On June 28, 2011, the OCC issued a bulletin titled "Description: Risk Management Guidance and Sound Practices" with respect to use of third party service providers for prepaid access programs (the Bulletin).
The Bulletin provides guidance on the risk management expectations of the OCC with respect to all prepaid programs, but especially for banks using third party service providers for their prepaid access programs. While the Bulletin is not binding per se, there is near certainty that the OCC will be examining banks based on the guidance provided in the Bulletin.
The Bulletin sets forth several areas of guidance, including:
While most of the general topics within the Bulletin were generally known to be areas where the OCC has previously indicated are areas of concern, the Bulletin drills down further into those areas with specific procedures and requirements that were not previously known or that were not previously a common practice within the industry. As a result, all banks regulated by the OCC which issue or sell payroll cards, gift cards or general spend prepaid cards should carefully review the Bulletin and begin implementation of the procedures and requirements contained within the Bulletin.
Even for banks that do not issue or sell prepaid cards, or are not national banks, the guidance offers insight into the expectations of the bank regulators on managing risk.
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