Point-of-Sale Finance Series: Beyond Credit – Deposit Accounts, Prepaid Cards, Overdraft, and Surcharges

Taylor Gess (0:05)

Welcome to this crossover episode of The Consumer Finance Podcast and Payments Pros. I'm Taylor Gess, an associate in Troutman Pepper Locke's Consumer Financial Services regulatory practice, and I'll be your host for today's episode. Today, we're giving you another installment of our special highlight series on point of sale finance, where we are joined by Jason Cover and Carlin McCrory to discuss payments products we are seeing at the point of sale, including some products you hear us discuss less on the podcast, but that we work with frequently like prepaid cards, hybrid prepaid cards and debit cards.

But before we jump into that topic, let me remind you to visit and subscribe to our blogs, troutmanfinancialservices.com and consumersfinancialserviceslawmonitor.com.

Don't forget about all of our other podcasts. We have the FCRA Focus, All About Credit Reporting, The Crypto Exchange About Crypto and Digital Assets, and Moving the Metal, our auto finance podcast. All of those are available on all popular podcast platforms. Speaking of those platforms, if you like this podcast, please let us know. Leave us a review on your podcast platform of choice and tell us how we're doing. Well, I'm excited for this overview of deposit and prepaid products, so let's get started. Jason and Carlin, welcome to the podcast.

Jason Cover (1:11)

Thanks, Taylor. Thank you for having us.

Carlin McCrory (1:12)

Excited to be here.

Taylor Gess (1:13)

So Jason, what kinds of payment products do you see at the point of sale? I'm thinking things like checking accounts or debit cards, prepaid cards, maybe digital wallets. Can you tell us a little bit about those types of products?

Jason Cover (1:24)

Yeah, I think you're absolutely right, Taylor. I think it depends sometimes on clients' existing portfolios and maybe how they're managing things across the board. But you hit the nail right on the head. Most folks are interested in one or more of those types of options. A deposit account, think of something like a traditional checking account that I think most folks would be familiar with. Prepaid cards, which are very similar to checking accounts but are obviously prepaid. Digital wallets, I think a lot of people have formulated that into their day-to-day life. Many of us don't carry wallets or purses anymore and just use a phone with a digital wallet on it with cards and other mechanisms loaded on there.

Then to a lesser extent, we do see things like gift cards and things of that nature that pop up just because they're in the same regulatory ecosphere. But that is the ecosphere of once we start moving at least somewhat away from credit transactions and then I think when things get interesting is when you start adding credit features on some of these products.

Taylor Gess (2:20)

Yeah, absolutely, Jason. We'll get into the credit features a little bit later. But for right now, Carlin, what are some important topics in consumer deposit account agreements?

Carlin McCrory (2:29)

There are very prescriptive requirements in both Reg DD and Reg E and Reg CC, for example, if your product does include checks. We also see a ton of questions as it relates to Reg E and unauthorized use, which has very similar provisions if you're already offering a credit product to those requirements within Reg Z.

There's tons of fraud in the deposit account area, just like there is with fraud and credit cards. We do get a lot of questions from clients on fraud with debit cards and other deposit products. You should be prepared to address it if this is a product that you're going to offer.

Some other smaller considerations that we see and think about are, will there be joint accounts offered? You have to think about the fees that you want to assess on the product, and those need to be clearly disclosed in accordance with regulatory requirements. We generally see disclosures about the specific bank that's involved and deposit insurance. Then there are other things that may not be in your agreement that you should consider, such as a sheet and making sure that you appropriately ledger each deposit account or prepaid card. So you know that Jason has $50, Carlin has $100 and Taylor has $500. You must have internal systems to appropriately ledger for each product that you have.

Taylor Gess (3:57)

Thanks, Carlin. That's really helpful to understand. Jason, let's shift back. So credit products are a significant part of both of our practices and credit features, as you mentioned earlier, can get tied into payment cards in some tricky ways, like overdraft and hybrid prepaid cards. Can you tell us a little bit about these types of payment products with credit features?

Jason Cover (4:17)

Yeah. So I think rewinding to what Carlin was saying, you have to start looking at Reg E and Reg CC and some of these statutes and regulations to sort of figure out where your product fits. So the definition of a prepaid count is in Reg E at 10052B3ID.