Industry groups oppose CFPB's proposal

Consumer Financial Protection Bureau's (CFPB) proposal to regulate overdraft services on prepaid cards and handling of virtual currencies is being opposed by industry groups.

"The proposal's overly prescriptive and complex rules for overdraft services would make offering such services for consumer short-term liquidity needs impracticable, if not impossible," Charles J. Harris, president of NetSpend, wrote in a March 23 note.

Although, the CFPB only states digital currencies in the proposal's definition section, analysts said it could imply currencies like Bitcoin would now have to fulfil the Electronic Fund Transfer Act requirements, known as Regulation E, which is mentioned in the proposal.

The bureau's earlier research on prepaid accounts "took two years and nowhere during that time was there any mention of virtual currencies," Peter Van Valkenburgh, director of research at the Coin Center said in an interview. "While we expect regulators will study and address regulation on virtual currencies, I don't think anyone suspected virtual currencies would be swept into rulemaking on prepaid products."

He added, "We are concerned about the procedural fairness in the rulemaking and what the substantive requirements under Regulation E would mean for Bitcoin, and whether that's a good fit in a prepaid card rule."