FTC Staff Comment to the Consumer Financial Protection Bureau Concerning Electronic Fund Transfers (Regulation E) and General Purpose Reloadable Prepaid Cards

BEFORE THE
CONSUMER FINANCIAL PROTECTION BUREAU
In the Matter of
Request for Comment on Advance Notice of Proposed Rulemaking
Electronic Fund Transfers (Regulation E) and General Purpose Reloadable Prepaid Cards
Docket No. CFPB-2012-0019
Comments of the Staff of the Bureau of Consumer Protection*
July 23, 2012
*These comments represent the views of the staff of the Bureau of Consumer Protection.
They are not necessarily the views of the Commission or any individual Commissioner.
The Commission has, however, voted to authorize the staff to submit these comments.

I. Introduction
On May 24, 2012, the Bureau of Consumer Financial Protection (CFPB) issued an
advance notice of proposed rulemaking (ANPR), seeking comment, data, and information from
the public about general purpose reloadable cards (GPR cards). The CFPB noted that it intends1
to issue a proposal to extend Regulation E protections to GPR cards, and is interested in learning
more about this product, including its costs, benefits, and risks to consumers. The CFPB is2
focusing on GPR cards in view of the cards’ expansive growth; increasing consumer use; and
lack of comprehensive federal regulation.3
The Federal Trade Commission (FTC or Commission) staff supports the protection of
consumers who use GPR cards, and the CFPB’s proposal to solicit information about the costs
and benefits of alternative protections relating to the costs and terms of GPR cards. Currently, a4
variety of different payment card options exist including credit cards, traditional debit cards,
electronic benefits transfers (EBTs), payroll cards and gift cards that have some form of
federal protections regarding costs and terms. Although GPR cards are expanding in usage,
consumers who use these cards do not have similar protections, and they may not realize that5
these protections are lacking. In the discussion below, FTC staff focuses in particular on four
protections that have applied to other payment cards: 1) limits on liability for fraud and
unauthorized use; 2) disclosure requirements for card fees and expiration dates; 3) error
resolution procedures; and 4) authorization standards for recurrent payments.
II. FTC Authority and Experience
The FTC has a long history of being the nation’s consumer protection agency, with
authority to protect consumers and maintain competition in broad sectors of the economy. It
enforces laws that prohibit business practices that are anticompetitive, deceptive, or unfair to
consumers, in order to protect the proper functioning and integrity of the marketplace without
impeding legitimate business activity. It has law enforcement and other authority over a wide
range of practices related to financial services and over most nonbank entities.
The agency enforces Section 5 of the FTC Act, which prohibits unfair or deceptive acts6
or practices in or affecting commerce, and the Commission has brought many law enforcement
actions against those who injure consumers by engaging in such practices in connection with
offering, selling, or providing financial services. For example, the FTC has brought a number of
actions against defendants engaged in unfair or deceptive practices involving the sale of GPR
cards or prepaid cards. In addition, the Commission has challenged as deceptive the failure of7
sellers of similar products, such as prepaid telephone calling cards and gift cards, to adequately
disclose fees that consumers must pay.8
In addition to its Section 5 enforcement, the Commission also enforces numerous
consumer financial services statutes and regulations, including those that specifically apply to
payment cards, such as the Truth in Lending Act (TILA) and Regulation Z (which, among other
things, set requirements for credit cards), and the Electronic Fund Transfer Act (EFTA) and
Regulation E (which, among other things, set requirements for debit cards). As part of its law9
enforcement work, the Commission has brought cases alleging that companies failed to provide

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timely credits as required by TILA and Regulation Z, or used negative-option plans that10
violated EFTA and Regulation E, through unauthorized recurrent debiting of bank accounts.11
The Dodd-Frank Act assigned the FTC new enforcement authority for payment cards12
by adding new Section 920 to EFTA. Among other things, Section 920 restricts certain13
practices related to debit and credit card transactions; it also restricts certain debit card
interchange fees. The FTC also has enforcement authority for numerous other financial services
statutes and regulations.14
The Commission engages in many activities other than law enforcement to protect
consumers of payment cards. For example, the FTC issues consumer and business education,15
conducts workshops to inform the public and itself about developing consumer protection
issues, and responds to requests for information about consumer financial issues from16
consumers, industry representatives, state law enforcement agencies, and the media.
Commission staff also has filed public comments with information and views to assist other
agencies, including to assist in their promulgation of rules to implement financial services
statutes. The Commission also is focusing increasingly on consumers’ use of mobile products17
and services, which sometimes use GPR cards as a payment method.18
Drawing on its experience with payment cards, FTC staff offers the information and
views below in response to the CFPB’s ANPR seeking comment on extending protections to
users of GPR cards that are currently afforded to users of other payment cards.
III. Major Payment Card Areas for Consideration
A. Current Regulation of Payment Cards
As noted above, GPR cards have been increasing in popularity and usage. They are one19
type of prepaid card, which is the fastest growing major payment type. Some sellers of GPR20
cards also are offering them for general retail use, and for transit system use. Students and the21
underbanked are among the greatest users of GPR cards. Moreover, 91% of underbanked22
consumers have a mobile phone, and, as noted above, mobile service providers often encourage23
their customers to use GPR cards as a payment method.24
Consumers are increasingly using GPR cards as an alternative to other payment cards and
methods in the marketplace. In addition to the FTC Act’s protection against unfair and
deceptive practices, consumers who use credit cards, traditional debit cards (linked to a bank or
other consumer asset account), electronic benefits transfers, payroll cards, and gift cards all are25
provided some protections relating to their costs and terms under other federal laws. In brief,
these protections are:
Credit cards: Under TILA and Regulation Z, consumers using
credit cards can rely on longstanding and
substantial protections related to the costs and terms
of these cards. These protections include:

