Pub. 8 2017 Issue 1

Spring 2017 11 West Virginia Banker from a health savings account or flexible spending arrangement among others. The final rule establishes new disclosure requirements in which financial institutions must provide both a “short form” and a “long form” disclosure to customers in advance of customers acquiring prepaid accounts. The “short form” disclosure includes the prepaid account’s most important fees and other information that will allow the consumer to compare the account’s key terms with other prepaid account programs. The “long form” disclosure includes a table of the prepaid account’s fees and their qualifying conditions as well as certain other information about the prepaid account program. The final rule includes several model short form disclosures that offer a safe harbor to the financial institutions that use them, as long as the model forms are used accurately and appropriately. The final rule also offers one sample long form disclosure that financial institutions may use as a guide when determining how to structure their disclosure. When deciding whether to use one of the sample forms provided, it is always important for the financial institution to make sure the form used meets all the disclosure requirements of the final rule and is inclusive of all prepaid accounts the institution offers. The final rule adopts an alternative to Regulation E’s periodic statement requirement that permits financial institutions to make to consumers certain methods for accessing information about their prepaid accounts in lieu of sending periodic statements. In addition, the rule requires financial institutions provide summary totals of the fees they have assessed against the prepaid accounts on both a monthly and annual basis. The final rule extends Regulation E’s limited liability and error resolution requirements to all prepaid accounts, regardless of whether the financial institution has completed consumer identification and verification procedures with respect to the account, but does not require provisional credit for unverified accounts. Once an account has been verified, financial institutions must comply with the provisional credit requirements, for both errors that occur prior to and after account verification, within the provisional time frame. Although not required at implementation, prepaid account issuers will also be required to submit their prepaid accounts agreements to the Bureau and publicly post the agreements to their websites effective October 1, 2018. The final rule also includes several revisions to the rules governing remittance transfers in subpart B of Regulation E that are intended to continue the current application of those rules to prepaid products. Specifically, they clarify that the location of prepaid accounts (other than payroll card accounts and government benefit accounts) does not determine where funds are being sent to or from for the purposes of application of the rules in subpart B. The final rule also clarifies that the current exemption that allows insured institutions to use estimates when providing certain disclosures does not extend to prepaid accounts, unless the prepaid account is a payroll card account or government benefit account. The final rule amends Regulation E and Z to regulate prepaid accounts with overdraft features by requiring that such credit features be distinct from the asset portion of the prepaid account (i.e. structured as a separate credit account or credit sub-account to the asset account in order to facilitate transparency and compliance with the various Regulation Z requirements). It is important for Compliance Officers of financial institutions that offer these types of accounts to begin researching the final rule now in order to ensure their entity will be prepared for the new compliance requirements once they become effective.  Patrick McGraw is a Senior Manager at Arnett Carbis Toothman LLP, Certified Public Accountants, Charleston, West Virginia. A Certified Public Accountant, Mr. McGraw has over six years experience in the financial institutions industry. He provides audit, internal audit, and loan review services to community banks through the firm’s Financial Institutions Service Group. Mr. McGraw can be contacted at 800-642-3601 or patrick.mcgraw@actcpas.com. It is important for Compliance Officers of financial institutions that offer these types of accounts to begin researching the final rule now in order to ensure their entity will be prepared for the new compliance requirements once they become effective