WASHINGTON—The CFPB has released what it is calling “guiding principles” for protecting consumers as the private sector develops new faster payment systems. The CFPB said it wants to ensure any new payment systems are secure, transparent, accessible, and affordable to consumers. The systems should also have robust protections when it comes to fraud and error resolution, the CFPB said.
In response, NAFCU said it believes that the payments industry should be responsible for setting all related standards, and that any duplicative regulations need to be avoided.
“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.”
“When making payments today, consumers generally have multiple options, which include providing cash, writing a check, swiping a credit or debit card, and entering information online for an electronic payment,” the CFPB said. “In general, non-cash payments are primarily processed through one or a combination of payment systems, including the automated clearing house (ACH), PIN debit, the credit card network, wire network, or check services. For these non-cash payments, there can be a delay of several hours to several days between the time a consumer initiates a transaction and the party to be paid actually receives the money. 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.”
According to the CFPB statement, 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 CFPB said it 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. The CFPB “principles can be found here.\
NAFCU Response
In response to the CFPB “principles,” NAFCU’s Regulatory Affairs Counsel Kavitha Subramanian issued a statement that the trade group “firmly believes that the payments industry must determine the best way to adopt a ubiquitous faster payment system that provides cost-effective and fair access for financial institutions of all sizes.”
“While NAFCU appreciates the CFPB’s recognition of private sector advancements on new faster payment solutions, NAFCU strongly urges the CFPB to engage with other federal regulators focusing on faster payment issues – such as the Federal Reserve – to ensure there are no duplicative regulatory burdens for credit unions to comply with,” Subramanian said. “NAFCU has been very involved with the Federal Reserve’s efforts thus far in gathering industry stakeholders and input on how to improve the U.S. payments system.”