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1) disclosures about fees and other terms;
2) limitations on liability for unauthorized use;26
3) dispute resolution procedures; and others.27
Debit cards: Under EFTA and Regulation E, consumers using
traditional debit cards are accorded numerous
protections. These protections are not identical to
those for credit cards under TILA and Regulation Z
but are nonetheless important and include:
1) disclosures about fees and other terms;
2) protections against unauthorized transfers;28
3) dispute resolution procedures, with provisional
credits to consumers’ accounts; and others.29
Electronic benefits transfers, Under EFTA and Regulation E (including standards
payroll cards, and gift cards: set for gift cards by the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (CARD
Act)), consumers using these cards or mechanisms30
all have some form of coverage.31
Consumers who use GPR cards generally are not accorded comparable protections under
federal law. For example, GPR cards are not “credit,” and are not subject to TILA and32
Regulation Z, as they do not entitle consumers to defer payment of debt or to incur debt and
defer its payment. GPR cards generally are not considered to be subject to EFTA and33
Regulation E, because they are not considered to be an “electronic fund transfer” or to be tied to
an “account” and no special exception exists to cover them. EFTA and Regulation E, however,34
do cover GPR cards that are specifically marketed as gift cards, for purposes of the gift card
rules. Essentially, EFTA and Regulation E’s standards cover various types of payment cards
(like traditional debit cards) that were available to consumers at the time these standards were
developed. These standards were revised later to address new products and services, such as
electronic benefits transfers, payroll cards, and gift cards. Even though GPR cards have
expanded in function and use over time, Regulation E has not been revised to address them.
In sum, although consumers who use GPR cards are protected from unfair and deceptive
practices under the FTC Act, they have less protection under other federal laws regarding the
cards’ costs and terms than users of other types of payment cards. GPR cards also have been
increasing in popularity and use. Providing additional protections to consumers who use GPR
cards may instill greater confidence in their use, fostering increased use and competition
between GPR cards and other payment methods. Therefore, FTC staff believes that the CFPB’s
initiative to assess the costs and benefits, including any related data, of according such
protections to consumers who use GPR cards is timely and in the public interest.
B. Major Issues for Consideration in the CFPB’s Initiative
This comment focuses in particular on four protections that apply to various other

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payment cards, such as credit cards, debit cards, electronic benefit transfers, payroll cards, and
gift cards: 1) liability limits for fraud and unauthorized use; 2) disclosure requirements for fees35
and expiration; 3) error resolution procedures; and 4) authorization standards for recurrent
payments. FTC staff recommends that, in assessing these protections, the CFPB consider
specific problems experienced by consumers absent these protections and available data about
the costs and benefits of them, including any differences between GPRs and other payment cards
that may affect these costs and benefits.
1. Liability Limits
At present, federal law does not limit the liability of users of GPR cards for fraudulent or
unauthorized use. Thus, federal law does not protect a consumer who loses the card to a thief or
otherwise, and an unauthorized person could use the full amount of any remaining balance on the
card to make purchases or, with some cards, to obtain the funds themselves. Under federal law,36
consumers who use GPR cards thus bear the entire risk of loss from fraud or unauthorized use.37
In the FTC’s experience, liability limits for credit and debit cards under TILA and EFTA
have provided important consumer protections against fraud and unauthorized use. As noted
above, under TILA and Regulation Z, a consumer’s liability is capped at a maximum of $50, for
unauthorized transactions involving credit cards. Under EFTA and Regulation E, a consumer38
is liable for an unauthorized transfer involving a debit card only if the financial institution has
provided certain disclosures, and the amount of liability depends on how quickly the consumer
notifies the financial institution of the problem. By contrast, gift cards have no liability39
limits.40
Based on its experience with payment cards, FTC staff believes that consumers face
significant risk of loss through the use of GPR cards. The issue of liability limits for GPR cards
was recently considered at the FTC’s Mobile Workshop. Panelists considered the issue of
liability protection for prepaid cards, including GPR cards, in view of the expanding mobile
market. Consumers Union also has explained that “with prepaid cards [which include GPR41
cards], consumers might be out of all their money due to an unauthorized transaction regardless
of how quickly the loss is reported, and may not have access to missing money when money is
needed to pay bills and for daily essentials.” Moreover, because underbanked consumers,42
students, and others of limited means often use GPR cards as a payment mechanism, these losses
may have a greater impact on them than they would on more affluent consumers.
Extending liability limits, however, also may impose costs on consumers. Credit and
debit card issuers currently are responsible for the difference between the cost of a fraudulent or
unauthorized transaction and the legal limit on liability. These issuers also may incur costs in43
administering systems to address fraudulent and unauthorized transactions. Issuers of GPR cards
who do not screen potential customers may incur higher marginal costs in developing new
systems to prevent fraudulent and unauthorized transactions to comply with a regulation. Credit
and debit card issuers who screen card holders presumably have been able to recoup these costs
through increases in the cost of cards, such as the interest rate or fees they charge consumers. If
issuers of GPR cards are legally responsible for the difference between the cost of a fraudulent

