Congressional Black Caucus members urge Fed action on faster payments
Four members of the Congressional Black Caucus have joined a growing chorus of voices calling for the swift adoption of real-time payments in the U.S.
In a letter Monday to Federal Reserve Board Chairman Jerome Powell, Democratic Rep. Gregory Meeks of New York and three of his colleagues argued that the nation’s aging payments system is contributing to economic inequality.
The letter, also signed by Reps. Cedric Richmond, D-La., Joyce Beatty, D-Ohio, and Dwight Evans, D-Pa., pointed to various ways that Americans who live paycheck to paycheck can be hurt by lag times in the payment system.
“The increased prevalence of overdraft fees, high cost small dollar credit and check cashing has cost our constituencies tens of billions of dollars that a real time payments system would help ameliorate,” the letter stated.
In their recent calls for the Fed to implement real-time payments, Democratic lawmakers are wading into an issue that previously was mostly just discussed within the business community.
Earlier this month, Sen. Chris Van Hollen, D-Md., called for faster adoption of real-time payments during a hearing with Randal Quarles, the Fed’s vice chair of supervision.
The Trump administration has also encouraged the Fed to move quickly. The Treasury Department released a report in July that suggested the Fed develop a real-time settlement service in an effort to enable widespread access to payment innovations.
The letter from members of the Congressional Black Caucus came in response to a recent request for comment by the Fed about its own role in the future of immediate payments.
Last year, an industry-led group convened by the Fed established a goal that by 2020, anyone with a U.S. bank account should have access to payments that are highly secure and delivered in close to real time.
Real-time capabilities have long been in place in the United Kingdom, Sweden and a host of other countries. In the U.S., payments apps such as Venmo provide real-time notifications to users, but they do not provide all of the benefits of a nationwide real-time system that connects every bank.
The question of the Fed’s role in a future system of real-time payments is a sensitive one. The central bank does not want to be seen as usurping authority from the private sector. It also wants to avoid being seen as favoring large banks or small banks; firms in those two segments of the industry often hold differing views on the proper role of the Fed in the payments system.
In their letter to the Fed, the four House Democrats urged the Fed to act more aggressively than it has so far by mandating real-time payments.
“Delay is costing Americans billions of dollars that they do not have and contributing to the growing income inequality that the Fed rightfully agrees is harming our nation,” they wrote.