CFPB Issues Interpretive Rule to Allow Consumers to Receive Economic Impact Payments Quickly Via Prepaid Cards

Earlier this week, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule paving the way for consumers to collect the pandemic-relief payments provided through the CARES Act via prepaid accounts. Though the federal government is using direct deposit to get the funds to many consumers, such direct transfers may not be an option for all consumers.

“In these unprecedented times, policymakers are acting swiftly to provide consumers with needed financial support through new mechanisms and for new purposes outside of existing government benefit programs,” said Kathleen Kraninger, CFPB Director, in a press release announcing the rule.

Since government agencies may not have access to consumers’ account information and not all consumers have pre-existing accounts for direct deposit, a prepaid account could be more cost-efficient for both parties. Prepaid accounts could also be faster, more secure, and more convenient than disbursements through paper checks and other methods.

The Electronic Fund Transfer Act (EFTA), through its implementing regulation, Regulation E, prohibits government agencies from requiring consumers to create accounts for the receipt of government benefits.

To get around this regulation for the purposes of expediting relief payments, the CFPB’s interpretive rule has concluded that if direct deposit is unavailable and certain conditions are met, the relief payments are not considered “government benefits.” Thus, they are not subject to EFTA’s compulsory use prohibition.

“The steps we are taking today ensure that consumers can receive these payments in a fast, secure, and efficient manner,” said Director Kraninger.

The full Interpretive Rule on Treatment of Pandemic Relief Payments under Regulation E and Application of the Compulsory Use Prohibition can be found here.