5
or unauthorized transaction and the legal limit of liability, and they do not currently engage in
screening their customers, they too may seek to recoup these costs through increases in the cost
of cards. Such cost increases may affect consumers’ choice of payment methods, including their
choice between GPR cards and cash, which could cause consumes to lose the convenience of
GPR cards.
Thus, FTC staff recommends that the CFPB identify and propose for public comment
specific requirements governing limitations on consumer liability for GPR cards, taking into
account the costs and benefits of alternative ways to limit consumers’ liability.
2. Disclosure of Fees and Expiration Dates
GPR cards often involve a variety of fees, which can vary widely by type and amount.44
For example, Green Dot a major seller of GPR cards - charges fees for: 1) card purchase (up
to $4.95 at a retail store); 2) monthly charge ($5.95, waived if consumer loads $1,000 in a month
or has at least 30 qualifying purchases posted); 3) loading cash at retail locations (up to $4.95);
5) lost or stolen card replacement ($4.95); and 6) second card ($4.95, but free for student card),
among others. OmniCard another major seller of GPR cards charges fees for: 1) card
issuance ($2.95); 2) monthly maintenance ($2.95); 3) cash advance ($4 each); 4) lost or stolen
card replacement ($4.95); 5) express shipment of card ($29.95); 6) printed and mailed statement
($29.95); and 7) card to card transfers ($1), among others. Further, card fee disclosures may45
vary in medium and format: disclosures may be on card inserts or online, if at all, and they may
not be uniform in terminology or information offered. Information about fees is important to
consumers, not only because it facilitates their ability to understand the purchase cost, but also
because it empowers them to compare: 1) the costs of GPR cards relative to the costs of other
payment cards and methods, and 2) the costs of one GPR card versus competing GPR cards.
GPR cards often have a date on which they expire. In many instances, when the card
expires, consumers can lose the value of the card and the sellers of the GPR card can retain the
amount that consumers placed on the card. Some cards permit consumers to obtain another46
card at expiration, but the consumer must be in good standing or the account must be “active”
and the card received at the address to which it is sent. Because, upon expiration, consumers47
can lose the amount of funds on the card, and the ability to use the card for which they have paid
fees, the expiration date is important to consumers in deciding whether to choose a GPR card or
a particular GPR seller.48
Consumers may have a difficult time locating information about expiration dates because
the information disclosed about them appears to be limited, and even where provided, its
presentation varies widely. Some information about expiration dates may be provided with the
card’s packaging at sale, but it may be either on or adjacent to the card, or instead may be inside
the packaging and therefore available only when a consumer purchases the item. Other
information may be available online, if at all. Indeed, a review of online information provided
with advertisements for GPR cards reveals that: some GPR cards are marketed online as having
an expiration date, but with no indication of what the date will be, other than a reference to
information on the card itself; some ads provide an exact expiration date; and others state that49 50

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there is no expiration date. Some cards provide this information on the landing page of the51
online advertisement; for others, consumers must search through numerous “FAQs,” “Help,” or52
“Terms and Conditions” pages often themselves provided with links in fine print to reach the
information.53
To foster consumer understanding of card features and comparison shopping, federal law
currently mandates that issuers disclose to consumers information about fees and other terms of
certain payment cards other than GPR cards. As noted, TILA and Regulation Z require that
issuers and others provide consumers with clear and conspicuous disclosures of fees and terms
for credit cards. EFTA and Regulation E likewise require that issuers of traditional debit cards54
and providers of electronic fund transfers clearly and conspicuously disclose fee information.55
Regulation E also requires various clear and conspicuous fee disclosures for gift cards, payroll56
cards, and electronic benefits transfers in some circumstances. Indeed, in response to the57 58
confusion that consumers faced when purchasing gift cards that did not adequately disclose
expiration dates and other terms, the CARD Act set new standards for gift cards and certain
similar products, now part of Regulation E. These rules require that issuers and sellers clearly59
and conspicuously disclose expiration dates and impose other limitations on expiration dates.60
Consumers who use GPR cards likely would find similar fee and expiration date information to
be valuable in making decisions.
Further, the FTC’s law enforcement experience demonstrates that the failure of sellers of
payment cards to adequately disclose material information about fees and expiration
requirements can deceive consumers and be unlawful under the FTC Act. However, even61
where consumers may not be deceived, the clear and prominent disclosure of fees and62
expiration dates can enhance the ability of consumers to understand terms and comparison shop
among alternative payment methods and providers. Not only can such information assist
consumers in making better-informed decisions, but it also can foster competition and consumer
confidence in the marketplace, which benefits consumers and businesses alike.
FTC staff recognizes that clearly and prominently disclosing fee and expiration date
information would impose some costs on providers of GPR cards. Some of these disclosures
may already be necessary to avoid deceptive marketing of the value of GPR cards, in violation of
Section 5 of the FTC Act. In addition, these costs are likely to vary based on the nature and
extent of the information that must be disclosed and the medium (e.g., print, online, or mobile
device) in which it must be disclosed. FTC staff notes, however, that the costs of making such
disclosures do not appear to have been prohibitive for the issuers of some GPR cards and in the
context of other payment methods. FTC staff recommends that the CFPB identify and propose
for public comment specific disclosure requirements for fees and expiration dates for GPR cards,
taking into account the costs and benefits of alternative ways to provide such information to
consumers.
3. Error Resolution Procedures
Merchants may unintentionally debit GPR cards for erroneous amounts. For example, a
merchant may inadvertently debit a GPR card in an amount that is two or three times the purchase

