some of
Regulation E’s protections, such as those
providing protections for unauthorized
transactions and those governing error
resolution processes. These commenters
recommended that certain Regulation E
requirements, such as the periodic
statement requirement, not be imposed.
In contrast, some other commenters
expressed the view that FDIC insurance
and Regulation E protections are not
sufficient to adequately protect
cardholders. These commenters
expressed concern that Federal benefits
might be deposited onto prepaid and
stored value products that carry high
fees or other features, such as lines of
credit, that may affect the amount of the
Federal benefit ultimately available to
the Federal benefit recipient. One
consumer advocacy organization
requested that FMS impose a number of
additional requirements on prepaid
cards in order for them to be eligible for
the exception to the ‘‘in the name of the
recipient’’ rule. Additional requirements
that commenters proposed include:
Prohibiting the deposit of Federal
benefits onto prepaid cards or stored
value cards that contain credit features;
regulating the fees associated with a
prepaid card or stored value card;
imposing fee disclosure requirements;
requiring prepaid card providers to
inform benefit recipients of the Direct
Express® prepaid card 2 or of any other
lower-cost options; and ensuring that
card providers cannot collect fees or
repayment of any advances by
2 The Direct Express® prepaid card is a card
established pursuant to terms and conditions
approved by FMS. Direct Express® is a registered
service mark of the Financial Management Service,
U.S. Department of the Treasury. The Direct
Express® Debit MasterCard® card is issued by
Comerica Bank, pursuant to a license by MasterCard
International Incorporated. MasterCard® and the
MasterCard® Brand Mark are registered trademarks
of MasterCard International Incorporated. See, 75
FR 34394, 34397–34398 (Jun. 17, 2010) for a
description of the Direct Express® card.
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exercising any right of set-off against
Federal benefit payments.
On the other hand, another consumer
advocacy organization supported the
prepaid card proposal without any
changes, except that they urged us to
craft language that ensures that
cardholders’ access to responsiblydesigned credit is not restricted. This
organization recognized the concern
that the accounts may be structured to
facilitate payday lending or other
similar arrangements that can result in
unaffordable debt levels for Federal
beneficiaries. However, they expressed
concern that a vaguely worded
restriction on credit features associated
with card accounts could prevent
Federal benefit recipients from
accessing forms of credit that are
responsibly structured.
Finally, some commenters expressed
concern that we have not pursued
enforcement action against entities that
may be currently violating the ‘‘in the
name of the recipient’’ requirements by
allowing payments onto prepaid cards
or other accounts. One commenter
urged that, in order to allow for
enforcement, the rule expressly provide
that no institution (bank or nonbank)
may accept direct deposit of Federal
payments to accounts that do not meet
the rule’s requirements.
III. Interim Final Rule
We are revising the proposed prepaid
card exception to address the comments
we received. We are requiring that the
funds accessible through the card be
insured for the benefit of the cardholder
in light of the fact that commenters
uniformly supported such an insurance
requirement, but we are broadening that
provision to allow for eligibility of
insurance by National Credit Union
Share Insurance Fund (NCUSIF). We are
aware that NCUSIF pass-through
insurance is available to beneficial
owners of share accounts in certain
circumstances, and we request comment
on whether credit unions have
established, or might establish in the
future, prepaid card accounts that
provide pass-through insurance for
members or non-members.
Because Regulation E currently does
not cover any prepaid cards other than
payroll cards, we are making the
prepaid card exception available for
prepaid cards if the issuer voluntarily
provides all of the protections that
apply to payroll cards under Regulation
E, as may be amended from time to
time. In addition, we are adding a
requirement that the prepaid card not
have an attached line of credit or loan
feature that triggers automatic
repayment from the card account. While
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80337
we are not determining a fee structure
or a range of acceptable fees, it is our
expectation that the fees for such cards
be transparent to the recipient,
adequately disclosed, and reasonable by
industry standards. We note in this
regard that Regulation E requires that
fees be disclosed in a clear and readily
understandable manner.
In developing the interim final rule,
we have attempted to balance the need
to maintain appropriate consumer
protections—consistent with the general
requirement of section 210.5(a)—with
concerns expressed by different
commenters. As originally proposed, the
exception would not have allowed the
delivery of Federal payments to any
general use prepaid card accounts,
because prepaid card accounts (other
than payroll card accounts) are not
subject to Regulation E. Moreover,
several commenters indicated that the
industry is unlikely to develop prepaid
cards that provide cardholders with all
of the protections applicable to bank
deposit accounts. Finalizing the
requirement that eligible cards be
covered by all of the protections that
apply to an account under Regulation E
would therefore have rendered the
exception pointless. Instead, we are
requiring that the protections that apply
to payroll card accounts under
Regulation E be provided by the card
issuer. For cards that do not constitute
payroll cards as defined in Regulation E,
this means that the issuer must
voluntarily provide the protections that
apply to payroll cards. This requirement
ensures that cardholders will receive
important consumer protections, while
allowing prepaid card issuers to provide
account history and balance information
in lieu of sending periodic statements.
Several commenters pointed
specifically to Regulation E’s statement
requirements as a barrier to the
provision of prepaid cards at a
reasonable cost. Regulation E provides
an alternative means of compliance for
the statement requirements for payroll
cards. Generally, statements need not be
sent if the issuer makes the consumer’s
account balance available by phone and
also makes available an electronic
history of the consumer’s account
transaction activity covering 60 days, as
well as a written transaction history
covering 60 days upon the consumer’s
request. See 12 CFR 205.18(b).
Consequently, the unauthorized
transaction and error resolution
reporting deadlines for payroll cards are
triggered by the earlier of the sending of
a written history reflecting the
transaction to the cardholder or the date
the cardholder accesses the electronic
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
account history reflecting the
transaction. See 12 CFR 205.18(c)(3), (4).
We considered developing a separate
framework of requirements based on
Regulation E to apply to prepaid cards
to which Federal payments are directly
deposited, but believe it would be
detrimental to introduce a separate and
unique framework of consumer
protections for a relatively limited class
of transactions involving prepaid cards.
The payroll card requirements of
Regulation E are well established and
Treasury believes that, in general, the
card industry already is familiar with
appropriate measures necessary to meet
those requirements. In this regard,
Treasury believes that a number of
prepaid cards already provide most,
though not necessarily all, of the payroll
card protections to cardholders. It is our
expectation that some issuers of existing
prepaid cards will choose to modify the
terms and conditions of the card
accounts to include all of the payroll
card protections to cardholders, so that
their cards will be eligible to receive
Federal payments. We also anticipate
that as new prepaid card programs are
developed, issuers seeking to make the
cards available to Federal payment
recipients will structure their cards to
incorporate Regulation E’s payroll card
protections. We request comment on the
extent to which prepaid card issuers
will choose to do so. We also request
comment on the kinds of changes that
card issuers will undertake to provide
the consumer protection specified in
this interim final rule and the costs
associated with adopting these changes.
