SENATE, No. 1890

STATE OF NEW JERSEY

218th LEGISLATURE

 

INTRODUCED FEBRUARY 15, 2018

 


 

Sponsored by:

Senator  TROY SINGLETON

District 7 (Burlington)

 

 

 

 

SYNOPSIS

     Requires access to certain prepaid account information; limits fees and liability associated with use of prepaid accounts.

 

CURRENT VERSION OF TEXT

     As introduced.

 


An Act concerning prepaid accounts and supplementing Title 17 of the Revised Statutes.

 

     Be It Enacted by the Senate and General Assembly of the State of New Jersey:

 

     1.    As used in this act:

     “Access device” means a card, code, or other means to access a prepaid account.

     “Consumer” means a natural person.

     “Electronic fund transfer” means any transfer of funds that is initiated through an electronic terminal, telephone, computer, or magnetic tape for the purpose of ordering, instructing, or authorizing a financial institution to debit or credit a consumer’s account; the term includes, but is not limited to:

     (1)   point-of-sale transfers;

     (2)   automated teller machine transfers;

     (3)   direct deposits or withdrawals of funds;

     (4)   transfers initiated by telephone; and

     (5)   transfers resulting from debit card transactions, whether or not initiated through an electronic terminal.

     “Financial institution” means a bank, a savings and loan association, a mutual savings bank, a credit union, or any other person who, directly or indirectly, holds a prepaid account belonging to a consumer.

     “Government benefit account” means an account established by a State agency for distributing government benefits to a consumer electronically, such as through automated teller machines or point-of-sale terminals

     “Payroll card account” means an account that is directly or indirectly established through an employer and to which electronic fund transfers of the consumer’s wages, salary, or other employee compensation, such as commissions, are made on a recurring basis, whether the account is operated or managed by the employer, a third-party payroll processor, a depository institution, or any other person.

     “Prepaid account” means:

     (1)   a payroll card account;

     (2)   a government benefit account, other than a government benefit account established for distributing needs-tested benefits in a program established under State or local law or administered by a State or local agency;

     (3)   an account that is marketed or labeled as “prepaid” and that is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at automated teller machines; opened by or for the benefit of a consumer and owned by a consumer that contains account owner funds, to which the account owner or any other person may add funds and from which funds may be withdrawn by the account owner, and from which payments may be made by the account owner through use of an access device sold to a consumer in New Jersey; or

     (4)   an account:

     (a)   that is issued on a prepaid basis in a specified amount or is not issued on a prepaid basis but is capable of being loaded with funds thereafter;

     (b)   whose primary function is to conduct transactions with multiple, unaffiliated merchants for goods or services, or at automated teller machines, or to conduct person-to-person transfers; and

     (c)   that is not a checking account, share draft account, or negotiable order of withdrawal account.

     (5)   A prepaid account shall not include:

     (a)   a demand deposit, savings deposit, or other asset account other than as described above;

     (b)   an account that is loaded only with funds from a health savings account, medical savings account, health reimbursement arrangement, dependent care assistance program, or transit or parking reimbursement arrangement;

     (c)   an account held pursuant to a bona fide trust agreement;

     (d)   an account that is directly or indirectly established through a third party and loaded only with qualified disaster relief payments;

     (e)   the person-to-person function of an account established by or through the United States government whose primary function is to conduct closed-loop transactions on United States military installations or vessels, or similar government facilities;

     (f)   a prepaid telecommunications or technology card, rewards card, gift card, or gift certificate, as those terms are defined in section 1 of P.L.2002, c.14 (C.56:8-110); or

     (g)   an account established for distributing needs-tested benefits in a program established under State or local law or administered by a State or local agency.