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price for an item. A merchant directly or through an erroneous bar code also may misplace a
decimal and debit a GPR card for $20 rather than $2. If such errors are not corrected, it clearly
causes harm to consumers whose GPR cards have been debited. Although some issuers of GPR
cards may provide some form of procedure to assist consumers in disputing such errors, others do
not. For example, the “Ralphs/Kroger” reloadable prepaid debit card provides, among other
things, “If you want to dispute a purchase you have made using the card, it is best to contact the
retailer who accepted your card.” As discussed above, unauthorized use can also occur on GPR63
cards, leading to erroneous debits on the cards.
When such errors occur with debit or credit cards, federal law provides consumers with
dispute resolution rights. Currently, EFTA and Regulation E provide consumers using debit cards
with important error resolution rights. Generally, financial institutions must take steps to64
resolve disputes within ten business days of receiving a notice of error; if they need additional
time, they must provisionally recredit missing funds within the ten business days, and then they
may generally take up to 45 days from receipt of the notice of error to investigate and determine
whether an error occurred. These error resolution procedures ensure that consumers have a65
uniform way to resolve disputes about funds, and also are not left waiting for funds pending a
potentially lengthy investigation. These rights enable consumers to challenge many erroneous
charges or debits on their accounts, and obtain corrective action. TILA and Regulation Z also66
provide important billing dispute rights to consumers, including the right to a prompt
investigation and to have funds restored that have already been remitted erroneously within no
longer than two billing cycles, or 90 days from receipt of a dispute notice. In contrast to users67
of credit and debit cards, users of GPR cards do not have any right under federal law to dispute
errors.
As part of the consideration of these issues, FTC staff believes that the CFPB should
explore the issues surrounding GPR card users’ access to information about their card balance
and transaction history, including the need to notify consumers of their ability to access such
information. For example, both TILA and Regulation Z (credit cards) and EFTA and Regulation
E (debit cards) require card issuers to provide their customers with periodic account statements
and related information. Access to information about their card balance and transaction history68
can be important to consumers because otherwise, they may find it difficult to exercise their error
resolution rights, as well as to manage their financial obligations. As with limits on liability for
unauthorized use, some GPR card issuers voluntarily provide their customers access to such
information, either online or via automated telephone systems. However, other GPR card69
issuers may charge fees to check this information or may not make it readily available.
In sum, FTC staff believes there that there appear to be benefits to mandating error
resolution procedures, with ready access to card balance and transaction history information, for
consumers who use GPR cards. In addition, because some GPR card issuers currently offer some
protections voluntarily, and because issuers of other payment cards offer error resolution
procedures with ready access to account information, the costs of implementing such procedures70
for GPR cards might not be prohibitive. FTC staff recommends that the CFPB identify and
propose for public comment specific error resolution procedures for GPR cards, taking into
account the costs and benefits of alternative ways to offer consumers such protections.

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4. Recurrent Payments
In certain circumstances, merchants may make multiple debits to some payment cards that
consumers use to purchase goods and services. Merchants often make such recurrent debits
pursuant to negative-option plans under which consumers agree to receive periodic shipments of
goods or services and have regular charges debited to their payment cards. The payment cards to
which merchants may post these debits include GPR cards.
The main consumer protection problem associated with posting recurrent debits is that
merchants selling goods and continuity services via negative-option plans could do so without the
consumer’s authorization. The Commission has brought numerous actions for violations of71
Section 5 of the FTC Act, among other laws, against merchants that have posted without
authorization such recurring debits involving recurrent payments from consumers’ accounts in
connection with job-related scams, and government grant scams, for example. Moreover,72 73
many merchants that post such debits add insult to injury by refusing to accede to consumers’
demands that the recurring payments cease. Because merchants can drain funds from74
consumers’ accounts quickly through repeated debits to payment cards, consumers face the risk
of incurring substantial injury if these debits occur without their consent.
Current law protects consumers from unauthorized recurrent charges to their debit cards.
Specifically, EFTA and Regulation E require merchants and others who seek to take recurrent
debits from consumers’ bank accounts through electronic fund transfers (including debit cards) to
obtain consumers’ preauthorization for the transactions. The authorization must be in the form of
a writing signed or similarly authenticated by the consumer, and the merchant or other person
must provide a copy to the consumer. The authorization also must evidence the consumer’s75
identity and assent and must be readily identifiable, with the terms of the authorization clear and
readily understandable. Such protections do not apply to GPR cards.76
Given the significant consumer risks and potential harms associated with recurrent debits,
FTC staff recommends that the CFPB identify and propose for public comment specific
authorization requirements for recurrent payments for GPR cards, taking into account the costs
and benefits of alternative ways to offer and obtain such authorization.
IV. Conclusion
FTC staff supports the CFPB’s effort to solicit and consider information on the issue of
extending various consumer protections to users of GPR cards that are accorded to users of other
payment methods. FTC staff believes that it is worthwhile to consider such protections in
addition to those afforded consumers under Section 5 of the FTC Act. FTC staff hopes that this
comment is useful to the CFPB in its assessment, and appreciates the CFPB’s consideration of
this information. If any other information would be useful regarding these matters, please contact
Jessica Rich, Associate Director for Financial Practices, at (202) 326-3224.

