Federal agencies continue to promulgate rules and interpretations to guide and facilitate consumer relief during the COVID-19 public health crisis. The CFPB has recently turned its attention to provisions of the Electronic Funds Transfer Act (EFTA) and Regulation E that could impact consumers receiving COVID-19 relief payments from the government. The Bureau's interpretive rule regarding the definition of "government benefits" for the purposes of the EFTA and Regulation E became effective.
Under the new interpretive rule, the definition of "government benefits" under EFTA section 913 and Regulation E § 1005.10(e)(2) excludes payments which:
- Are made to provide assistance to consumers in response to the COVID-19 pandemic or its economic impacts;
- Are not part of an already-established government benefit program,
- "Already-established government benefit program" includes existing government benefit programs for which the volume or dollar value of the program payments is increased because of the COVID-19 pandemic;
- Are made on a one-time or otherwise limited basis; and
- Are distributed without a general requirement that consumers apply to the agency to receive funds;
- Filing a tax return or consumer provision of information necessary to complete a consumer identification/verification process prior to activating an access device does not, by itself, constitute an application.
This publication follows the press release on April 13, 2020, in which the Bureau acknowledged the "compulsory use prohibition" under the EFTA and Regulation E – which generally prohibits requiring consumers to establish accounts with a particular financial institution as a condition of receiving a government benefit via electronic fund transfer – may hinder certain consumers from receiving pandemic-relief payments, including the economic impact payments authorized by the CARES Act. The compulsory use prohibition may not be an issue when a government agency can make disbursements directly to a consumer's account through direct deposit. However, a government agency may be unable to do so for certain consumers. For example, the agency may lack the account information of the consumer, or the consumer may not have a pre-existing account that can accept direct deposits. In such cases, the disbursement of funds via alternative means, such as a newly issued prepaid account, would be preferable for both the agency and the consumer in terms of timing, costs, and convenience. This interpretive rule now permits government agencies to pursue such alternative methods of payment to best serve the needs of the public during the COVID-19 pandemic.