The CFPB Weighs in With Guidelines to Protect Consumers Using Faster Payments

The federal Consumer Financial Protection Bureau on Thursday issued nine guidelines summarizing its vision for faster payments as banks, payment processors, tech companies, and other government regulators continue work on proposals for improving U.S. payments.

“Companies developing new financial technologies should be building systems from the outset with consumer protections in mind,” CFPB Director Richard Cordray said in a news release. “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.”

The guidelines include strong consumer control over payments; privacy and data protections; fraud error-resolution procedures; transparency in transaction status, receipts and pricing; and affordable costs. Still others address access to payment systems; funds availability—meaning that consumers be made the primary beneficiaries of faster clearing and settlement, not just banks or third parties; use of technologies to enhance security, and accountability mechanisms to curb misuse of payment systems.

With all non-cash payments, according to the CFPB, there can be a delay of several hours to several days between the time the consumer initiates the transaction and the time the financial institutions involved complete it. In most cases, particularly with regularly scheduled transactions such as direct deposits and recurring bill payments, existing payment services “generally suffice,” the CFPB said.

“Still,” the preface to the guidelines says, “consumers may prefer faster transfers for certain situations, such as a transfer to another person like a relative or repair person, a last-minute bill payment, or a retail payment where both the consumer and merchant want to settle a transaction immediately.”

The CFPB noted that it has been involved in recent efforts to improve U.S. payments, including submitting comments to automated clearing house governing body NACHA on its plans for same-day ACH transactions, and by participating in the Federal Reserve’s broad payment-system improvement initiative.

A creation of 2010’s Dodd-Frank Act with a broad mandate, the CFPB often is a lighting rod for critics of government regulation. Last November, the CFPB proposed 800-plus pages of new prepaid card rules.

That brief but controversial history has some observers predicting that the guidelines released Thursday could evolve into more detailed regulations. “At some point, this will become the rules of the road,” Eric Grover, principal at Minden, Nev.-based payments-advisory firm Intrepid Ventures, tells Digital Transactions News.

Grover questions whether there is a need for consumer guidelines. “It doesn't strike me that there's an obvious problem,” he says. “First of all, faster payments barely exist. Why [is the CFPB] weighing in? They have the power to.”

But the Bureau advocates that consumers should be the ultimate beneficiaries as U.S. payments become faster and more secure. “Given the potential benefits to consumers, the Consumer Financial Protection Bureau has been advocating for the development of faster and safer consumer payment capabilities in both new and existing payment systems,” the CFPB said.