Comment on FR Doc # E9-10864

Consumers Union, the non-profit publisher of Consumer Reports® writes to comment on the suggested changes to the Bank Secrecy Act (RIN 1506-AA91). Consumers Union appreciates that FinCEN is not currently seeking to change the definition of stored value cards but seeks input on stored value cards generally and whether stored value should be considered as money transmission. We urge FinCEN to avoid unintended adverse consequences that could arise if it were to re-define stored value cards as money transmission devices. One type of stored value card, the prepaid card or as referred to by the prepaid card industry as the “general purpose reloadable card” should not be subject to the requirements of Monetary Service Businesses (MSBs) for three reasons. First, prepaid cards are not single-use money transmission devices but rather are used and operate like debit cards linked to traditional bank accounts. Second, prepaid cards are issued by banks as defined under the Bank Secrecy Act and therefore cannot be made subject to MSB requirements. Finally, consumer protections rely on defining prepaid cards as being tied to an account, not as single-use money transmission devices. Prepaid Cards Provide Bank Account-Type Services and Functionalities Many of the stored value cards on the market provide bank account-type services and functionalities. These prepaid cards are marketed and used much more like multiple use deposit accounts for day-to-day transactions than as single-use monetary instruments such as checks or money orders. For example, prepaid cards are marketed as substitutes for bank accounts, and are linked to an account which may be held in the name of the card user or held in a pooled account kept on the card user’s behalf. These cards allow for direct deposit of paychecks or other periodic sources of income into the account, as well as allow payments out of the account when authorized by use of the card, or by other means. In fact, some of these cards even link to savings accounts. Funds loaded to prepaid cards generally “are held in the aggregate account until the cardholder draws down the available balance” or in individual accounts. Prepaid Cards are Stored Value Cards Issued by Banks We agree with FinCEN that the proposed definitions for money transmission should not be extended to include all stored value cards. We do not seek to change FinCEN’s view on extending the definition of money service businesses to retailers who issue closed loop stored value cards, or gift cards. More importantly, we agree with FinCEN that open loop stored value cards could not be made subject to MSB definitions because prepaid cards are issued by depository institutions or banks. For example, two leading prepaid card companies, Green Dot and NetSpend, offer cards issued by FDIC-insured banks. Consumer Protections Depend on Account Definition Finally, the similarity of accounts holding the funds backing prepaid cards and other types of deposit accounts is illustrated by statutes such as the Federal Deposit Insurance Act and the Electronic Funds Transfer Act. The FDIC clarified that stored value card funds qualify as “deposits,” and set forth guidelines or “pass through” requirements to provide individual cardholders insurance for funds held in a pooled deposit account. The consumer protections of the EFTA also depend on the existence of an “account” and do not apply to single use money transmission devices. Payroll cards, a type of stored value card, are already included in the definition of account in Regulation E. We ask FinCEN to select a definition of stored value cards that does not characterize prepaid cards as money transmission devices to avoid unintended adverse consequences to consumers’ current and future protections, such as those under EFTA and FDIA, which protect the types of stored value cards linked to individual or pooled accounts. We understand there are other statutes that address stored value cards; however, characterizing stored value cards as money transmission devices may set negative precedent for future consumer protection regulations and statutes. These protections are critical to a growing number of consumers who rely on these products to manage household funds on a day-to-day basis. We appreciate this opportunity to provide these comments and hope to work with FinCEN and others toward strengthening the Bank Secrecy Act to prevent money laundering activities without categorizing stored value cards in a manner that might have unintended adverse consequences for future consumer protection under other statutes.