In a case involving the application of Regulation E (Reg. E) to certain prepaid cards, the Consumer Financial Protection Bureau (CFPB) submitted an amicus brief arguing that the error resolution procedures in Reg. E apply to pandemic-related unemployment benefits that are issued via prepaid cards.

Reg. E, which implements the Electronic Fund Transfer Act (EFTA), sets out the rights and responsibilities of users and issuers of certain accounts, including “prepaid accounts.” The regulation defines “prepaid accounts” to include “government benefit accounts,” but also excludes accounts that are “loaded only with qualified disaster relief payments.” When Reg. E applies to a prepaid account, an issuer must timely investigate disputed transactions.

The case involves the issuance of Pandemic Unemployment Assistance (PUA) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The Maryland Department of Labor’s Division of Unemployment Insurance granted PUA benefits to the plaintiff, who elected to receive the benefits on a prepaid card issued by the defendant bank. The plaintiff claimed that the bank violated the EFTA and Reg. E in its handling of his disputes related to the card.

The district court concluded that the bank was not obligated to follow the procedures in Reg. E because PUA benefits are not covered by the rules. According to the district court, the PUA benefits are qualified disaster relief payments because they were granted due to the COVID-19 pandemic, meaning that they are specifically excluded from the definition of “prepaid account” under Reg. E.

On appeal to the Fourth Circuit, the CFPB argues in its amicus brief that PUA benefits are covered by Reg. E as “government benefit accounts.” The CFPB asserts that the district court erred in concluding that the benefits at issue are qualified disaster relief funds because that exclusion applies to certain types of prepaid accounts but not government benefit accounts. Any additional analysis beyond determining that PUA benefits meet the “prepaid account” definition as “government benefit accounts” was in error, according to the CFPB.

Why It Matters

If Reg. E applies to prepaid cards that provide access to pandemic-related benefits, banks issuing such cards must ensure that they are complying with Reg. E in their handling of disputes, along with all of the other requirements in the EFTA and Reg. E.