Setting the Record Straight on Prepaid, Part 4

What is Regulation E and when does it apply?

Well, if I were to answer that question thoroughly with plenty of examples and detailed explanation, it would take about 20 or 30 pages and you would be ready to fall asleep by the end of it. I know, because I wrote a document like that for a previous employer. I’ll give a simplified overview here; it won’t cover all the nuances, but should give you a reasonable idea of what’s going on.

Regulation E applies only to consumer accounts. It does not apply to accounts held by business entities, or to anything which is not an “account” as defined in the regulation (which is why it generally doesn’t apply to non-reloadable prepaid cards). The best-known parts of Regulation E protect the consumer from being liable for the full amount of unauthorized charges or electronic transfers, as long as the disputed charge meets certain requirements (for example, you can’t call a charge “unauthorized” just because the merchant who charged your card later refused to let you return an item you decided you didn’t want) and the consumer reports the unauthorized charge within the timeframes set out in Regulation E. The cardholder agreement for the GPR card will provide information on how the cardholder can report unauthorized charges.

Setting the Record Straight on Prepaid, Part 3

It’s not a bank account. Why does a GPR card have FDIC insurance coverage?

While the funds of all the prepaid card customers in a specific GPR card program may be held together in a single pool of funds in a custodial account, the FDIC-insured issuing bank and its regulators require the program manager to maintain an accurate accounting of the amount of funds associated with each individual GPR card account, and to retain identifying information about the primary cardholder for each card account. Because the underlying owners of the funds (i.e., the cardholders) are known and individually identifiable, and since the exact amount belonging to each cardholder is known, each cardholder receives FDIC insurance protection up to the full FDIC limits on his or her card account. That is, the custodial account may contain in excess of $250,000 (the limit of each individual depositor’s FDIC insurance coverage at a specific insured bank), but each card account is fully insured up to the FDIC limits regardless of the total sum held in the custodial account. This issue was settled by an FDIC advisory opinion issued on commingled deposit accounts (in that specific case, for payroll cards) as of August 16, 2002. A further clarification affirming the applicability of this rule to stored value cards and other “nontraditional access mechanisms” was issued by the FDIC on November 13, 2008.

Setting the Record Straight on Prepaid, Part 2

What’s the difference between reloadable and non-reloadable? And who’s got my money?

Let’s talk a bit about how prepaid cards work behind the scenes. For a given prepaid card brand, the company which processes the card transactions, arranges production of the physical cards, manages the distribution channels, provides the customer service, and levies the card fees, is the “program manager.” The program manager, as a rule, is not a bank, which means that the program manager does not serve as a repository for the customer’s funds. The customer’s funds are stored in an account at an actual bank, known as an “issuing bank.” The account the funds are stored in is known as the “custodial account” because the issuing bank is acting as the custodian of the funds.

Setting the Record Straight on Prepaid, Part 1

This blog post will be a departure from what I’ve written so far. My two rules to date have been (1) no discussions about my work and (2) no discussions about my personal relationships. However, I’m going to bend Rule # 1 a bit today.

See, I’ve worked for several years in prepaid debit cards, although I’m not employed in the industry currently: my work primarily involved general-purpose reloadable cards, or “GPR” cards, sold directly to individual consumers. I’ve had a bunch of different roles, but most recently my job responsibilities involved analyzing legal and regulatory compliance issues. Regulation in the prepaid space is not normally a topic I’d opine on in a public forum, but I feel like I need to counteract some of the misinformation that is being propagated in news coverage of the prepaid space.

Thought for the Day

"The beet was Rasputin's favorite vegetable. You could see it in his eyes."
- Tom Robbins, Jitterbug Perfume

Thought for the Day

"'But in her heart what every woman wants is to be some kind of goddess, I think -- men pick up a ruined echo of that thought and try to put them on pedestals ... but what a man senses is not what a woman wants. A woman wants to be in the clear, is all. To stand if she will, or walk .... Or to drive, Homer. A man will not see that. He thinks a goddess wants to loll on a slope somewhere on the foothills of Olympus and eat fruit, but there is no god or goddess in that. All a woman wants is what a man wants -- a woman wants to drive.'"

Ophelia Todd speaking in "Mrs. Todd's Shortcut," by Stephen King

Thought for the Day

"Faith" is a fine invention
When Gentlemen can see—
But Microscopes are prudent
In an Emergency.

- Emily Dickinson

Thought for the Day

I placed a jar in Tennessee,
And round it was, upon a hill.
It made the slovenly wilderness
Surround that hill.

The wilderness rose up to it,
And sprawled around, no longer wild.
The jar was round upon the ground
And tall and of a port in air.

It took dominion everywhere.
The jar was gray and bare.
It did not give of bird or bush,
Like nothing else in Tennessee.

- Wallace Stevens, "Anecdote of the Jar"

Update on PFC Manning's pre-trial confinement

I was very happy just now to read the most recent blog update from the attorney representing Pfc. Bradley Manning. It was published yesterday, and confirms that Manning is now being held under normal, humane conditions of detention. Seeing our government respond to public pressure to act ethically and humanely by finally doing the right thing is deeply gratifying. It makes me a little more hopeful for my country's future.

More of this, please. We still have an entire extra-judicial prison at Guantanamo that has to be shut down. Fair and humane treatment of those prisoners, with meaningful access to a legal system that is not a kangaroo court, doesn't cease to be a moral imperative just because they are not U.S. citizens.

Really, America?

A headline from MSNBC yesterday: "Bin Laden's death rekindles 'enhanced' interrogation debate."

Really, America? Is this who we are as a nation? Do we respond to the death of the guy who was, apparently, the primary architect of the 9/11 plot, by deciding this gives us free rein to go torture some more people? If this is how we behave as a country, what have we become?

When you torture prisoners, you lose all moral authority to tell others not to do likewise. The recognition of that fact was the entire basis of the Third Geneva Convention. You cannot get around this basic fact of human morality by labeling your prisoners "unlawful enemy combatants" or anything else. You can call them "Satan spawn" if you like - that still does not sanctify torture, anymore than it did during the Inquisition.

For an excellent unpacking of the practical reasons why torture was unlikely to have played any role in gathering the information that led to tracking down bin Laden, please see Heather Hurlburt's article today in The New Republic. For the moral case against torture, consult Jesus' Sermon on the Mount, if you consider yourself a Christian. If you are not a Christian, consider this: if your parent, child, sibling, spouse, or other loved one was picked up near a field of battle (for example, because they happened to live there or be traveling through at the time of conflict) or even on it, how would you feel if your loved one was tortured because someone suspected that they *might* have information which would give a small advantage to one side's army? Even in the unlikely event that they happened to possess such information, would you feel any less furious, destroyed, and heartsick? Would you ever, ever under any circumstances feel that your loved one's torment had been somehow justified?

Spawning more fear, pain, and hatred in the world should not be the role to which we aspire as a nation.