On July 9, 2015, the Consumer Financial Protection Bureau (CFPB) issued a set of “consumer protection principles” for the financial industry as it develops new, faster payment processing systems. Last November, CFPB Director Richard Cordray gave a speech that expressed concerns over lack of consumer protection for loss or theft, a general lack of transparency, and exclusionary effects on some consumers in the payment processing industry. These guidelines − which are not enforceable regulations − appear to be the CFPB’s next step in addressing those concerns.
Nine identified principles stress that new, faster payment processing systems should do the following:
- Provide clear terms about when, how and under what terms consumers have authorized a payment.
- Inform consumers about how their data is transferred through a new payment system, including potential risks of the data transfer.
- Provide “robust” protections for mistaken, fraudulent, unauthorized or erroneous transactions.
- Provide real-time access to information about transaction status.
- Keep costs low and disclose fees.
- Remain broadly accessible to consumers.
- Allow faster access to funds.
- Contain strong protections to detect and limit errors, unauthorized transactions and fraud.
- Provide accountability mechanisms for commercial participants intended to incentivize those participants to prevent and correct fraudulent, unauthorized or otherwise erroneous transactions.
All payment processing system participants should heed these guidelines and implement any necessary policy adjustments to ensure compliance with each identified principle. Although the principles are not yet enforceable regulations, they likely foreshadow the CFPB’s future stance on and involvement with regulatory enforcement of payment processors. The CFPB will certainly remain an active overseer of this industry.