July 24, 2019

Van Hollen, Warren, Pressley, García Introduce Legislation to Ensure the Fed Will Act on Faster Payments

Today, U.S. Senators Chris Van Hollen (D-Md.) and Elizabeth Warren (D-Mass.) and Representatives Ayanna Pressley (D-Mass.) and Jesús “Chuy” García (D-Ill.) introduced the Payment Modernization Act of 2019. Right now, Americans lose billions of dollars each year in overdraft fees, driving consumers to turn to more costly financial products because of our inefficient payments system. This legislation would clarify that the Federal Reserve has the existing authority to build a real-time payments system and requires the Fed to implement its own process. Taxpayers deserve a public utility that allows them to safely and securely access their own money and that allows small institutions and entrepreneurs to compete on a more even playing field. But the Fed’s failure to act is creating a vacuum that could result in a de facto monopoly of our payments system by the big banks that fails to include necessary safeguards for working Americans.

“For far too long, consumers and small businesses have unfairly shouldered the costs of our slow payments system – despite the fact that we have the technology to update it and a clear and urgent need to do so. I’ve pushed the Federal Reserve to develop a system that has the necessary guardrails, but progress there has been too slow,” said Senator Van Hollen. “Every day that passes without a better payments system in place puts the United States farther behind other major economies, and millions of working Americans — especially those living paycheck to paycheck — are paying the price. That’s why I’m teaming up with my colleagues to introduce this bicameral legislation, which will ensure that the Fed acts without delay to develop a fast, efficient, equitable, and fair payments system”

“People living paycheck-to-paycheck shouldn’t have to wait up to five days for a check to clear so that they can pay their rent, cover child care, or pick up groceries,” said Senator Warren. “Our bill would create a national, real-time payments system so that families have faster access to the money they earned and don’t have to pay overdraft fees or rely on a shady payday lender to make ends meet.”

“Thousands of people in the Massachusetts 7th live paycheck to paycheck and cannot afford to wait days for their checks to clear,” said Congresswoman Pressley. “The Federal Reserve Bank has a responsibility to respond to the needs of the American public, such as establishing an inclusive and faster payments system. Our bill, the Payment Modernization Act of 2019, will ensure that the Federal Reserve speeds up the process of clearing payments so that all hardworking Americans can access and move their money quickly, safely and securely 24/7/365.”

“Being poor is too expensive in America. People living paycheck to paycheck shouldn’t be charged overdraft fees simply because their bills are due sooner than their paycheck is deposited into their account. We can’t rely on big banks or tech monopolies like Facebook to look out for hard working families. Instead, the Federal Reserve should modernize and establish a reliable, efficient system using recommendations from its own task force, and that’s what this bill does,” said Congressman García.

“This legislation will save working families billions every year. Giving people access to their own money in real-time will result in fewer overdrafts, payday loans, late fees, interest charges. This legislation will make it less expensive to be poor,” said Aaron Klein, Fellow (Economic Studies) at the Brookings Institution. “America’s antiquated payment system is a driver of income inequality. This legislation helps fix that by bringing real-time payments to America. Real-time payments technology has been widely adopted globally.”

To read the full text of the bill, click here. For a fact sheet, click here.