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CFPB's Cordray Outlines Concerns for Real-Time Payments System
Monday, December 1, 2014 6:00 AM

Consumer Financial Protection Bureau Director Richard Cordray told attendees at the annual Clearing House Conference in New York that he has concerns about electronic payments networks, particularly its effects on consumers.

Cordray shared several examples that the CFPB received regarding how abuses of the payments system have led to mistreated consumers who were left vulnerable to loss and theft or were exposed to otherwise "hidden and exclusionary effects." During his remarks, Cordray outlined several concerns the bureau has with the process.

The stories included everything from a consumer being victimized by a payday lender to another consumer repeatedly suffering automatic withdrawals by a gym after a "free" membership expired.

Cordray said that financial institutions and administrators must be "vigorous and proactive" in policing these types of activities, and credited good practices seen at credit unions over the last year for developing screening mechanisms for detecting such abuse.

"But more needs to be done," he said. "We must shine a light on the murkier corners of electronic payment systems and related practices, and we must be vigilant about preserving consumer protections no matter how these approaches may evolve in the future."

Transparency in the payments system is another concern of the CFPB. Consumers need to know when money deposited into accounts is available, as well as when funds are debited from accounts.

Cordray added that the CFPB is carefully studying whether regulatory changes are needed to address some of these concerns. He said this fast payments system should include faster access to deposited funds; real-time account status information and protection from hair-trigger assessments of fees; robust consumer protections when it comes to unauthorized transactions; and accessibility of the system to all consumers.