We have also attempted to balance the
competing comments made by
consumer organizations relating to
credit features associated with prepaid
cards. In order to prevent Federal
payments from being delivered to
prepaid cards that have payday lending
or ‘‘account advance’’ features, we are
prohibiting prepaid cards from having
an attached line of credit if the credit
agreement allows for automatic
repayment of a loan from a card account
triggered by the delivery of the Federal
payment into the account. Our intention
is that this restriction will prevent
arrangements in which a bank or
creditor ‘‘advances’’ funds to a
cardholder’s account, and then repays
itself for the advance and any related
fees by taking some or all of the
cardholder’s next deposit. Accounts
covered by Regulation E, including
payroll cards, are subject to restrictions
on these types of arrangements through
Regulation E’s ‘‘compulsory use’’
provision, which provides: ‘‘No
financial institution or other person may
condition an extension of credit to a
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consumer on the consumer’s repayment
by preauthorized electronic fund
transfers, except for credit extended
under an overdraft credit plan or
specified to maintain a specified
minimum balance in the consumer’s
account.’’ 12 CFR 205.10(e). Because
prepaid cards other than payroll cards
are not currently covered by this
provision, we are restricting credit
features associated with cards as a
condition for the receipt of Federal
payments onto a card.
This restriction does not, however,
bar the provision of credit to consumers
who receive Federal payments via an
eligible prepaid card product. Nor does
this restriction absolutely bar a
recipient-cardholder from repaying a
loan with an eligible prepaid card
product to which Federal payments
have been made. We request comment
on whether we have struck the
appropriate balance, and on whether the
wording of the prohibition is
sufficiently clear.
To address comments made
concerning the need to enforce the ‘‘in
the name of the recipient’’ requirement,
we have added a provision to the
exception to make it clear that no
person or entity may issue a prepaid
card that accepts Federal payments in
violation of the rule’s requirements, and
that any financial institution that holds
an account for or on behalf of a prepaid
card issuer to which Federal payments
are received is responsible for ensuring
that the requirements of the exception
are met. Treasury believes that, under
this provision, a violation of a
requirement of the exception currently
would be enforceable by the appropriate
Federal or State regulator (or both) to
the extent that the regulator has
jurisdiction over the person or entity,
and in accordance with applicable law.
If we become aware that Federal
payments are being deposited to prepaid
cards that do not meet these
requirements, we will review the
situation and take appropriate action.
We may, for example, contact both the
issuer and the financial institution
holding the issuer’s account, review the
terms and conditions of the card
account, and refer any violations of our
requirements to the appropriate
regulatory bodies, including the primary
regulator of the financial institution
maintaining the card account for an
issuer. Treasury requests comment on
whether the wording of this provision is
sufficiently clear.
Treasury also seeks comment on
whether the consumer protections
provided by this interim final rule allow
for more novel uses of these cards by
consumers including, but not limited to,
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those (1) who currently own bank
accounts but prefer receiving payments
by check due to privacy reasons; and (2)
consumers who are unbanked or
underbanked who receive Federal
payments by check.
IV. Section-by-Section Analysis
Section 210.5(b)(5)(i) permits a
Federal payment to be deposited to an
account accessed by a prepaid card that
does not meet the ‘‘in the name of the
recipient’’ requirement if certain
conditions are met. To be eligible to
receive Federal payments, a prepaid
card must meet four conditions. The
first condition, at § 210.5(b)(5)(i)(A), is
that the account be held at an insured
financial institution. The second
condition, at § 210.5(b)(5)(i)(B), requires
that the account be set up to meet the
requirements for pass through deposit or
share insurance under 12 CFR part 330
or 12 CFR part 745 such that the funds
accessible through the card are insured
for the benefit of the Federal payment
recipient. The third condition, at
§ 210.5(b)(5)(i)(C), is that the account is
not attached to a line of credit or loan
agreement under which repayment from
the card account is triggered by delivery
of the Federal payment. The fourth
condition, at § 210.5(b)(5)(i)(D), requires
the issuer of the card to comply with all
of the requirements, and to provide the
Federal payment recipient with the
same consumer protections, that apply
to a payroll card under regulations
implementing the Electronic Fund
Transfer Act (EFTA), 15 U.S.C. 1693a(1).
The payroll card provisions of those
regulations currently are located at 12
CFR 205.18 and are administered by the
Board of Governors of the Federal
Reserve System. This authority is
scheduled to be transferred to the CFPB
on the ‘‘designated transfer date,’’ which
is set as July 21, 2011.3
With respect to the fourth condition,
§ 210.5(b)(5)(i)(D) provides that the
issuer must comply with the rules
implementing the EFTA ‘‘as amended.’’
Treasury notes that, as of the designated
transfer date, the CFPB will be
authorized to prescribe rules, as well as
issue interpretations and guidance,
implementing the provisions of the
EFTA (other than section 920 of the
EFTA).4 In addition, the requirements
under the EFTA are enforceable by the
Federal banking agencies, the Federal
Trade Commission, and other Federal
agencies, including the CFPB, subject to
several provisions of the Consumer
3 75
FR 57,252 (Sept. 20, 2010).
Public Law 111–203, § 1075 (amending the
EFTA to allow the Board to prescribe rules relating
to interchange transaction fees for electronic debit
transactions).
4 See
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Financial Protection Act of 2010.5
Treasury expects that, as the
requirements under the EFTA that apply
to a payroll card account may be
amended or interpreted from time to
time, the CFPB and the agencies charged
with enforcing the EFTA—not
Treasury—also will be in the position to
administer the requirements under this
§ 210.5(b)(5)(i)(D).
Section 210.5(b)(5)(ii) prohibits a
person or entity from issuing a card that
receives Federal payments in violation
of these requirements. Moreover, any
financial institution violates this
regulation if the institution maintains an
account for or on behalf of an issuer of
a prepaid card that receives Federal
payments if that issuer violates this
subsection. As discussed above, we will
refer violations of the regulation to the
appropriate regulatory bodies.
Section 210.5(b)(5)(iii) provides that
the term ‘‘payroll card account’’ has the
same meaning as that term is defined for
purposes of the rules implementing the
EFTA. The term ‘‘prepaid card’’ means a
card, code, or other means of access to
funds of a recipient. The term ‘‘issuer’’
means a person or entity that issues a
prepaid card.
V. Procedural Requirements
emcdonald on DSK2BSOYB1PROD with RULES
Request for Comment on Plain Language
Executive Order 12866 requires each
agency in the Executive branch to write
regulations that are simple and easy to
understand. We invite comment on how
to make the interim final rule clearer.