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1. Electronic Fund Transfers (Regulation E) ANPR, 77 Fed. Reg. 30923 (May 24, 2012). A GPR card is issued for a
set amount and is reloadable, meaning the consumer can add funds to the card. Id.
2. Id. Regulation E is one of the regulations implementing the Electronic Fund Transfer Act (EFTA). The CFPB’s
Regulation E is found at 12 C.F.R Part 1005. EFTA is found at 15 U.S.C. § 1693 et seq. EFTA and Regulation E
generally apply to electronic fund transfers (EFTs) that authorize a financial institution to debit or credit a
consumer’s “account,” which is a demand deposit, savings, or other consumer asset account held directly or
indirectly by a financial institution and established primarily for personal, family or household purposes. See 77
Fed. Reg. at 30924 and 12 C.F.R. § 1005.2(b)(1).
3. See supra note 1.
4. See 77 Fed. Reg. at 30925.
5. As discussed below, Section 5 of the FTC Act protects consumers who use these cards from unfair or deceptive
acts or practices. See infra note 6 and accompanying text. However, there are no federal regulations or protections
pertaining to the costs and terms of GPR cards comparable to the provisions for other payment cards.
6. 15 U.S.C. § 45(a).
7. See, e.g., FTC v. VirtualWorks, LLC (VirtualWorks), No. C09 03815 (N.D. Cal. filed Aug. 19, 2009), available at
http://www.ftc.gov/os/caselist/0723241/c0903815.shtm; FTC v. Swish Marketing, Inc. (Swish Marketing), No. C09
03814 (N.D. Cal. filed Aug. 19, 2009), available at http://www.ftc.gov/os/caselist/0723241/c0903814.shtm; FTC v.
EdebitPay, LLC (EdebitPay), No. 07 4880 (C.D. Cal. filed July 30, 2007), available at
http://www.ftc.gov/os/caselist/0623125/index.shtm. Generally, the FTC’s cases against sellers of GPR cards alleged
that marketers duped consumers into buying the cards, baiting them with the ostensible sale of a payday loan or a
line of credit.
8. See, e.g., FTC v. Millenium Telecard, Inc.(Millenium), No. 2:11 cv 02479 (D.N.J. filed May 2, 2011); FTC v.
Alternatel, Inc. (Alternatel), No. 1:08 cv 21433 (S.D. Fla. filed May 19, 2008) (prepaid telephone calling card
cases). The FTC has been at the forefront of federal efforts to protect consumers from deceptive practices in the
prepaid calling cards business. See Prepared Statement of the Federal Trade Commission on Prepaid Calling Cards
Before the House Subcommittee on Commerce, Trade, and Consumer Protection, Committee on Energy and
Commerce, Dec. 3, 2009, available at http://www.ftc.gov/os/2009/12/P074406prepaidcc.pdf. Prepaid calling cards
have some of the same vulnerabilities as GPR cards. The CFPB’s ANPR focuses on open loop cards (which can be
used any place that accepts payment from a retail electronic payments network, including Visa, MasterCard,
American Express or Discover) and prepaid calling cards are generally closed loop mechanisms (which can be used
Respectfully submitted,
David Vladeck, Director
Jessica Rich, Associate Director
Thomas Pahl, Assistant Director
Teresa Kosmidis, Attorney
Carole Reynolds, Senior Attorney
Bureau of Consumer Protection

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only at a specific merchant or group of merchants). Nevertheless, some similar issues including confusing and
inadequately disclosed fees and terms can occur in both mechanisms. Prepaid calling cards can serve as a
convenient and inexpensive lifeline to connect consumers particularly recent immigrants and members of the U.S.
armed services to their families. See In re Darden Restaurants (Darden), F.T.C. Dkt. No. C 4189 (2007), and In
re KMart Corp. (KMart), F.T.C. Dkt. No. C 4197 (2007) (gift card cases).
9. 15 U.S.C. § 1601 et seq. TILA is implemented by Regulation Z; the CFPB’s Regulation Z is found at 12 C.F.R.
Part 1026. Among other things, TILA and Regulation Z establish disclosure requirements and dispute resolution
procedures for open end credit (including for credit cards), limit liability for unauthorized use of credit cards, and set
other consumer protections for credit cards, as well as for other types of credit. Among other things, EFTA and
Regulation E establish disclosure requirements and error resolution procedures for debit cards and certain other types
of electronic fund transfers (EFTs), limit liability for unauthorized EFTs, and set various other consumer protections
for EFTs, gift cards, and certain other electronic transactions, including for foreign remittance transfers. See
generally EFTA and Regulation E, supra note 2.
10. See FTC v. Xpics Publishing, Inc., Civ. Action No. 00 7613 (C.D. Cal. filed Jul. 13, 2000), available at
http://www.ftc.gov/os/caselist/9823541.shtm, FTC v. Netpliance, Civ. Action No. A 01 CA 420 SS) (W .D. Tex.
filed June 27, 2001), available at http://www.ftc.gov/os/2001/07/netpliancecmplaint.pdf, (complaint charging,
among other things, failure to provide timely credits regarding consumers’ credit accounts).
11. See, e.g., FTC v. Leanspa, No. 3:11 cv 01715 (D. Conn. filed Nov. 7, 2011), available at
http://www.ftc.gov/os/caselist/1123135/index.shtm; FTC v. Willms, No. 2:11 cv 00828 (W .D. W ash. filed Sept. 2,
2011) (amended complaint), available at http://www.ftc.gov/os/caselist/1023012/index.shtm; FTC v. Grant Connect,
LLC (Grant Connect), 2:09 cv 01349 (D. Nev. filed July 27, 2009), available at
http://www.ftc.gov/os/caselist/0923108/index.shtm; FTC v. Johnson (Johnson), No. 2:10 cv 02203 (D. Nev. filed
Dec. 21, 2010), available at http://www.ftc.gov/os/caselist/1023015/index.shtm; FTC v. Central Coast
Nutraceuticals, Inc., No. 10 cv 4931 (N.D. Ill. filed Aug. 5, 2010), available at
http://www.ftc.gov/os/caselist/1023028/index.shtm. The FTC has brought scores of negative option cases involving
credit or debit cards, over many years.
12. The Dodd Frank W all Street Reform and Consumer Protection Act (“Dodd Frank Act”), Pub. L. 111 203, 124
Stat. 1376 (2010). Under the Dodd Frank Act, the Commission has the authority to continue to enforce many
consumer financial statutes and regulations, including TILA and Regulation Z, and EFTA and Regulation E, and
also enforce any CFPB rules applicable to entities within the FTC’s jurisdiction.
13. See Dodd Frank Act, id., § 1075. The Federal Reserve Board implemented some of these requirements through
new final and interim regulations, including new Regulation II, 12 C.F.R. Part 235, for the debit card interchange fee
and routing provisions of the Dodd Frank Act. See Debit Card Interchange Fees and Routing, Final Rule, 76 Fed.
Reg. 43394 (July 20, 2011), and Interim Final Rule, 76 Fed. Reg. 43478 (July 20, 2011), available at
http:www.federalreserve.gov/newsevents/press/bcreg/20110629a.htm. Regulation II implements parts of EFTA.
The FTC enforces Regulation II for nonbank entities, including payment networks, issuers, and merchants. The FTC
also enforces related statutory requirements that were self effecting without regulatory implementation, which
restrict payment card networks from limiting merchants and others in establishing terms for acceptance of payment
cards. See Dodd Frank Act, id.
14. For example, the FTC also enforces the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq.; the Equal
Credit Opportunity Act, 15 U.S.C. § 1691 et seq.; the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.; and the
Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.
15. See, e.g., FTC, NEW RULES ON ELECTRON IC PAYM ENTS LOW ER COSTS FOR RETAILERS, available at
http:business.ftc.gov/documents/bus78 new rules electronic payments lower costs retailers.

