Payments Law Tool Kit

Venable / 30 29 / Venable State Law In addition to the federal laws noted above, a number of states regulate “stored value,” whose definition is similar to that of prepaid access under the FinCEN regulations. States that regulate stored value typically require licensure by any entities that “issue” or “sell” prepaid access. Obtaining state licenses can be a complicated process, and, once licensed, a provider of stored value is required to comply with various state consumer protection requirements. Prepaid Access / Stored Value Prepaid access (also called stored value) is defined as a payment service where funds have been paid in advance and can be retrieved or transferred at some point in the future. Prepaid access can be issued in an electronic or physical form, and comes in many different flavors, whether a digital wallet or a general-purpose reloadable card that you can purchase and load at a supermarket. While popular, prepaid access is also subject to a robust federal and state regulatory framework. Federal Law At the federal level, prepaid access is a type of money services business that is regulated under the Bank Secrecy Act (BSA) by the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Treasury Department. A prepaid program is defined as an arrangement under which one or more persons acting together provide prepaid access. If a program qualifies as prepaid access, FinCEN’s regulations apply to certain participants involved in the program – namely, providers and sellers of prepaid access. If they are subject to the FinCEN requirements, the providers and sellers of a prepaid program are required to implement anti-money laundering (AML) programs and comply with various other reporting requirements. Fortunately, the FinCEN regulations provide a number of exemptions to these requirements, including for closed-loop prepaid access to funds not to exceed $2,000 per day. Effective April 1, 2019, the Consumer Financial Protection Bureau’s (CFPB) prepaid rule brings most types of prepaid accounts within the scope of Regulation E (12 CFR Part 1005), along with some new, additional disclosure and other consumer protection requirements. The rule applies to prepaid accounts established primarily for personal, family, and household purposes, but not to business or commercial accounts. The rule generally covers payroll card accounts, government benefit accounts, and accounts that are marketed or labeled as prepaid and redeemable upon presentation at multiple, unaffiliated merchants for goods or services, or usable at automated teller machines.