For example, you may wish to discuss:
(1) Whether we have organized the
material to suit your needs; (2) whether
the requirements of the rule are clear; or
(3) whether there is something else we
could do to make this rule easier to
understand.
Regulatory Planning and Review
The Office of Management and Budget
(OMB)’s Office of Information and
Regulatory Affairs (OIRA) designates the
interim final rule as a ‘‘significant
regulatory action’’ as defined in
Executive Order 12866. While Treasury
has not conducted a regulatory impact
analysis that comports with the
requirements of OMB Circular A–4,
Treasury is providing some preliminary
information about the current industry
practices, and potential costs and
benefits of this rule. Treasury believes
that many issuers of the prepaid cards
are already providing some consumer
5 See, e.g., Public Law 111–203, §§ 1025–1026
(governing the enforcement authorities of the CFPB
and a prudential regulator with respect to a
depository institution and, depending on the size of
that institution, its affiliates).
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protection. We seek comment on the
degree to which consumer protection is
already provided by prepaid debit card
issuers; the changes the issuers would
undertake to provide the level of
consumer protection specified in this
rulemaking; and the costs associated
with providing these additional
protections.
In addition, Treasury believes that
once prepaid cards provide the
specified consumer protections, these
cards will be used in novel ways. An
example of this is receiving tax refunds
on these prepaid cards. Given that there
were approximately 45 million tax
refund checks issued in FY 2010,
assuming $1 per check processing fee on
the part of the Federal government, and
assuming that all Federal tax refunds are
processed through prepaid cards, the
reduction in costs to the Federal
government for processing these checks
could be approximately $45 million.
Therefore, Treasury seeks information
from the public regarding other ways in
which these prepaid cards will be used
to receive Federal payments across
different types of consumers.
Depending upon the comments
received on the interim final rule,
Treasury may produce a Regulatory
Impact Analysis that comports with the
requirements of Circular A–4 in its final
rule.
Regulatory Flexibility Act Analysis
Because no notice of proposed
rulemaking is required, the provisions
of the Regulatory Flexibility Act (RFA)
(5 U.S.C. 601 et seq.) do not apply. Even
if the RFA did apply, we have
considered the potential impact of this
rule on small entities and hereby certify
that the interim final rule will not have
a significant economic impact on a
substantial number of small entities. We
believe the rule will affect only a
limited number of small entities and
that any economic impact will be
minimal. Currently, Federal non-vendor
payments are not permitted to be
delivered to general use prepaid cards.
The interim final rule will allow
prepaid card issuers to develop and
offer to Federal benefit recipients
prepaid cards that meet the rule’s
requirements. Some prepaid card
issuers, regardless of size, may choose to
meet the rule’s requirements, in which
case they may be able to expand their
customer base to include Federal benefit
recipients. Any economic impact for
these issuers is not expected to be
significant. Accordingly, a regulatory
flexibility analysis under the RFA is not
required. We invite comments regarding
any less burdensome alternatives to this
rule.
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80339
Unfunded Mandates Act of 1995
Section 202 of the Unfunded
Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act),
requires that the agency prepare a
budgetary impact statement before
promulgating any rule likely to result in
a Federal mandate that may result in the
expenditure by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year. If a budgetary impact
statement is required, section 205 of the
Unfunded Mandates Act also requires
the agency to identify and consider a
reasonable number of regulatory
alternatives before promulgating the
rule. We have determined that the
interim final rule will not result in
expenditures by State, local, and tribal
governments, in the aggregate, or by the
private sector, of $100 million or more
in any one year. Accordingly, we have
not prepared a budgetary impact
statement or specifically addressed any
regulatory alternatives.
Authority To Issue Interim Final Rule
The Administrative Procedure Act (5
U.S.C. 551 et seq.) (APA) generally
requires public notice before
promulgation of regulations or a
showing of good cause that prior notice
and opportunity to comment are
unnecessary, impracticable, or contrary
to the public interest. See 5 U.S.C.
553(b). In accordance with section
553(b), FMS published a notice of
proposed rulemaking requesting
comment on the prepaid card exception
on May 14, 2010 (75 FR 27239) and
FMS has considered the comments
received in developing this interim final
rule. FMS is issuing this rule for effect,
but also wishes to provide the public
another opportunity to comment on it.
List of Subjects in 31 CFR Part 210
Automated clearing house, Electronic
funds transfer, Financial institutions,
Fraud.
For the reasons set forth in the
preamble, 31 CFR part 210 is amended
as follows:
■
PART 210—FEDERAL GOVERNMENT
PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
1. The authority citation for part 210
continues to read as follows:
■
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31
U.S.C. 321, 3301, 3302, 3321, 3332, 3335, and
3720.
2. In § 210.5, redesignate paragraph
(b)(5) as (b)(6) and add a new paragraph
(b)(5) to read as follows:
■
E:\FR\FM\22DER1.SGM
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Federal Register / Vol. 75, No. 245 / Wednesday, December 22, 2010 / Rules and Regulations
§ 210.5 Account requirements for Federal
payments.
*
*
*
*
(b) * * *
(5)(i) Where a Federal payment is to
be deposited to an account accessed by
the recipient through a prepaid card that
meets the following requirements:
(A) The account is held at an insured
financial institution;
(B) The account is set up to meet the
requirements for pass-through deposit
or share insurance such that the funds
accessible through the card are insured
for the benefit of the recipient by the
Federal Deposit Insurance Corporation
or the National Credit Union Share
Insurance Fund in accordance with
applicable law (12 CFR part 330 or 12
CFR part 745);
(C) The account is not attached to a
line of credit or loan agreement under
which repayment from the account is
triggered upon delivery of the Federal
payments; and
(D) The issuer of the card complies
with all of the requirements, and
provides the holder of the card with all
of the consumer protections, that apply
to a payroll card account under the rules
implementing the Electronic Fund
Transfer Act, as amended.
(ii) No person or entity may issue a
prepaid card that receives Federal
payments in violation of this subsection,
and no financial institution may
maintain an account for or on behalf of
an issuer of a prepaid card that receives
Federal payments if the issuer violates
this paragraph.
(iii) For the purposes of this
paragraph (b)(5), the term—
(A) ‘‘Payroll card account’’ shall have
the same meaning as that term is
defined in the rules implementing the
Electronic Fund Transfer Act;
(B) ‘‘Prepaid card’’ means a card, code,
or other means of access to funds of a
recipient; and
(C) ‘‘Issuer’’ means a person or entity
that issues a prepaid card.