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16. The FTC recently held two workshops that also pertain to financial services, including payment cards. See, e.g.,
FTC W orkshop, Paper Plastic . . . or Mobile? (Apr. 26, 2012), available at
http://www.ftc.gov/bcp/workshops/mobilepayments, and FTC Workshop, In Short: Advertising & Privacy
Disclosures in a Digital World (May 30, 2012), available at http://www.ftc.gov/bcp/workshops/mobilepayments.
17. See, e.g., FTC, Comments of the Staff of the Bureau of Consumer Protection, the Bureau of Economics, and the
Office of Policy Planning, Before the Board of Governors of the Federal Reserve System, In the M atter of Request
for Comments on Truth in Lending, Proposed Rule (Apr. 8, 2008), available at
http://www.ftc.gov/opa/2008/04/frb.shtm; FTC, Comment of the Staff of the Bureau of Consumer Protection, In the
Matter of the Office of Thrift Supervision’s Advance Notice of Proposed Rulemaking Regarding Unfair or
Deceptive Acts or Practices (Dec. 12, 2007), available at http://www.ftc.gov/opa/2007/12/thrift.shtm.
18. See supra note 16.
19. 77 Fed. Reg. 30923. See also American Banker, “Consumer Finance, Prepaid Industry Expects Pressure to
Simplify Fees,” May 31, 2012 (“Prepaid cards appeal to a diverse and growing consumer base . . .”).
20. Federal Reserve System, The 2010 Federal Reserve Payments Study, Apr. 5, 2011 at 68, available at
http://www.frbservices.org/files/communications/pdf/research/2010 payments study.pdf. Prepaid cards or general
purpose reloadable cards are being marketed as attractive alternatives to check cashiers and traditional bank
accounts. See generally Consumers Union, ConsumerReports Prepaid Cards: Loaded with Fees, Weak on
Protections (Consumers Union Report), Mar. 2012, available at
http://www.consumersunion.org/pdf/Prepaid Cards Report 2012.pdf.
21. See Federal Reserve Bank of Philadelphia, A Prepaid Case Study: Ready Credit’s General Purpose & Transit
Fare Programs, Apr. 2012, available at
http://www.phil.frb.org/consumer credit and payments/payment cards center/publications/discussion papers/2012/D
2012 April Ready Credit.pdf.
22. Banks and financial firms now control or influence federal financial aid disbursement to over 9 million students
by linking prepaid debit cards to student id cards; some of these cards involve prepaid reloadable (open loop) cards.
See U.S. PIRG Education Fund, The Campus Debit Card Trap, May 2012, available at
http://www.uspirgedfund.org/sites/pirg/files/reports/USPIRG Debitcardtrap may2012final 2 0.pdf.
23. Federal Reserve System, Consumers and Mobile Financial Services, Mar. 2012, at 19.
24. Also, more mobile service providers are focusing on underbanked consumers, who tend to use general purpose
reloadable prepaid accounts as bank account substitutes. See generally Center for Financial Services Innovation,
Reaching Underbanked Consumers Through Mobile Services, 2011, available at
http://www.ftc.gov/os/comments/mobilepayments/00018 82915.pdf (submitted as a comment to the FTC’s
W orkshop, Paper, Plastic or Mobile), see supra note 16.
25. Both gift cards and GPR cards are forms of prepaid cards, where consumer place value in advance on or through
the card. GPR cards are reloadable, and can be used to add value. Regulation E applies to GPR cards that are
marketed as gift cards, but does not generally apply to GFR cards. See 12 C.F.R. § 1005.20.
26. All users of credit cards, not solely consumers, have limited liability for unauthorized use of these cards. See 12
C.F.R. § 1026.12 1, CFPB Official Staff Commentary to Regulation Z.
27. See, e.g., 12 C.F.R. §§ 1026.5, 1026.6, 1026.12(b), and 1026.13.
28. The limits on consumers’ liability vary, depending on how quickly consumers report the loss or theft of the card.
See generally 12 C.F.R. § 1005.6.

