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Education

Lending sphere issues in 2015 and produced a final report in 2017. As a result,
The Clearing House's RTP system went live in November
The report's third chapter provides an overview of 2017 and is a new back-end payments system that allows
the lending industry and proposes recommendations clearance, settlement and availability in real time. The RTP
ranging from codifying the "valid when made" doctrine system is open to U.S. depository institutions, but as of July
recognizing banks as the "true lender," to rescinding the 1018, it only connected six U.S. Banks. The Treasury agrees
Consumer Financial Protections Bureau's payday rule, with the proposals of the task force and recommends the
which restricts access to credit. Federal Reserve move quickly to facilitate faster payments
through the development of a real time settlement service
The Treasury recommends that policymakers address and that allows access by smaller financial institutions,
post-financial crisis regulations, which prevent traditional community banks, and credit unions.
deposit-based lenders from adopting technologies that
would allow them to compete with nonbank lenders, and Another key topic in the report addresses payments
ultimately create a more competitive marketplace that systems outside the United States. According to the report,
would benefit consumers. an estimated 25 countries had live payment systems faster
than those available in the United States as of mid-2017 ‒
The report also addresses student loans and servicing, before the TCH RTP went live. In the United States, the
which are topics that could easily justify separate reports Federal Reserve operates the National Settlement Service,
on their own. Generally, the Treasury recommends that which is a deferred net settlement system and only
the Department of Education become more involved in operates Monday through Friday from 7:30 a.m. to 5:30
setting standards with clear guidelines for the extensive p.m. Some payments systems allow 24/7.
network of nonbanks involved in loan servicing and debt
collection. Policy recommendations
Payments infrastructure The report's last chapter focuses on enabling a policy
environment. A prevailing theme of the report, discussed
Next, the report turns to the payments industry. The at length in this chapter, is the Treasury's recommendation
Treasury recognizes the importance of the current
that regulators proactively engage with the private sector
payments infrastructure to commerce, while at the same to evolve with new technologies. According to the report,
time understanding that new technologies are constantly
many private sector stakeholders expressed frustration
changing the way people pay for goods and services. It by the number of state and federal agencies that must
describes the current payments system in the United States
be consulted when bringing a new product or service to
as "operationally complex" and built upon the "back-end" market.
processes of heavily regulated financial institutions.
Often, new technologies that could be implemented
Not surprisingly, there has been little innovation on
by financial services firms do not have an established
the "back end" while nonbank and technology firms regulatory scheme in place. In these situations, the Treasury
operating on the "front end" of the payments industry
recommends the creation of "regulatory sandboxes"
continue to innovate and are responsible for launching in order to facilitate meaningful experimentation and
new payments solutions, improving functionality and
promote innovation.
creating competition. According to the Treasury, although
the current system is operationally complex, it allows
On the international front, the Treasury recommends the
private firms to innovate and build upon the payments United States continue to engage in international forums
infrastructure without being subject to extensive
and leverage international bodies to support domestic
government supervision. goals and regulatory priorities. The Treasury also
concluded it would be premature to develop international
The report additionally describes the importance of regulatory standards for many applications of financial
money transmitters to the process of facilitating payments
technology.
between nonbank firms via multiple channels. This
echoes its earlier discussion about the fragmented state-
The Treasury's recommendations are designed to facilitate
specific licensing requirements, which affect money growth of the domestic financial services industry while
transmitters and hinder industry growth. The report also
benefiting U.S. consumers. Only a few recommendations
addresses new payment services including person-to- appear to include anything resembling a specific action
person payments and digital wallets. However, besides
plan. Many are no more than general concepts. Time
providing some adoption statistics by various age groups, will tell how many will impact the current regulatory
the Treasury takes a "wait and see" position.
framework.
Faster payments
Robert J. McCarthy is an attorney with Global Legal Law Firm, whose
The Treasury identifies speed as critical to the attorneys are well recognized as top payments industry experts. Contact
modernization of the payments industry. This is not a new him at rmccarthy@attorneygl.com.
concept. The Faster Payments Task Force was put together
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