*
*
*
*
*
emcdonald on DSK2BSOYB1PROD with RULES
*
Dated: December 16, 2010.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2010–32114 Filed 12–21–10; 8:45 am]
BILLING CODE 4810–35–P
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40 CFR Part 52
Environmental Protection Agency, 290
Broadway, 25th Floor, New York, New
York 10007–1866, (212) 637–4249.
SUPPLEMENTARY INFORMATION:
[EPA–R02–OAR–2010–0310, FRL–9214–4]
Table of Contents
Approval and Promulgation of
Implementation Plans; New Jersey;
8-Hour Ozone Control Measures
I. What action is EPA taking?
II. What comments did EPA receive in
response to its proposal?
III. What are EPA’s conclusions?
IV. Statutory and Executive Order Reviews
ENVIRONMENTAL PROTECTION
AGENCY
Environmental Protection
Agency (EPA).
ACTION: Final rule.
AGENCY:
The Environmental Protection
Agency (EPA) is approving a request by
New Jersey to revise the State
Implementation Plan (SIP) for ozone
involving the control of volatile organic
compounds (VOCs). The SIP revision
consists of two new rules, Subchapter
26, ‘‘Prevention of Air Pollution From
Adhesives, Sealants, Adhesive Primers
and Sealant Primers,’’ and Subchapter
34, ‘‘TBAC Emissions Reporting,’’ (TBAC
means tertiary butyl acetate or
t-butyl acetate) and revisions to
Subchapter 23, ‘‘Prevention of Air
Pollution From Architectural Coatings,’’
Subchapter 24, ‘‘Prevention of Air
Pollution From Consumer Products,’’
and Subchapter 25, ‘‘Control and
Prohibition of Air Pollution by
Vehicular Fuels,’’ of the New Jersey
Administrative Code. The intended
effect of this action is to approve control
strategies that will result in VOC
emission reductions that will help
achieve attainment of the national
ambient air quality standard for ozone.
DATES: Effective Date: This rule is
effective on January 21, 2011.
ADDRESSES: EPA has established a
docket for this action under Docket ID
No. EPA–R02–OAR–2010–0310. All
documents in the docket are listed on
the https://www.regulations.gov Web
site. Although listed in the index, some
information is not publicly available,
e.g., CBI or other information whose
disclosure is restricted by statute.
Certain other material, such as
copyrighted material, is not placed on
the Internet and will be publicly
available only in hard copy form.
Publicly available docket materials are
available either electronically through
https://www.regulations.gov or in hard
copy at the Environmental Protection
Agency, Region II Office, Air Programs
Branch, 290 Broadway, 25th Floor, New
York, New York 10007–1866. This
Docket Facility is open from 8:30 a.m.
to 4:30 p.m., Monday through Friday,
excluding legal holidays. The Docket
telephone number is 212–637–4249.
FOR FURTHER INFORMATION CONTACT: Paul
Truchan, Air Programs Branch,
SUMMARY:
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I. What action is EPA taking?
On April 9, 2009, New Jersey
submitted a proposed revision to the
State Implementation Plan (SIP) that
includes amendments to New Jersey
Administrative Code, Title 7: Chapter 27
(NJAC 7:27)
—Subchapter 24, ‘‘Prevention of Air
Pollution From Consumer Products,’’
—Subchapter 26, ‘‘Prevention of Air
Pollution From Adhesives, Sealants,
Adhesive Primers and Sealant
Primers,’’
—Subchapter 34, ‘‘TBAC Emissions
Reporting,’’ and
—Amending the definition of volatile
organic compound (VOC) throughout
NJAC 7:27.
The revisions to Subchapter 24 expand
the number of consumer product
categories that are regulated, and
revised and improved the portable fuel
container requirements. Subchapter 26
is a new rule that regulates adhesives,
sealants, adhesive primers and sealant
primers that are sold in larger containers
and used primarily in commercial/
industrial applications, but includes
residential applications of these
products, such as carpet and flooring
installations and roofing installations.
Subchapter 34 is a new rule that
establishes reporting requirements for
tertiary butyl acetate or t-butyl acetate
(TBAC) emissions. The definition of
VOC was revised throughout the New
Jersey rules to exclude TBAC from VOC
emissions limitations or VOC content
requirements, but requires that TBAC be
considered a VOC for purposes of
recordkeeping, emissions reporting,
photochemical dispersion modeling and
inventory requirements. These rules
complete the commitment New Jersey
made as part of its RACT analysis and
1997 8-hour national ambient air quality
standard (NAAQS) ozone attainment
demonstration that EPA conditionally
approved.
For additional information, see the
proposed rulemaking published on July
22, 2010 (75 FR 42672) or the Technical
Support Document which is available
on line at https://www.regulations.gov
and entering the docket number EPA–
R02–OAR–2010–0310.
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Agencies
[Federal Register Volume 75, Number 245 (Wednesday, December 22, 2010)]
[Rules and Regulations]
[Pages 80335-80340]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32114]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Fiscal Service
31 CFR Part 210
RIN 1510-AB24
Federal Government Participation in the Automated Clearing House
AGENCY: Financial Management Service, Fiscal Service, Treasury.
ACTION: Interim final rule.
-----------------------------------------------------------------------
SUMMARY: The Department of the Treasury, Financial Management Service
(FMS) is amending its regulation governing the use of the Automated
Clearing House (ACH) system by Federal agencies to permit the delivery
of Federal payments to prepaid debit cards that meet certain criteria.
To be eligible to receive Federal payments, a card must provide the
cardholder with pass-through deposit or share insurance and the card
account must not have an attached line of credit or loan feature that
triggers automatic repayment from the card account. In addition, the
issuer of the card account must provide the cardholder with all of the
consumer protections that apply to a payroll card under the Federal
Reserve Board's Regulation E.
DATES: This interim final rule is effective January 21, 2011. Comments
must be received on or before February 22, 2011.
ADDRESSES: You can download this interim final rule at the following
Web site: https://www.fms.treas.gov/ach. You may also inspect and copy
this interim final rule at: Treasury Department Library, Freedom of
Information Act (FOIA) Collection, Room 1428, Main Treasury Building,
1500 Pennsylvania Avenue, NW., Washington, DC 20220. Before visiting,
you must call (202) 622-0990 for an appointment.
In accordance with the U.S. government's eRulemaking Initiative,
FMS publishes rulemaking information on https://www.regulations.gov.
Regulations.gov offers the public the ability to comment on, search,
and view publicly available rulemaking materials, including comments
received on rules.
Comments on this rule, identified by docket FISCAL-FMS-2010-0003,
should only be submitted using the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions on the Web site for submitting comments.
Mail: Walt Henderson, Financial Management Service, 401
14th Street, SW., Room 337, Washington, DC 20227.
The fax and e-mail methods of submitting comments on rules to FMS
have been decommissioned.