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29. See, e.g., 12 C.F.R. §§ 1005.7, 1005.10, and 1005.11.
30. Pub. L. 111 24, 123 Stat. 1734 (2009).
31. See generally 12 C.F.R. §§ 1005.15, 1005.18, and 1005.20.
32. See 77 Fed. Reg. 30924 25. GPR cards that are marketed as gift cards are subject to the gift card rules under
Regulation E. See 12 C.F.R. § 1005.20. These requirements include, among other things, disclosures about gift card
features and terms pertaining to fees and expiration dates, and restrictions on fees and expiration. However, as
noted, Regulation E generally does not apply to GPR cards that are not marketed as gift cards.
As noted above, Regulation II, under EFTA, applies in some respects to GPR cards. These rules impose
limits on interchange transaction fees, and prohibit network exclusivity and routing limits. See generally 12 C.F.R.
Part 235; see also Debit Card Interchange Fees and Routing, Final Rule, 76 Fed. Reg. 43394 (July 20, 2011),
available at http://www.gpo.gov/fdsys/pkg/FR 2011 07 20/pdf/2011 16861.pdf, and Debit Card Interchange Fees
and Routing, Interim Final Rule; Request for Comment, 76 Fed. Reg. 43478 (July 20, 2011), available at
http://www.gpo.gov/fdsys/pkg/FR 2011 07 20/pdf/2011 16860.pdf.
33. See, e.g., Regulation Z, 12 C.F.R. § 1026.2(a)(14).
34. See Regulation E definition of “electronic fund transfer,” including “any transfer of funds . . . for the purpose of
ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account.” 12 C.F.R.
§ 1005.3. See also definition of “account,” as a “demand deposit (checking), savings, or other consumer asset
account . . . held directly or indirectly by a financial institution and established primarily for personal, family, or
household purposes.” 12 C.F.R. § 1005.2(b)(1). Although the cards’ funds may be accessible by consumers through
various entities, they may be held in some form of aggregate or “pooled” arrangement with other funds, rather than
in a consumer asset account itself.
35. The CFPB may wish to consider the example of payroll cards, as one possible approach in this area. In 2006,
payroll cards were increasing in popularity and use. Littler, Debunking Myths about Payroll Debit Cards, Nov. 3,
2010 available at http://www.littler.com/publication press/publication/debunking myths about payroll debit cards
(“Payroll debit cards work similar to a credit card or bank debit card.”) In August 2006, the Federal Reserve Board
amended Regulation E’s definition of “account” to include a “payroll card account,” with the result that Regulation
E’s substantive and disclosure protections applied, albeit with certain specific provisions designed for payroll card
considerations. See generally 71 Fed. Reg. 51437 (Aug. 30, 2006). Regulation E’s unauthorized use and error
resolution protections are now among the protections afforded to consumers for payroll cards. Id.
36. Although GPR cards do not generally provide for overdraft usage, some cards permit consumers to opt in to
such a program. See 77 Fed. Reg. 30923 (May 24, 2012). Thus, some consumers using GPR cards could
experience overdrafts for fraudulent use, thereby increasing their potential loss.
37. Some entities may offer voluntary contractual coverage to protect consumers, to some degree, from fraud or
unauthorized use. Although these protections may be helpful to consumers, they could be rescinded at any time,
and they are not uniform or enforceable under federal law. They also have specific limitations in application. See,
e.g., Visa and MasterCard’s “zero liability” programs, available at
http://usa.visa.com/personal/security/visa security program/zero liability.html and
http://www.mastercard.us/zero liability.html.
38. See 12 C.F.R. § 1026.12.
39. See 12 C.F.R. § 1005.6. The consumer’s liability is limited to $50, if reported within two business days of
discovery, and up to $500 for charges thereafter; however, if the loss is not reported within sixty days after the
consumer’s periodic statement is mailed that includes the loss, the consumer can face unlimited liability for charges

