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FinCEN Issues Final Rule on Prepaid Access

September 6, 2011

Authors

Bryan Cave

FinCEN Issues Final Rule on Prepaid Access

September 6, 2011

by: Bryan Cave

Retailers Issuing Gift Cards and/or Selling Other Companies’ Gift Card or Prepaid Cards Impacted

New anti-money laundering regulations that directly impact retail businesses that issue or sell gift cards or other prepaid cards have recently been released. These new regulations, known as the prepaid access “Final Rule,” currently effective on September 27, 2011, were issued by the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and require the collection and verification of customer information when certain prepaid cards are sold or reloaded. Retailers issuing their own closed loop gift cards, or selling and reloading other companies’ open and/or closed loop gift cards may be significantly impacted by the new Final Rule. (Print-Friendly Version)

I. RETAILERS THAT ISSUE THEIR OWN “CLOSED LOOP” GIFT CARDS

Many retailers now issue (either directly or through a gift card company) their own gift cards useable solely to buy goods or services at their own

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New "Durbin" Interchange and Routing Final Regulations Issued

July 1, 2011

Authors

Bryan Cave

New "Durbin" Interchange and Routing Final Regulations Issued

July 1, 2011

by: Bryan Cave

On June 29, 2011, the Federal Reserve Board approved its final interchange rules, entitled Regulation II, “Debit Card Interchange Fees and Routing,” setting the maximum permissible interchange fee that an issuer may receive for an electronic debit transactions made with debit cards and general use prepaid cards, codes, and other account access devices.

Under the final rules, issuers are permitted to charge a base fee of 21 cents plus 5 basis points (.05%) multiplied by the full value of the transaction, to cover fraud losses.  In addition, a 1 cent per transaction fraud prevention adjustment was also proposed, for those issuers who meet eligibility requirements (such as having fraud prevention and data security policies and procedures in place, which must be updated and certified on an annual basis.)  The fraud prevention adjustment rules are new, and are open for comment through September 30, 2011.

Under the new rules, a covered

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Final Interchange Rules Approved

June 30, 2011

Authors

Bryan Cave

Final Interchange Rules Approved

June 30, 2011

by: Bryan Cave

Prepaid Industry Gets Some Relief but General Purpose Reloadable Cards Face Unanticipated Restrictions

At a publicly held board meeting on June 29, 2011, the Federal Reserve Board approved its final interchange rule, entitled Regulation II, “Debit Card Interchange Fees and Routing,” setting the maximum permissible swipe fee an issuer may receive for an electronic debit transactions, adopting routing requirements and applying unanticipated new restrictions to General Purpose Reloadable (GPR) cards to take advantage of the interchange cap exemption. In addition—to the relief of the banking industry—the Fed announced that the rules on pricing requirements will go into effect on Oct. 1, 2011, as opposed to July 21 as dictated by the Durbin Amendment.

Under the final rule, issuers are permitted to charge a base fee of 21 cents (representing 80 percent of an issuer’s average transaction cost), plus five basis points on the full value of the

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China’s First Efforts at Licensing Prepaid Payment Issuers

June 15, 2011

Authors

Bryan Cave

China’s First Efforts at Licensing Prepaid Payment Issuers

June 15, 2011

by: Bryan Cave

Optimism Tempered with Caution

A version of this post also appeared in the June 2011 issue of Paybefore Legal.

The People’s Republic of China has ventured carefully in the area of payment cards. Its first step was launching its national bankcard network, UnionPay, in 2002. From that beginning, the Chinese bankcard industry has grown rapidly. According to UnionPay, by the end of 2006, there were 1.175 billion bankcards: 1.119 billion debit cards and 56 million credit cards.

In the last five years, closed-loop prepaid cards, especially store and phone cards, also have been booming in China. A recent Mercator report, Prepaid Cards in China 2010, indicated overall sales of closed-loop prepaid cards exceeded $200 billion. For example, a category of cards known as payroll and benefit cards, exceeded US$58 billion in sales. These are not the payroll cards we are accustomed to in the United States, but are

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Prepaid Cards That Access Lines of Credit Are "Credit Cards"

April 20, 2011

Authors

Bryan Cave

Prepaid Cards That Access Lines of Credit Are "Credit Cards"

April 20, 2011

by: Bryan Cave

On March 18, 2011, the Federal Reserve Board of Governors issued a Supplementary Information and Final Regulation and Commentary (“Supplementary Information”) which, among other things, clarified the definition of credit card. The following Client Alert focuses on how the new Supplementary Information impacts debit and prepaid cards that access a separate line of credit.

Since publication of the February 2010 and June 2010 Final Rules, the Board has become aware that clarification is needed to resolve confusion regarding how institutions must comply with particular aspects of those rules. In order to provide guidance and facilitate compliance with the final rules, the Board published proposed amendments to portions of the regulation and the accompanying staff commentary on November 2, 2010. See 75 FR 67458 (November 2010 Proposed Rule).

With respect to prepaid cards, the Supplementary Information discusses what happens when a customer opens a line of credit in connection with a

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Unlimited FDIC Insurance for Non-Interest Bearing Transaction Accounts

April 7, 2011

Authors

Bryan Cave

Unlimited FDIC Insurance for Non-Interest Bearing Transaction Accounts

April 7, 2011

by: Bryan Cave

On November 15, 2010, the Federal Deposit Insurance Corporation (FDIC) issued a final rule to implement Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”). Section 343 of the Act provides for unlimited deposit insurance for “noninterest-bearing transaction accounts” through December 31, 2012.

In the months since the FDIC issued its final rule, we have observed some confusion in the banking industry as to exactly what kinds of accounts will be considered to be “noninterest-bearing transaction accounts.” It is not the case, as some seem to have believed, that the definition covers only accounts offered to businesses. Consumer accounts can qualify for the unlimited deposit insurance, if properly structured. For some banks, this may mean a change to their existing deposit agreement terms.

FDIC regulation now defines “noninterest-bearing transaction account” as any deposit or account maintained at an FDIC insured bank or

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Federal Reserve Board Issues Final Gift Card Rules

March 29, 2010

Authors

Bryan Cave

Federal Reserve Board Issues Final Gift Card Rules

March 29, 2010

by: Bryan Cave

On March 23, 2010, the Federal Reserve Board issued its final rule, a summary and analysis of the final rule, and the official staff interpretation of the final rule in connection with Title IV of the CARD Act (the “Final Rules” or “Rules”).  The Final Rules are comparable to the proposed rules that were issued in November 2009, and follow the gift card related provisions set forth in the CARD Act addressing fees, expiration, disclosures, and various exemptions.  Set forth in this Bryan Cave Client Alert is a brief summary of key provisions of the Rules.

The Rules set forth various restrictions and guidelines with respect to gift card fees, expiration dates, and disclosures.  The Final Rules apply to any gift certificate, store gift card, or general-use gift card (including any reward/promotional card or any virtual/online gift card) that is sold or distributed to a consumer on or after

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