Federal Reserve Must Ensure Money Moves Safely As Financial Transactions Quicken
WASHINGTON, D.C. – Consumer Reports applauded the Federal Reserve Board’s announcement today that it plans to operate a new payment system to facilitate faster financial transactions. The Federal Reserve said it will develop the FedNow Service, a real-time payment and settlement service for the future.
The nonprofit consumer advocacy organization noted that the plan holds a number of potential benefits, but cautioned the agency to take steps to protect consumers from fraud that can come with faster transactions.
“The Federal Reserve’s plan will enable consumers to better manage their money in real time, especially those working paycheck to paycheck,” said Christina Tetreault, senior policy counsel for Consumer Reports. “A faster payment system will give workers quicker access to their pay and help them avoid overdraft fees from spending money before funds are credited to their accounts. Same day bill payment will make it easier for consumers to pay bills on time and avoid late fees.”
Consumer Reports noted, however, that some countries have seen an increase in fraud after implementing a faster payment system. “A faster payment system can enable crooks to get away with their ill gotten gains more quickly if steps aren’t taken to prevent fraud,” said Tetreault. “The Federal Reserve should work with stakeholders to ensure its new payment system is not only fast but safe.”
From 2015-2017, Tetreault served on the Steering Committee of the Federal Reserve’s Faster Payments Task Force, representing consumer interests. The task force brought together a diverse range of stakeholders. In 2016, it published its Faster Payments Effectiveness Criteria report, laying out a set of standards to ensure a successful faster payment system. Last year, Consumer Reports urged the Federal Reserve to consider developing a new payments system and to look to those effectiveness criteria for guidance.
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Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For more than 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.