Instructions: All submissions received must include the agency name
(``Financial Management Service'') and docket number FISCAL-FMS-2010-
0003 for this rulemaking. In general, comments received will be
published on Regulations.gov without change, including any business or
personal information provided. Comments received, including attachments
and other supporting materials, are part of the public record and
subject to public disclosure. Do not disclose any information in your
comment or supporting materials that you consider confidential or
inappropriate for public disclosure.
FOR FURTHER INFORMATION CONTACT: Walt Henderson, Director of the EFT
Strategy Division, at (202) 874-6619 or walt.henderson@fms.treas.gov;
or Natalie H. Diana, Senior Counsel, at (202) 874-6680 or
natalie.diana@fms.treas.gov.
[[Page 80336]]
SUPPLEMENTARY INFORMATION: On May 14, 2010, we published in the Federal
Register, at 75 FR 27239, a Notice of Proposed Rulemaking (NPRM)
requesting comment on a number of proposed amendments to 31 CFR part
210 (part 210). One of the proposed amendments was to allow Federal
payments to be delivered to prepaid debit card or similar card accounts
meeting certain consumer protection requirements. The NPRM also
proposed to allow Federal payments to be delivered to certain kinds of
accounts established by nursing facilities or religious orders. In
addition, the NPRM addressed a number of other issues, including
requirements adopted by NACHA--The Electronic Payments Association in
2009 to identify international payment transactions using a new
Standard Entry Class and proposed changes to the process for reclaiming
post-death benefit payments from financial institutions.
In this Interim Final Rule, we are finalizing the proposal in the
NPRM to allow Federal payments to be delivered to prepaid card accounts
meeting certain consumer protection requirements, with a number of
changes reflecting the comments that we received. Although we
previously requested and received comment on the prepaid card proposal,
we are issuing this rule as an interim final rule in order to provide
the public with an additional opportunity to comment. This interim
final rule does not address any of the other proposed amendments to
part 210 that were published in the NPRM. The final rule relating to
those proposed amendments will be issued separately.
I. Background and Summary of Prepaid Card Proposal
Title 31 CFR 210.5(a) generally requires that a Federal direct
deposit payment be delivered to a deposit account at a financial
institution. For all payments other than vendor payments, the account
at the financial institution must be in the name of the recipient,
unless one of the exceptions listed in the regulation applies. As
explained in the NPRM, our long-standing interpretation of the words
``in the name of the recipient'' has been that the payment recipient's
name must appear in the account title. See, e.g., 64 FR 17480,
referring to discussion at 63 FR 51490, 51499. The purpose of this
requirement is to ensure that the payment reaches the intended
recipient through delivery to a deposit account that the recipient owns
and to which he or she has unfettered access, so that the payment is
not diverted to a creditor or another third party before it reaches the
recipient and comes under the recipient's control.
The ``in the name of the recipient'' requirement has the effect of
prohibiting payments to pooled accounts in which the recipient's
ownership interest is reflected in subacccount records. Because prepaid
card programs are generally set up using this kind of structure, the
delivery of non-vendor Federal payments to these types of cards
currently is prohibited. We indicated in the NPRM that we believed that
the ``in the name of the recipient'' requirement may be impeding the
use of prepaid card programs that may be beneficial to the unbanked and
underbanked populations. We therefore requested comment on a proposal
to create an exception to the ``in the name of the recipient''
requirement in order to allow the delivery of Federal payments to
accounts accessed by prepaid and stored value cards, provided that the
card bears the cardholder's name and meets the following requirements:
The account accessed by the card is held at an insured
depository institution and meets the requirements for pass-through
insurance under 12 CFR part 330 such that the cardholder's balance is
FDIC insured to the extent permitted by law; and
The card account constitutes an ``account'' as defined in
12 CFR 205.2(b) such that the consumer protections of Regulation E (12
CFR part 205), the rule prescribed by the Board of Governors of the
Federal Reserve System (Board) to implement the Electronic Fund
Transfer Act, apply to the cardholder.
We requested comment on the implications of allowing delivery of
Federal benefit and other non-vendor payments to accounts that meet the
requirements listed above. We further noted that we are mindful of
concerns that account arrangements may be structured to facilitate
automatic third party debits to a direct deposit account (known in some
States as payday lending) and similar arrangements that are
inappropriate for Federal benefit recipients, and we particularly
solicited comment on whether the consumer protections required in the
proposed exception are adequate to prevent potential abuses.
II. Summary of Comments
We received 12 comments in response to the NPRM. The commenters
represented a variety of perspectives. Comments were submitted by
financial institutions, consumer advocacy groups, industry
associations, the Senate Committee on Finance and the House Committee
on Ways and Means. Most commenters commented on our proposal to allow
Federal payments to be deposited to prepaid card accounts.
Several commenters, including financial institutions and a
nonprofit organization focusing on financial services for underserved
consumers, supported the proposed prepaid card exception to the ``in
the name of the recipient'' requirement. Those supporting the exception
noted that prepaid products can benefit Federal payment recipients by
expanding their options to receive Federal payments. They pointed out
that underbanked Federal benefit recipients currently may use a variety
of high cost financial service providers to cash their benefit checks
and pay their bills. These commenters also noted that underbanked
individuals may tend to hold significant amounts of cash, which may
pose a security risk. According to these commenters, expanding Federal
benefit recipients' ability to use prepaid cards could alleviate many
of these concerns.
Most commenters supported our proposed requirement that the prepaid
cardholder's balance be FDIC-insured via the FDIC's requirements for
pass-through insurance. Comments regarding the proposed requirement
that card accounts constitute ``accounts'' subject to Regulation E were
mixed. Several commenters urged us to clarify the proposed requirement
that the consumer protections of Regulation E apply to the cardholder.
Some commenters noted that currently the only type of prepaid cards to
which Regulation E applies are payroll cards. Since Regulation E does
not currently apply to general use prepaid cards, some commenters were
uncertain as to whether only payroll cards would be eligible for the
proposed exception. Therefore, commenters requested that the final rule
clarify whether a prepaid card that would fit within the exception
proposed by Treasury must: (a) Actually be subject to Regulation E
(which, under current law, would eliminate many or all general use
prepaid products from eligibility under the proposed exception); or (b)
provide protections similar or identical to those contained in
Regulation E.
Other commenters suggested that Regulation E should be extended to
cover all prepaid cards. We note that FMS does not have the authority
to amend Regulation E to cover prepaid cards. That authority is
assigned to the Board.\1\ One commenter, referring to
[[Page 80337]]
Regulation E, recommended that ``Treasury ensure that these protections
are in place prior to allowing benefits to be deposited onto any
cards.'' It is unclear whether the commenter intended to suggest that
we delay finalizing the prepaid card proposal until the Board amends
Regulation E to address general use prepaid cards.
