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Groups Call for Fraud Protections in New E-Payment System

Online payments will become instantaneous once a new system, now being developed by the Federal Reserve, comes online in 2024 or 2025. (mymmemo/AdobeStock)
Online payments will become instantaneous once a new system, now being developed by the Federal Reserve, comes online in 2024 or 2025. (mymmemo/AdobeStock)
August 7, 2019

JEFFERSON CITY, Mo. - Consumer groups are calling for more fraud protections in a new electronic payment system announced this week, to be developed by the Federal Reserve.

It now can take a day or two for funds from direct-deposit and online bill payments to actually hit the account. The new system would make that process instantaneous, but Lauren Saunders, associate director of the National Consumer Law Center, said faster transactions also could benefit scammers. She urged the Fed to give e-payments some of the same protections people now have with their credit-card purchases.

"It's incredibly important for the banks that create accounts that allow people to receive payments to make sure that they're not receiving money for illegal purposes," she said. "So, institutions that enable scammers to receive fraudulent payments need to be responsible for that, and to compensate consumers who are defrauded."

The new system will be controlled by the Federal Reserve and will compete with another system being developed by a group of the biggest banks. Consumer groups want the Fed to develop important "rules of the road," so that financial institutions have an incentive to prevent fraud.

Saunders said the new system will give lower-income families more immediate access to their funds and correct balances, which should result in fewer overdraft charges.

"Real-time payments can help people understand better what money is in their account," she said, "because when you make a payment, if the money comes out immediately, you're less likely to get caught later with a payment coming out that you've forgotten about."

The Fed has released a set of questions about automatic payments, which will be open for public comment for the next 90 days. The new payment system is expected be up and running in five or six years.

The Fed's announcement is online here, and public comments can be made here.

Suzanne Potter, Public News Service - MO