 

     2.    a.     A financial institution shall provide a consumer who owns a prepaid account with access to a monthly account statement that clearly sets forth for each electronic fund transfer during the month:

     (1)   the amount involved and the date of the transfer;

     (2)   the type of the transfer;

     (3)   the identity of the owner’s account with the financial institution from which or to which funds are transferred; and

     (4)   the identity of any third party to whom or from whom funds were transferred.

     b.    A financial institution shall not be subject to the requirements of subsection a. of this section if the financial institution makes available to the consumer:

     (1)   the account balance through a readily available phone line;

     (2)   90 days worth of electronic history that covers the past 90 days worth of account transactions; and

     (3)   if the account owner requests orally or in writing, the financial institution provides 90 days worth of account transactions.

     c.     A financial institution may not charge a fee for any service provided under subsection b. of this section, except that a financial institution may charge a fee of not more than $1 for each monthly written statement provided pursuant to paragraphs (2) or (3) of subsection b. of this section.

 

     3.    a.     In connection with a prepaid account, a financial institution shall not charge:

     (1)   an annual fee;

     (2)   an overdraft fee, including a fee for shortage or nonsufficient funds, or any other fee for a transaction processed for amounts exceeding the account balance;

     (3)   a usage fee for use at point of sale;

     (4)   a fee for a declined transaction;

     (5)   a fee for the use of an automated teller machine owned or operated by the issuer of the access device;

     (6)   a fee for a balance inquiry or access to transaction information through an automated teller machine owned or operated by the issuer of the access device;

     (7)   a fee for an inquiry to customer service, provided a fee may be charged after two inquiries during a monthly statement cycle;

     (8)   an account closing fee or a fee to obtain the remaining balance in the prepaid account, provided a fee may be charged for issuing a check for the account’s remaining balance;

     (9)   an activation, initiation, or enrollment fee; or

     (10)  a fee for any activity not described in subsection b. of this section or subsection c. of section 2 of P.L.    , c.     (C.        ) (pending before the Legislature as this bill).

     b.    A financial institution may charge:

     (1)   a fee for a replacement access device, not to exceed $5 for each replacement access device;

     (2)   a fee for expedited delivery of a replacement access device;

     (3)   a periodic fee, not more frequently than monthly;

     (4)   a reload fee, or any other similar fee for depositing funds to the prepaid account, if the financial institution provides an alternate method for depositing funds to the prepaid account without a fee;

     (5)   a fee for a transfer from the prepaid account to another account;

     (6)   a fee for bill payment by check;

     (7)   a fee for a withdrawal by the account owner from an automated teller machine that is:

     (a)   located outside the United States; and

     (b)   not owned or operated by the issuer of the access device, including a fee to cover the costs of any charge to the financial institution by the owner or operator of the automated teller machine relating to the use of the automated teller machine by the account owner;

     (8)   a fee for a purchase or a withdrawal of funds in a foreign currency;

     (9)   an inactivity or dormancy fee, provided that the fee is imposed only after one year of inactivity;

     (10) a fee to obtain the remaining balance in the prepaid account by check;

     (11) a fee for a returned deposit item or other similar fee in connection with depositing funds to a prepaid account;

     (12) a fee for adding an additional access device to a prepaid account; or

     (13) a fee for a withdrawal of funds from a prepaid account at a financial institution in a face-to-face transaction.

 

     4.    a.  A financial institution shall provide to a consumer the following initial disclosures, at the time the consumer contracts for a prepaid account or before the first electronic fund transfer is made involving the consumer’s prepaid account:

     (1)   together with any application, offer, or solicitation for a prepaid account, a table of any fees, in writing, that may be imposed by the financial institution associated with using the prepaid account, for electronic fund transfers, or for the right to make transfers, which shall:

     (a)   be conspicuously displayed to the consumer before purchase;

     (b)   be easily understood by the consumer; and

     (c)   include the amount and a description of each fee that may be charged by the financial institution;

     (2)   the telephone number and address of the person or office to be notified when the consumer believes that an unauthorized electronic fund transfer has been or may be made;

     (3)   on the access device, a toll-free telephone number and website at which the consumer may access a clear and easily understandable disclosure of the fees that may be charged in connection with the prepaid account;

     (4)   a summary of the consumer’s liability, under section 5 of this act or under any other State or federal law or agreement, for unauthorized electronic fund transactions;

     (5)   the financial institution’s business days;

     (6)   the type of electronic fund transfers that the consumer may make and any limitations on the frequency and dollar amount of transfers, except that details of the limitations need not be disclosed if confidentiality is essential for security purposes;

