WASHINGTON–The final rule related to funds transfers via the Fed’s FedNow settlement service are set to go into effect in Q1 of 2023 following publication in the Federal Register.
According to the Federal Reserve, the final rule that will govern the always-on interbank settlement service is substantially similar to the proposal issued last year, with some clarifications, according to the Fed. The service offers clearing functionality to support instant payments in the United States.
Since issuing its proposal in June of 2021 to create a new subpart C of Regulation J, the Fed reported it received 31 “substantive” comments from a variety of sources.
The Fed said comments that came from within the financial industry generally supported the proposal for the clarity it provides regarding legal matters and certain “foundational aspects” of the FedNow Service. Meanwhile, consumer groups and academics expressed opposition to some aspects of the proposed rule, citing their view that consumer protections for instant payments are insufficiently covered by the Electronic Fund Transfer Act (EFTA) and its implementing regulation, which is issued by and within the jurisdiction of the Consumer Financial Protection Bureau (CFPB).
The Clarifications
The Federal Reserve said the final clarifications include:
- The addition of a commentary example of how a transfer – a portion of which is governed by the Electronic Funds Transfer Act (under jurisdiction of the CFPB) – may also be governed by Reg J’s new subpart C.
- The addition of a commentary example addressing when a FedNow participant may have additional time to determine whether to accept a payment order, generally allowed only when the participant has reasonable cause to believe the beneficiary is not entitled or permitted to receive payment. The example notes such reasonable cause could exist where a particular payment order may be related to fraudulent activity, according to the Fed.
For more info, go here.