The Consumer Financial Protection Bureau (CFPB) has laid out its guidelines for how it thinks a faster payments system in the U.S. should look.
It’s primary goal, according to an announcement released yesterday, is to “ensure consumer protections are built into new payment systems from outset.” These systems are designed to reduce “pocket-to-pocket” payment times between consumers and the businesses they are transacting with. Under the CFPB’s guidelines, new payment systems would be more “secure, transparent, accessible and affordable” to consumers.
It also wants to ensure that new faster payments systems are better equipped to deal with “fraud and error resolution.”
"Companies developing new financial technologies should be building systems from the outset with consumer protections in mind,” said CFPB Director Richard Cordray. “It is a lot easier to build something right from the start than it is to retrofit it. The CFPB will continue our work to help ensure that financial services marketplaces are safe and transparent for consumers."
Because non-cash payments can create a delay between the time when a consumer conducts a transaction and when the company actually gets paid, there’s more of a risk for fraud, it asserts. This is one of the sweeping changes the CFPB wants to eliminate with the revamped payment systems.
"And all existing payment systems — including those that involve the exchange of cash — expose consumers to some risk of loss or security, including in some cases, risks of unauthorized or fraudulent debits,” the CFPB stated in a press release. “While American consumers benefit from and make use of these payment systems, there remain opportunities to improve efficiency, reduce transaction costs for consumers and reduce credit and fraud risks. There is also greater opportunity for consumers to have real time information about their account balances so they can know when they do and do not have funds to transact."
The trend in the payments industry has been the development of real-time payments systems. Leaders include NACHA and clearXchange, who have recently made significant strides in helping develop faster payments. NACHA’s membership, which consists of most financial institutions in this country directly or through regional associations, voted in favor of a change to NACHA operating rules that adopts Same Day ACH. A month later, the clearXchange network announced the launch of a real-time payments solution designed to enhance the experience of consumers, businesses and government entities utilizing its network.
In a letter addressed in February, David Silberman, associate director of the division of research, markets and regulations at CFPB, remarked that “the CFPB would welcome implementation of same-day ACH services."
"Same-day ACH can provide consumers with faster availability of funds. In addition, same-day ACH may help alleviate some of the challenges consumers face today in trying to forecast when various types of credit and debit payments will post to their accounts and the complications — such as overdrawn balances, non-sufficient balances for subsequent payments and fees — that can arise from such uncertainty,” he continued.
The CFPB says that faster payment and enhanced payment systems are at the forefront of its goals.
"The CFPB wants to ensure that consumer protections are at the forefront as new and improved payment systems are developed. The protections recommended in today’s Consumer Protection Principles relate to privacy, transparency, costs, security and consumer control."