CFPB Outlines Guiding Principles for Faster Payment Networks

CFPB Outlines Guiding Principles for Faster Payment Networks
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July 9, 2015

In the race to develop faster payment systems, the Consumer Financial Protection Bureau (CFPB) wants to ensure that companies are implementing protocols that will protect and serve the public.

As regulators and the financial services industry explore these instant payment systems, the CFPB has identified about 10 principles that would ensure these systems feature robust protections when it comes to fraud and error resolution.

"Companies developing new financial technologies should be building systems from the outset with consumer protections in mind," CFPB Director Richard Cordray said in a written statement. "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."

Today, most non-cash payments are processed through a combination of systems, including the automated clearing house (ACH), PIN debit, the credit card network, wire network, or check services. Each one of these can feature a delay of several hours or even days and each one exposes consumers to some risk.

As companies in the technology and finance fields strive to shorten these delays to an instant or near-instant transaction, risk can grow. Regulators and the financial services industry are both weighing in during this process to form systems that serve all interests, and the CFPB wants to ensure that consumer protections are at the forefront. The CFPB lists nine principles they consider to be of the utmost importance:

Consumer Control over Payments
Any new system must be clear about when, how, and under what terms consumers have authorized a payment.

Data and Privacy
Consumers are to be informed of how their data is being transferred and of any associated risks.

Fraud and Error Resolution Protections
Faster payments are accompanied by robust consumer protections with respect to mistaken, fraudulent, unauthorized, or otherwise erroneous transactions.

Payments include real-time access to information about the status of transactions.

Systems are affordable and all fees charged to consumers are disclosed in a manner that allows easy comparison to different available payment options.

Systems must be widely accepted by business and other consumers.

Funds Availability
Faster payments must guarantee faster availability of funds for consumers, not just for depository institutions.

Security and Payment Credential Value
Systems have built-in protections to detect and limit errors, unauthorized transactions, and fraud.

Strong Accountability Mechanisms that Effectively Curtail System Misuse
Commercial participants are incentivized to prevent consumer misuse, as opposed to benefiting from fees levied against errors.

More information can be found here.