---------------------------------------------------------------------------
\1\ See 15 U.S.C. 1693b(a). This authority will be transferred
to the Bureau of Consumer Financial Protection (CFPB) pursuant to
Public Law 111-203, Sec. 1084.
---------------------------------------------------------------------------
Some financial institutions commented that requiring issuers to
voluntarily provide cardholders with the protections of Regulation E
would increase costs to cardholders and adversely impact innovation in
the prepaid card industry. Several financial institutions suggested
that FMS should require compliance with only some of Regulation E's
protections, such as those providing protections for unauthorized
transactions and those governing error resolution processes. These
commenters recommended that certain Regulation E requirements, such as
the periodic statement requirement, not be imposed.
In contrast, some other commenters expressed the view that FDIC
insurance and Regulation E protections are not sufficient to adequately
protect cardholders. These commenters expressed concern that Federal
benefits might be deposited onto prepaid and stored value products that
carry high fees or other features, such as lines of credit, that may
affect the amount of the Federal benefit ultimately available to the
Federal benefit recipient. One consumer advocacy organization requested
that FMS impose a number of additional requirements on prepaid cards in
order for them to be eligible for the exception to the ``in the name of
the recipient'' rule. Additional requirements that commenters proposed
include: Prohibiting the deposit of Federal benefits onto prepaid cards
or stored value cards that contain credit features; regulating the fees
associated with a prepaid card or stored value card; imposing fee
disclosure requirements; requiring prepaid card providers to inform
benefit recipients of the Direct Express[supreg] prepaid card \2\ or of
any other lower-cost options; and ensuring that card providers cannot
collect fees or repayment of any advances by exercising any right of
set-off against Federal benefit payments.
---------------------------------------------------------------------------
\2\ The Direct Express[supreg] prepaid card is a card
established pursuant to terms and conditions approved by FMS. Direct
Express[supreg] is a registered service mark of the Financial
Management Service, U.S. Department of the Treasury. The Direct
Express[supreg] Debit MasterCard[supreg] card is issued by Comerica
Bank, pursuant to a license by MasterCard International
Incorporated. MasterCard[supreg] and the MasterCard[supreg] Brand
Mark are registered trademarks of MasterCard International
Incorporated. See, 75 FR 34394, 34397-34398 (Jun. 17, 2010) for a
description of the Direct Express[supreg] card.
---------------------------------------------------------------------------
On the other hand, another consumer advocacy organization supported
the prepaid card proposal without any changes, except that they urged
us to craft language that ensures that cardholders' access to
responsibly-designed credit is not restricted. This organization
recognized the concern that the accounts may be structured to
facilitate payday lending or other similar arrangements that can result
in unaffordable debt levels for Federal beneficiaries. However, they
expressed concern that a vaguely worded restriction on credit features
associated with card accounts could prevent Federal benefit recipients
from accessing forms of credit that are responsibly structured.
Finally, some commenters expressed concern that we have not pursued
enforcement action against entities that may be currently violating the
``in the name of the recipient'' requirements by allowing payments onto
prepaid cards or other accounts. One commenter urged that, in order to
allow for enforcement, the rule expressly provide that no institution
(bank or nonbank) may accept direct deposit of Federal payments to
accounts that do not meet the rule's requirements.
III. Interim Final Rule
We are revising the proposed prepaid card exception to address the
comments we received. We are requiring that the funds accessible
through the card be insured for the benefit of the cardholder in light
of the fact that commenters uniformly supported such an insurance
requirement, but we are broadening that provision to allow for
eligibility of insurance by National Credit Union Share Insurance Fund
(NCUSIF). We are aware that NCUSIF pass-through insurance is available
to beneficial owners of share accounts in certain circumstances, and we
request comment on whether credit unions have established, or might
establish in the future, prepaid card accounts that provide pass-
through insurance for members or non-members.
Because Regulation E currently does not cover any prepaid cards
other than payroll cards, we are making the prepaid card exception
available for prepaid cards if the issuer voluntarily provides all of
the protections that apply to payroll cards under Regulation E, as may
be amended from time to time. In addition, we are adding a requirement
that the prepaid card not have an attached line of credit or loan
feature that triggers automatic repayment from the card account. While
we are not determining a fee structure or a range of acceptable fees,
it is our expectation that the fees for such cards be transparent to
the recipient, adequately disclosed, and reasonable by industry
standards. We note in this regard that Regulation E requires that fees
be disclosed in a clear and readily understandable manner.
In developing the interim final rule, we have attempted to balance
the need to maintain appropriate consumer protections--consistent with
the general requirement of section 210.5(a)--with concerns expressed by
different commenters. As originally proposed, the exception would not
have allowed the delivery of Federal payments to any general use
prepaid card accounts, because prepaid card accounts (other than
payroll card accounts) are not subject to Regulation E. Moreover,
several commenters indicated that the industry is unlikely to develop
prepaid cards that provide cardholders with all of the protections
applicable to bank deposit accounts. Finalizing the requirement that
eligible cards be covered by all of the protections that apply to an
account under Regulation E would therefore have rendered the exception
pointless. Instead, we are requiring that the protections that apply to
payroll card accounts under Regulation E be provided by the card
issuer. For cards that do not constitute payroll cards as defined in
Regulation E, this means that the issuer must voluntarily provide the
protections that apply to payroll cards. This requirement ensures that
cardholders will receive important consumer protections, while allowing
prepaid card issuers to provide account history and balance information
in lieu of sending periodic statements.
Several commenters pointed specifically to Regulation E's statement
requirements as a barrier to the provision of prepaid cards at a
reasonable cost. Regulation E provides an alternative means of
compliance for the statement requirements for payroll cards. Generally,
statements need not be sent if the issuer makes the consumer's account
balance available by phone and also makes available an electronic
history of the consumer's account transaction activity covering 60
days, as well as a written transaction history covering 60 days upon
the consumer's request. See 12 CFR 205.18(b). Consequently, the
unauthorized transaction and error resolution reporting deadlines for
payroll cards are triggered by the earlier of the sending of a written
history reflecting the transaction to the cardholder or the date the
cardholder accesses the electronic
[[Page 80338]]
account history reflecting the transaction. See 12 CFR 205.18(c)(3),
(4).