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incurred thereafter.
40. See 12 C.F.R. § 1005.20.
41. See generally FTC W orkshop Transcript, Paper, Plastic . . . or Mobile, Session 2, available at
http://htc 01.media.globix.net/COMP008760MOD1/ftc web/transcripts/042612 FTC sess2.pdf.
42. See Consumers Union Report at 17, supra note 20.
43. Issuers also may incur the costs of voluntarily adopting and implementing measures (such as the use of personal
identification numbers (PINs)) to prevent fraudulent or unauthorized transactions.
44. See generally id. See also Consumer Action, Prepaid Card Survey, April 2012, available at
http://www.consumer action.org/downloads/press/2012 Prepaid Card Survey.pdf; see also Consumer Action,
Prepaid Card News, Spring 2012, available at
http://www.consumer action.org/downloads/english/CA News Spring 2012.pdf.
45. Green Dot and OmniCard disclose some fee information in some media. See, e.g., “Green Dot Card Fees,”
available at www.greendot.com/greendot/about our products; Omni Card Fees Schedule, available at
http://www.omnicard.com/fees schedule.
46. See, e.g., OmniCard FAQs, available at http://www.omnicard.com/faqs. (“After the Card has expired, it is no
longer valid, you will not be able to add funds to the Card and all transactions will be declined.”)
47. See, e.g. OmniCard, FAQs, available at http://www.omnicard.com/faqs, and Terms & Conditions, available at
http://www.omnicard.com/terms conditions (“Your Card is valid until the date embossed on the front of the card
(“the expiration date”) or until the Card has been inactive for over 120 days and has a $0 balance an which time the
Card will automatically expire. After the Card has expired, it is no longer valid, you will not be able to add funds to
the Card and all transactions will be declined.” “If your card is active, you will automatically be issued a new Card a
few weeks prior to its expiration date. If the new Card is returned to us due to an invalid address, it will become an
“expired” Card . . .”).
48. As noted, because the imposition of fees on cards can cause the card balance to decline over time, consumers
may not actually have an “active” card at expiration, and hence may not receive another card. A similar issue arose
in the FTC’s gift card cases; the complaints charged that, although the cards were marketed as having no expiration
dates, dormancy fees were deducted from the card’s balance during months of inactivity, causing cards that
previously had value to expire. See Darden, and KMart, supra note 8 (complaints charged that, although the cards
were marketed as having no expiration dates or as permitting consumers to redeem the cards’ value, dormancy fees
were deducted from the cards’ balance during months of inactivity, causing cards that previously had value to expire
or have little or no value). Similarly, in the FTC cases against marketers of prepaid calling cards, the FTC alleged
deception where the defendants failed to disclose fees that would be applied to the balance on the card. See supra
note 8.
49. See, e.g., OmniCard, FAQs, supra note 46.
50. For example, TransCard has a 36 month expiration. See TransCard, Reloadable Cards, available at
http://corp.transcard.com/en/Products/Reloadable Cards.aspx.
51. The American Express PASS Card (described by American Express as a “reloadable prepaid card parents give
to teens and young adults”) states in an online ad that “[a]vailable funds on the Pass Card do not expire.” See
American Express, FAQs, available at
https://www.americanexpress.com/us/content/prepaid/pass/faqs.html?vgnextchannel 95ddb81e8482a110VgnVCM1
00000defaad94RCRD&appInstanceName default&vgnextnoice 1&name pass markup faq&type intbenefitdetail.

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52. See, e.g., TransCard, Reloadable Cards, available at http://corp.transcard.com/en/Products/Reloadable
Cards.aspx.
53. See, e.g., OmniCard, FAQs, supra note 46; Green Dot, Reloadable Prepaid Cards, Help, available at
http://www.greendot.com/greendot/help#expire.
54. See, e.g., 12 C.F.R. §§ 1026.5 and 1026.6. Various substantive limits on credit card accounts are found in 12
C.F.R. 1026, Subpart G.
55. See, e.g., 12 C.F.R. §§ 1005.7, and 1005.9.
56. See 12 C.F.R. § 1005.20. It also includes limitations on expiration dates, and disclosures of those features.
57. See 12 C.F.R. § 1005.18.
58. See 12 C.F.R. § 1005.15.
59. See 12 C.F.R. § 1005.20. As noted, those rules exclude GPRs that are not marketed as gift cards.
60. See id.
61. See, e.g., Millenium Telecard and Alternatel, supra note 8; see also Edebitpay, VirtualWorks, and Swish
Marketing, supra note 7, and Darden and KMart, supra note 8. Generally, the FTC’s cases against sellers of
GPR cards alleged that marketers duped consumers into buying the cards, baiting them with the ostensible sale of a
payday loan or a line of credit. See Editpay, VirtualWorks, and Swish Marketing, id.
62. In enforcing the FTC Act, the Commission has generally required that, if information must be disclosed to
consumers, the disclosure must be clear and prominent so that consumers will both notice and understand it. See
generally, FTC Policy Statement on Deception, appended to In re Cliffdale Assocs., Inc., 103 F.T.C. 110, 174 84.
63. See Ralphs/Krogers “Frequently Asked Questions,” available at http://www.ralphs.kpfprepaid.com/faq.asp.
64. See 12 C.F.R. § 1005.11. Consumers have up to 60 days from the transmittal date of the statement containing
the error, to notify the financial institution. Id. Electronic benefit transfers and payroll cards also have some error
resolution procedures, tailored to these particular payment mechanisms. See 12 C.F.R. §§ 1005.15 and 1005.18.
65. See 12 C.F.R. § 1005.11.
66. See, e.g., 12 C.F.R. § 1005.11.
67. See 12 C.F.R. § 1026.13. Consumers have up to 60 days from the mailing date of the statement containing the
error, to notify the creditor of the error.
68. See, e.g., 12 C.F.R. § 1026.7, 12 C.F.R. § 1005.9, respectively.
69. For example, GreenDot provides online or telephone access to account balance or activity information, at no
charge to the consumer. See GreenDot, Your Balance and Transaction History, available at
http://www.greendot.com/greendot/help#sure.
70. See Consumers Union Report at 16, supra note 20.
71. See FTC, Negative Options, A Report by the staff of the FTC’s Division of Enforcement, Jan. 2009, at i,
available.

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72. See FTC v. National Sales Group, No. 11 cv 01230 (N.D. Ill, filed Feb. 22, 2011), available at
http://www.ftc.gov/os/caselist/1023246/index.shtm.
73. See Grant Connect and Johnson, supra note 11.
74. See, e.g., FTC v. United States Benefits, LLC, Civ. No. 3:10 cv 0733 (M.D. Tenn. filed Aug. 3, 2010), available
at http://www.ftc.gov/os/caselist/1023084/index.shtm.
75. See 12 C.F.R. § 1005.10(b).
76. See 12 C.F.R. §§ 1005.10(b) 5 and 6, CFPB Official Staff Commentary to Regulation E.