Prepaid largely spared in final Durbin Amendment

Prepaid largely spared in final Durbin Amendment - The Green Sheet:
Most segments of the prepaid card industry apparently escaped the regulatory effects of the so-called Durbin Amendment to The Restoring American Financial Stability Act of 2010. Only open-loop, network-branded, nonreloadable gift cards, as well as similarly open-loop, nonreloadable rebate and loyalty cards, will be subject to the amendment, which is primarily designed to regulate the amount of debit card interchange the card brands can charge merchants.

According to Terry Maher, General Counsel for the Network Branded Prepaid Card Association, the amendment excludes all reloadable prepaid card programs that do not impose overdraft fees and that allow cardholders at least one free ATM transaction per month (on an ATM that is part of the card issuer's network).

Examples of exempted prepaid cards are those used to facilitate government benefits payments and cards typically used by low- to moderate-income (LMI) consumers as alternative financial tools, such as general purpose reloadable (network-branded) cards and payroll cards, Maher said. Maher believes the legislators chose to 'carve out' reloadable prepaid cards from inclusion in the amendment because of the consequences of interchange regulation on LMI cardholders, of which many are considered unbanked and without access to traditional bank accounts. Maher said government agencies would also feel a substantial negative impact from regulation of government benefits cards.