     (7)   a summary of the consumer’s right to receipts and periodic statements, as provided in section 2 of this act;

     (8)   the circumstances under which, in the ordinary course of business, the financial institution may provide information concerning the consumer’s account to third parties; and

     (9)   a notice that a fee may be imposed by an automated teller machine operator, when the consumer initiates an electronic fund transfer or makes a balance inquiry, and by any network used to complete the transaction.

     b.    If a consumer’s prepaid account becomes subject to terms and conditions different from those described in the initial disclosures required pursuant to subsection a. of this section, disclosures for the new terms and conditions shall be provided to the consumer by the financial institution.

 

     5.    a.  A consumer may be held liable, within the limitations described in subsection b. of this section, for an unauthorized electronic fund transfer involving the consumer’s prepaid account only if the financial institution has provided the disclosures required by subsection a. of section 4 of this act.  If the unauthorized transfer involved an access device, it must be an accepted access device the financial institution provided as a means to identify the consumer to whom it was issued.

     b.    A consumer’s liability for an unauthorized electronic fund transfer or a series of related unauthorized transfers shall be determined as follows:

     (1)   If the consumer notifies the financial institution within two business days after learning of the loss or theft of the access device, the consumer's liability shall not exceed the lesser of $50 or the amount of unauthorized transfers that occur before notice to the financial institution.

     (2)   If the consumer fails to notify the financial institution within two business days after learning of the loss or theft of the access device, the consumer's liability shall not exceed the lesser of $500 or the sum of:

     (a)   $50 or the amount of unauthorized transfers that occur within the two business days, whichever is less; and

     (b)   the amount of unauthorized transfers that occur after the close of two business days and before notice to the institution, provided the institution establishes that these transfers would not have occurred had the consumer notified the institution within that two-day period.

     (3)   A consumer shall report an unauthorized electronic fund transfer that appears on a periodic statement within 60 days of the financial institution's transmittal of the statement to avoid liability for subsequent transfers.  If the consumer fails to do so, the consumer's liability shall not exceed the amount of the unauthorized transfers that occur after the close of the 60 days and before notice to the institution, and that the institution establishes would not have occurred had the consumer notified the institution within the 60-day period.  When an access device is involved in the unauthorized transfer, the consumer may be liable for other amounts set forth in subparagraphs (a) or (b) of paragraph (2) of this subsection, as applicable.

     (4)   If the consumer’s delay in notifying the financial institution was due to extenuating circumstances, the institution shall extend the times specified in this subsection.

     (5)   Notice to a financial institution is given when a consumer takes steps reasonably necessary to provide the institution with the pertinent information, whether or not a particular employee or agent of the institution actually receives the information.  The consumer shall notify the institution in person, by telephone, or in writing.  Written notice is considered given at the time the consumer mails the notice or delivers it for transmission to the institution by any other usual means.  Notice shall be considered constructively given when the institution becomes aware of circumstances leading to the reasonable belief that an unauthorized transfer to or from the consumer’s account has been or may be made.

     c.     If any State law or any agreement between the consumer and the financial institution imposes less liability than is provided by this section, the consumer’s liability shall not exceed the amount imposed under the State law or agreement.

 

     6.    Any person found to be in violation of this act shall be subject to a civil penalty of not more than $1,000 per day for each day that the person is in violation of this act, which penalty may be collected by summary proceedings instituted by the Commissioner of Banking and Insurance in accordance with the "Penalty Enforcement Law of 1999," P.L.1999, c.274 (C.2A:58-10 et seq.).

 

     7.    The Commissioner of Banking and Insurance may promulgate, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations necessary to effectuate the purposes of this act.

 

     8.    This act shall take effect on the 120th day next following enactment.

 

 

STATEMENT

 

     This bill regulates prepaid accounts by limiting the fees that may be charged in connection with the accounts, limiting a consumer’s liability for an unauthorized electronic fund transfer involving the consumer’s prepaid account, and requiring financial institutions holding prepaid accounts to disclose certain information to consumers.  Under the bill, a prepaid account is defined to include: an account that is marketed or labeled as “prepaid” and that is redeemable upon presentation at multiple, unaffiliated merchants for goods or services or usable at automated teller machines; a payroll card account; and a government benefit account, other than a government benefit account established for distributing needs-tested benefits in a program established under State or local law or administered by a State or local agency.

