NEW YORK (11/24/14)--The Consumer Financial Protection Bureau (CFPB) has several concerns about electronic payments networks, particularly its effects on consumers, said bureau Director Richard Cordray last week to attendees at the annual Clearing House Conference in New York City.
During his remarks Cordray outlined several concerns the bureau has with the process.
"We have concerns that electronic payment systems can be misused to victimize consumers unless banks and the system administrators work to police and enforce safeguards," he said.
Cordray shared several examples received by the CFPB about 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."
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 and banks over the last year for developing screening mechanisms for detecting such abuse.
"But more needs to be done. 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," he said.
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.
"For some consumers, these uncertainties are of little consequence because they are able to maintain a healthy cushion of funds in their checking accounts," Cordray said. "But many other consumers struggle to keep up with their expenses and have no such cushion. Not knowing when a payment will be credited or a debit posted can cause them significant harm."
Cordray added that the CFPB is "carefully studying" whether regulatory changes are needed to address some of these concerns.
He wrapped up his remarks with a request when it comes to faster payments: "Make it an urgent priority," while keeping the interests of consumers top of mind.
Cordray 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.