We considered developing a separate framework of requirements based
on Regulation E to apply to prepaid cards to which Federal payments are
directly deposited, but believe it would be detrimental to introduce a
separate and unique framework of consumer protections for a relatively
limited class of transactions involving prepaid cards. The payroll card
requirements of Regulation E are well established and Treasury believes
that, in general, the card industry already is familiar with
appropriate measures necessary to meet those requirements. In this
regard, Treasury believes that a number of prepaid cards already
provide most, though not necessarily all, of the payroll card
protections to cardholders. It is our expectation that some issuers of
existing prepaid cards will choose to modify the terms and conditions
of the card accounts to include all of the payroll card protections to
cardholders, so that their cards will be eligible to receive Federal
payments. We also anticipate that as new prepaid card programs are
developed, issuers seeking to make the cards available to Federal
payment recipients will structure their cards to incorporate Regulation
E's payroll card protections. We request comment on the extent to which
prepaid card issuers will choose to do so. We also request comment on
the kinds of changes that card issuers will undertake to provide the
consumer protection specified in this interim final rule and the costs
associated with adopting these changes.
We have also attempted to balance the competing comments made by
consumer organizations relating to credit features associated with
prepaid cards. In order to prevent Federal payments from being
delivered to prepaid cards that have payday lending or ``account
advance'' features, we are prohibiting prepaid cards from having an
attached line of credit if the credit agreement allows for automatic
repayment of a loan from a card account triggered by the delivery of
the Federal payment into the account. Our intention is that this
restriction will prevent arrangements in which a bank or creditor
``advances'' funds to a cardholder's account, and then repays itself
for the advance and any related fees by taking some or all of the
cardholder's next deposit. Accounts covered by Regulation E, including
payroll cards, are subject to restrictions on these types of
arrangements through Regulation E's ``compulsory use'' provision, which
provides: ``No financial institution or other person may condition an
extension of credit to a consumer on the consumer's repayment by
preauthorized electronic fund transfers, except for credit extended
under an overdraft credit plan or specified to maintain a specified
minimum balance in the consumer's account.'' 12 CFR 205.10(e). Because
prepaid cards other than payroll cards are not currently covered by
this provision, we are restricting credit features associated with
cards as a condition for the receipt of Federal payments onto a card.
This restriction does not, however, bar the provision of credit to
consumers who receive Federal payments via an eligible prepaid card
product. Nor does this restriction absolutely bar a recipient-
cardholder from repaying a loan with an eligible prepaid card product
to which Federal payments have been made. We request comment on whether
we have struck the appropriate balance, and on whether the wording of
the prohibition is sufficiently clear.
To address comments made concerning the need to enforce the ``in
the name of the recipient'' requirement, we have added a provision to
the exception to make it clear that no person or entity may issue a
prepaid card that accepts Federal payments in violation of the rule's
requirements, and that any financial institution that holds an account
for or on behalf of a prepaid card issuer to which Federal payments are
received is responsible for ensuring that the requirements of the
exception are met. Treasury believes that, under this provision, a
violation of a requirement of the exception currently would be
enforceable by the appropriate Federal or State regulator (or both) to
the extent that the regulator has jurisdiction over the person or
entity, and in accordance with applicable law. If we become aware that
Federal payments are being deposited to prepaid cards that do not meet
these requirements, we will review the situation and take appropriate
action. We may, for example, contact both the issuer and the financial
institution holding the issuer's account, review the terms and
conditions of the card account, and refer any violations of our
requirements to the appropriate regulatory bodies, including the
primary regulator of the financial institution maintaining the card
account for an issuer. Treasury requests comment on whether the wording
of this provision is sufficiently clear.
Treasury also seeks comment on whether the consumer protections
provided by this interim final rule allow for more novel uses of these
cards by consumers including, but not limited to, those (1) who
currently own bank accounts but prefer receiving payments by check due
to privacy reasons; and (2) consumers who are unbanked or underbanked
who receive Federal payments by check.
IV. Section-by-Section Analysis
Section 210.5(b)(5)(i) permits a Federal payment to be deposited to
an account accessed by a prepaid card that does not meet the ``in the
name of the recipient'' requirement if certain conditions are met. To
be eligible to receive Federal payments, a prepaid card must meet four
conditions. The first condition, at Sec. 210.5(b)(5)(i)(A), is that
the account be held at an insured financial institution. The second
condition, at Sec. 210.5(b)(5)(i)(B), requires that the account be set
up to meet the requirements for pass through deposit or share insurance
under 12 CFR part 330 or 12 CFR part 745 such that the funds accessible
through the card are insured for the benefit of the Federal payment
recipient. The third condition, at Sec. 210.5(b)(5)(i)(C), is that the
account is not attached to a line of credit or loan agreement under
which repayment from the card account is triggered by delivery of the
Federal payment. The fourth condition, at Sec. 210.5(b)(5)(i)(D),
requires the issuer of the card to comply with all of the requirements,
and to provide the Federal payment recipient with the same consumer
protections, that apply to a payroll card under regulations
implementing the Electronic Fund Transfer Act (EFTA), 15 U.S.C.
1693a(1). The payroll card provisions of those regulations currently
are located at 12 CFR 205.18 and are administered by the Board of
Governors of the Federal Reserve System. This authority is scheduled to
be transferred to the CFPB on the ``designated transfer date,'' which
is set as July 21, 2011.\3\
---------------------------------------------------------------------------
\3\ 75 FR 57,252 (Sept. 20, 2010).
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With respect to the fourth condition, Sec. 210.5(b)(5)(i)(D)
provides that the issuer must comply with the rules implementing the
EFTA ``as amended.'' Treasury notes that, as of the designated transfer
date, the CFPB will be authorized to prescribe rules, as well as issue
interpretations and guidance, implementing the provisions of the EFTA
(other than section 920 of the EFTA).\4\ In addition, the requirements
under the EFTA are enforceable by the Federal banking agencies, the
Federal Trade Commission, and other Federal agencies, including the
CFPB, subject to several provisions of the Consumer
[[Page 80339]]
Financial Protection Act of 2010.\5\ Treasury expects that, as the
requirements under the EFTA that apply to a payroll card account may be
amended or interpreted from time to time, the CFPB and the agencies
charged with enforcing the EFTA--not Treasury--also will be in the
position to administer the requirements under this Sec.
210.5(b)(5)(i)(D).
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\4\ See Public Law 111-203, Sec. 1075 (amending the EFTA to
allow the Board to prescribe rules relating to interchange
transaction fees for electronic debit transactions).
\5\ See, e.g., Public Law 111-203, Sec. Sec. 1025-1026
(governing the enforcement authorities of the CFPB and a prudential
regulator with respect to a depository institution and, depending on
the size of that institution, its affiliates).
---------------------------------------------------------------------------
Section 210.5(b)(5)(ii) prohibits a person or entity from issuing a
card that receives Federal payments in violation of these requirements.
Moreover, any financial institution violates this regulation if the
institution maintains an account for or on behalf of an issuer of a
prepaid card that receives Federal payments if that issuer violates
this subsection. As discussed above, we will refer violations of the
regulation to the appropriate regulatory bodies.