     The bill requires financial institutions to provide a consumer whose funds are contained in a prepaid account with a monthly account statement that sets forth certain details for each electronic fund transfer during that month.  A financial institution is exempted from this requirement if it makes available to prepaid account owners the account balance through a readily available phone line, and 90 days worth of account transactions.

     The bill permits financial institutions to charge certain fees in connection with a prepaid debit account, which include:

     (1)   a fee for a replacement access device;

     (2)   a fee for expedited delivery of a replacement access device;

     (3)   a periodic fee, not more frequently than monthly;

     (4)   a reload fee, or any other similar fee for depositing funds to the prepaid account, if the financial institution provides an alternate method for depositing funds to the prepaid account without a fee;

     (5)   a fee for a transfer from the prepaid account to another account;

     (6)   a fee for bill payment by check;

     (7)   a fee for a withdrawal by the account owner from an automated teller machine that is located outside the United States, and not owned or operated by the issuer of the access device, including a fee to cover the costs of any charge to the financial institution by the owner or operator of the automated teller machine relating to the use of automated teller machine by the account owner;

     (8)   a fee for a purchase or a withdrawal of funds in a foreign currency;

     (9)   an inactivity or dormancy fee, provided that the fee is imposed only after one year of inactivity;

     (10) a fee to obtain the remaining balance in the prepaid account by check;

     (11) a fee for a returned deposit item or other similar fee in connection with depositing funds to a prepaid account;

     (12) a fee for adding an additional access device to a prepaid account; or

     (13) a fee for a withdrawal of funds from a prepaid account at a financial institution in a face-to-face transaction.

     The bill prohibits a financial institution from charging any fee in connection with a prepaid account except those fees expressly permitted by the bill.

     The bill also requires financial institutions to provide the following initial disclosures, at the time the consumer contracts for a prepaid account or before the first electronic fund transfer is made involving the consumer’s prepaid account:

     (1)   a table of any fees that may be charged in connection with the prepaid account together with any application, offer, or solicitation for a prepaid account;

     (2)   the telephone number and address of the person or office to be notified when the consumer believes that an unauthorized electronic fund transfer has been or may be made;

     (3)   a toll-free telephone number for customer service relating to the prepaid account, and, on the access device, a toll-free telephone number and website at which the consumer may access a clear and easily understandable disclosure of the fees that may be charged in connection with the prepaid account;

     (4)   a summary of the consumer’s liability, under the provisions of this bill or under any other State or federal law or agreement, for unauthorized electronic fund transactions;

     (5)   the financial institution’s business days;

     (6)   the type of electronic fund transfers that the consumer may make and any limitations on the frequency and dollar amount of transfers, except that details of the limitations need not be disclosed if confidentiality is essential for security purposes;

     (7)   a summary of the consumer’s right to receipts and periodic statements;

     (8)   the circumstances under which, in the ordinary course of business, the financial institution may provide information concerning the consumer’s account to third parties; and

     (9)   a notice that a fee may be imposed by an automated teller machine operator, when the consumer initiates an electronic fund transfer or makes a balance inquiry, and by any network used to complete the transaction.

     The bill provides that a consumer may be held liable, within certain limitations, for an unauthorized electronic fund transfer involving the consumer’s prepaid account only if the financial institution has provided the disclosures required by the bill.  If the unauthorized transfer involved an access device, it must be an accepted access device the financial institution provided as a means to identify the consumer to whom it was issued.  If any State law or any agreement between the consumer and the financial institution imposes less liability than is provided by the bill, the consumer’s liability will not exceed the amount imposed under the State law or agreement.

     Finally, any person found to be in violation of the bill would be subject to a civil penalty of not more than $1,000 per day for each day that the person is in violation, which penalty may be collected by summary proceedings instituted by the Commissioner of Banking and Insurance.