Q: Would a general-use prepaid card qualify for the exemption in § 235.5(c) if the cardholder is able to authorize the issuer to pay third parties with funds underlying the card through the issuer's online card or account management system?
A: No. If a cardholder is able to use the issuer's (or issuer's agent's) online card or account management system to authorize the issuer to pay a merchant or other payee from the cardholder's account or subaccount, then the card is not the only means of access to the underlying funds. For example, if a cardholder is able to pay a creditor by authorizing the issuer or issuer's agent to make electronic fund transfers out of an account, the card is not the only means of access to the underlying funds. (Added September 14, 2011)
This Q&A was obtained from FRB’s website, in a section for Regulation II (Debit Card Interchange Fees and Routing) Frequently Asked Questions, which may be found here: