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News
CFPB urges faster, safer largest private-sector check- and ACH-clearing operation
in the country – embarked upon a multiyear effort to build
consumer payments a real-time payment system for consumer and business
transactions.
In Consumer Protection Principles: CFPB's Vision of Consumer
aster payments are fine so long as consumers Protection in New Faster Payment Systems, published July
don't become short changed, according to the 9, 2015, the CFPB voiced support for faster payments but
Consumer Financial Protection Bureau, which insisted consumers must "remain top of mind" throughout
F recently published a set of principles it wants to the development and implementation of new systems.
see new systems built around.
"In publishing these Principles, we are not specifying how
"Companies developing new financial technologies they must be achieved," the bureau wrote. "Rather we
should be building systems from the outset with consumer recognize that a variety of system components, including
protections in mind," CFPB Director Richard Cordray said system architecture, operator covenants and warranties,
upon publication of the guidelines. "It is a lot easier to and requirements for participants and intermediaries,
build something right from the start than it is to retrofit rules and other mechanisms may play critical roles in
it." He added the agency "will continue our work to help providing consumer protection, utility and value."
ensure that financial services marketplaces are safe and
transparent for consumers." Nine points
The CFPB is a quasi-independent federal agency charged Here's what the CFPB wants to see with all new, faster
with enforcing consumer financial protection laws. payment systems:
Created under the 2010 Dodd-Frank Act, the CFPB has 1. Consumer control over payments, including
been controversial, and several actions undertaken by the procedures for easy revocation of authorizations
agency have direct consequences for payment companies. 2. Consumer control over how and when their
financial data gets shared, and with whom
A proposal pending before the agency, for example,
would extend to prepaid cards consumer protections 3. Fraud and error resolution protections, including
applicable now to debit and credit cards. The agency also easy-to-use mechanisms for reversing erroneous
has underway reviews of credit card company practices and unauthorized transactions
and mobile financial services. And it has taken payment 4. Transparency in terms of costs, risk, funds
processors to task for accepting business from fraudulent availability and security of payments
enterprises (see "CFPB sues ISOs, acquirer over client 5. Affordability, with fees disclosed clearly and in a
scams," The Green Sheet, April 27, 2015, issue 15:04:02).
manner that supports comparative shopping
In a speech to The Clearing House in November 2014, 6. Broad access for all consumers, banked and
Cordray hinted something like the new guidelines were unbanked alike
coming. "[W]e have concerns that electronic payment 7. Faster guaranteed access to funds, which should
systems can be misused to victimize consumers unless result in fewer overdrafts and non-sufficient funds
banks and the system administrators work to police and situations
enforce safeguards," he said. "We must shine a light on the
murkier corners of electronic payment systems and related 8. Strong, built-in protections to detect and limit
practices, and we must be vigilant about preserving errors, unauthorized transactions, fraud and data
consumer protections." breaches
9. Strong accountability mechanisms and
Guiding principles monitoring systems that protect against misuse
Several initiatives are underway to promote faster
payments. NACHA – The Electronic Payments Association On board with the CFPB's desired outcomes, Jim
adopted rules to support same-day settlement of automated Aramanda, President and Chief Executive Officer of The
clearing house (ACH) payments. Two new settlement Clearing House, stated, "Protecting consumers' hard
windows are being added to the ACH network's schedule earned money and providing them a safe and efficient
to accommodate same-day payments. (A batch processing way to transfer funds is at the core of what banks have
network, the ACH has historically operated on a next-day done for centuries."
settlement schedule.)
Meanwhile, the Federal Reserve has been working with
stakeholders (financial institutions, technology companies
and other regulators) to improve the speed and safety
of payments. The Clearing House – which operates the
10
CFPB urges faster, safer largest private-sector check- and ACH-clearing operation
in the country – embarked upon a multiyear effort to build
consumer payments a real-time payment system for consumer and business
transactions.
In Consumer Protection Principles: CFPB's Vision of Consumer
aster payments are fine so long as consumers Protection in New Faster Payment Systems, published July
don't become short changed, according to the 9, 2015, the CFPB voiced support for faster payments but
Consumer Financial Protection Bureau, which insisted consumers must "remain top of mind" throughout
F recently published a set of principles it wants to the development and implementation of new systems.
see new systems built around.
"In publishing these Principles, we are not specifying how
"Companies developing new financial technologies they must be achieved," the bureau wrote. "Rather we
should be building systems from the outset with consumer recognize that a variety of system components, including
protections in mind," CFPB Director Richard Cordray said system architecture, operator covenants and warranties,
upon publication of the guidelines. "It is a lot easier to and requirements for participants and intermediaries,
build something right from the start than it is to retrofit rules and other mechanisms may play critical roles in
it." He added the agency "will continue our work to help providing consumer protection, utility and value."
ensure that financial services marketplaces are safe and
transparent for consumers." Nine points
The CFPB is a quasi-independent federal agency charged Here's what the CFPB wants to see with all new, faster
with enforcing consumer financial protection laws. payment systems:
Created under the 2010 Dodd-Frank Act, the CFPB has 1. Consumer control over payments, including
been controversial, and several actions undertaken by the procedures for easy revocation of authorizations
agency have direct consequences for payment companies. 2. Consumer control over how and when their
financial data gets shared, and with whom
A proposal pending before the agency, for example,
would extend to prepaid cards consumer protections 3. Fraud and error resolution protections, including
applicable now to debit and credit cards. The agency also easy-to-use mechanisms for reversing erroneous
has underway reviews of credit card company practices and unauthorized transactions
and mobile financial services. And it has taken payment 4. Transparency in terms of costs, risk, funds
processors to task for accepting business from fraudulent availability and security of payments
enterprises (see "CFPB sues ISOs, acquirer over client 5. Affordability, with fees disclosed clearly and in a
scams," The Green Sheet, April 27, 2015, issue 15:04:02).
manner that supports comparative shopping
In a speech to The Clearing House in November 2014, 6. Broad access for all consumers, banked and
Cordray hinted something like the new guidelines were unbanked alike
coming. "[W]e have concerns that electronic payment 7. Faster guaranteed access to funds, which should
systems can be misused to victimize consumers unless result in fewer overdrafts and non-sufficient funds
banks and the system administrators work to police and situations
enforce safeguards," he said. "We must shine a light on the
murkier corners of electronic payment systems and related 8. Strong, built-in protections to detect and limit
practices, and we must be vigilant about preserving errors, unauthorized transactions, fraud and data
consumer protections." breaches
9. Strong accountability mechanisms and
Guiding principles monitoring systems that protect against misuse
Several initiatives are underway to promote faster
payments. NACHA – The Electronic Payments Association On board with the CFPB's desired outcomes, Jim
adopted rules to support same-day settlement of automated Aramanda, President and Chief Executive Officer of The
clearing house (ACH) payments. Two new settlement Clearing House, stated, "Protecting consumers' hard
windows are being added to the ACH network's schedule earned money and providing them a safe and efficient
to accommodate same-day payments. (A batch processing way to transfer funds is at the core of what banks have
network, the ACH has historically operated on a next-day done for centuries."
settlement schedule.)
Meanwhile, the Federal Reserve has been working with
stakeholders (financial institutions, technology companies
and other regulators) to improve the speed and safety
of payments. The Clearing House – which operates the
10
