CFPB Prepaid Card Rule: How It Affects You

Prepaid accounts — including PayPal and Venmo — now get federal protections that already existed for checking accounts and credit cards.
Spencer TierneyApr 8, 2019

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Prepaid debit cards are a popular budgeting tool in addition to being an alternative to checking accounts for many Americans, but historically they haven’t had laws to guard consumers from fraud or loss, among other things.

That has changed thanks to the Consumer Financial Protection Bureau’s rule, which gives prepaid accounts federal protections that already exist for checking accounts and credit cards.

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The new rule aims to treat prepaid debit cards more like checking accounts. This change benefits the many financially disadvantaged Americans who don't have checking accounts and use these cards as a substitute. The rule includes:

Note: If a prepaid account is unregistered, the last two protections above don’t apply. You’ll receive those protections from the point of registration onward.

Prepaid debit cards are not credit cards nor do they build a user’s credit history. But some of them let you borrow money through features such as overdraft programs, cash advances or other credit services. The CFPB calls these cards “hybrid prepaid-credit cards” and includes the following rules to regulate them:

Overall, the rules aim to bring more transparency to a prepaid marketplace that’s for taking advantage of the unbanked and other financially vulnerable consumers.

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