Section 210.5(b)(5)(iii) provides that the term ``payroll card
account'' has the same meaning as that term is defined for purposes of
the rules implementing the EFTA. The term ``prepaid card'' means a
card, code, or other means of access to funds of a recipient. The term
``issuer'' means a person or entity that issues a prepaid card.
V. Procedural Requirements
Request for Comment on Plain Language
Executive Order 12866 requires each agency in the Executive branch
to write regulations that are simple and easy to understand. We invite
comment on how to make the interim final rule clearer. For example, you
may wish to discuss: (1) Whether we have organized the material to suit
your needs; (2) whether the requirements of the rule are clear; or (3)
whether there is something else we could do to make this rule easier to
understand.
Regulatory Planning and Review
The Office of Management and Budget (OMB)'s Office of Information
and Regulatory Affairs (OIRA) designates the interim final rule as a
``significant regulatory action'' as defined in Executive Order 12866.
While Treasury has not conducted a regulatory impact analysis that
comports with the requirements of OMB Circular A-4, Treasury is
providing some preliminary information about the current industry
practices, and potential costs and benefits of this rule. Treasury
believes that many issuers of the prepaid cards are already providing
some consumer protection. We seek comment on the degree to which
consumer protection is already provided by prepaid debit card issuers;
the changes the issuers would undertake to provide the level of
consumer protection specified in this rulemaking; and the costs
associated with providing these additional protections.
In addition, Treasury believes that once prepaid cards provide the
specified consumer protections, these cards will be used in novel ways.
An example of this is receiving tax refunds on these prepaid cards.
Given that there were approximately 45 million tax refund checks issued
in FY 2010, assuming $1 per check processing fee on the part of the
Federal government, and assuming that all Federal tax refunds are
processed through prepaid cards, the reduction in costs to the Federal
government for processing these checks could be approximately $45
million. Therefore, Treasury seeks information from the public
regarding other ways in which these prepaid cards will be used to
receive Federal payments across different types of consumers.
Depending upon the comments received on the interim final rule,
Treasury may produce a Regulatory Impact Analysis that comports with
the requirements of Circular A-4 in its final rule.
Regulatory Flexibility Act Analysis
Because no notice of proposed rulemaking is required, the
provisions of the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et
seq.) do not apply. Even if the RFA did apply, we have considered the
potential impact of this rule on small entities and hereby certify that
the interim final rule will not have a significant economic impact on a
substantial number of small entities. We believe the rule will affect
only a limited number of small entities and that any economic impact
will be minimal. Currently, Federal non-vendor payments are not
permitted to be delivered to general use prepaid cards. The interim
final rule will allow prepaid card issuers to develop and offer to
Federal benefit recipients prepaid cards that meet the rule's
requirements. Some prepaid card issuers, regardless of size, may choose
to meet the rule's requirements, in which case they may be able to
expand their customer base to include Federal benefit recipients. Any
economic impact for these issuers is not expected to be significant.
Accordingly, a regulatory flexibility analysis under the RFA is not
required. We invite comments regarding any less burdensome alternatives
to this rule.
Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, 2 U.S.C.
1532 (Unfunded Mandates Act), requires that the agency prepare a
budgetary impact statement before promulgating any rule likely to
result in a Federal mandate that may result in the expenditure by
State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. If a budgetary
impact statement is required, section 205 of the Unfunded Mandates Act
also requires the agency to identify and consider a reasonable number
of regulatory alternatives before promulgating the rule. We have
determined that the interim final rule will not result in expenditures
by State, local, and tribal governments, in the aggregate, or by the
private sector, of $100 million or more in any one year. Accordingly,
we have not prepared a budgetary impact statement or specifically
addressed any regulatory alternatives.
Authority To Issue Interim Final Rule
The Administrative Procedure Act (5 U.S.C. 551 et seq.) (APA)
generally requires public notice before promulgation of regulations or
a showing of good cause that prior notice and opportunity to comment
are unnecessary, impracticable, or contrary to the public interest. See
5 U.S.C. 553(b). In accordance with section 553(b), FMS published a
notice of proposed rulemaking requesting comment on the prepaid card
exception on May 14, 2010 (75 FR 27239) and FMS has considered the
comments received in developing this interim final rule. FMS is issuing
this rule for effect, but also wishes to provide the public another
opportunity to comment on it.
List of Subjects in 31 CFR Part 210
Automated clearing house, Electronic funds transfer, Financial
institutions, Fraud.
0
For the reasons set forth in the preamble, 31 CFR part 210 is amended
as follows:
PART 210--FEDERAL GOVERNMENT PARTICIPATION IN THE AUTOMATED
CLEARING HOUSE
0
1. The authority citation for part 210 continues to read as follows:
Authority: 5 U.S.C. 5525; 12 U.S.C. 391; 31 U.S.C. 321, 3301,
3302, 3321, 3332, 3335, and 3720.
0
2. In Sec. 210.5, redesignate paragraph (b)(5) as (b)(6) and add a new
paragraph (b)(5) to read as follows:
[[Page 80340]]
Sec. 210.5 Account requirements for Federal payments.
* * * * *
(b) * * *
(5)(i) Where a Federal payment is to be deposited to an account
accessed by the recipient through a prepaid card that meets the
following requirements:
(A) The account is held at an insured financial institution;
(B) The account is set up to meet the requirements for pass-through
deposit or share insurance such that the funds accessible through the
card are insured for the benefit of the recipient by the Federal
Deposit Insurance Corporation or the National Credit Union Share
Insurance Fund in accordance with applicable law (12 CFR part 330 or 12
CFR part 745);
(C) The account is not attached to a line of credit or loan
agreement under which repayment from the account is triggered upon
delivery of the Federal payments; and
(D) The issuer of the card complies with all of the requirements,
and provides the holder of the card with all of the consumer
protections, that apply to a payroll card account under the rules
implementing the Electronic Fund Transfer Act, as amended.
(ii) No person or entity may issue a prepaid card that receives
Federal payments in violation of this subsection, and no financial
institution may maintain an account for or on behalf of an issuer of a
prepaid card that receives Federal payments if the issuer violates this
paragraph.
(iii) For the purposes of this paragraph (b)(5), the term--
(A) ``Payroll card account'' shall have the same meaning as that
term is defined in the rules implementing the Electronic Fund Transfer
Act;
(B) ``Prepaid card'' means a card, code, or other means of access
to funds of a recipient; and
(C) ``Issuer'' means a person or entity that issues a prepaid card.
* * * * *
Dated: December 16, 2010.
Richard L. Gregg,
Fiscal Assistant Secretary.
[FR Doc. 2010-32114 Filed 12-21-10; 8:45 am]
BILLING CODE 4810-35-P