1. Short title
This Act may be cited as the “Payments Modernization Act of 2019 ”.
Payments Modernization Act of 2019
A BILL
To amend the Expedited Funds Availability Act to require that funds deposited be available for withdrawal in real-time, and for other purposes.
2. Findings and purposes
Findings— Congress finds the following:
Families in the United States spend billions of dollars in overdraft fees in part because they are waiting for checks to clear over a weekend or holiday.
The inefficient payment system in the United States drives families, especially those living paycheck to paycheck, to use high-cost financial services to access funds more rapidly.
A faster payment system would provide people of the United States immediate access to funds and relief for those who overdraw their accounts because their deposits are not available in real-time, helping families potentially save billions of dollars each year.
The United States lags behind other countries in the speed and efficiency of its payment system.
Central banks around the world have already implemented real-time payment systems, including in the United Kingdom, Australia, Mexico, Poland, Japan, and South Africa.
The Federal Reserve System was created by Congress on December 24, 1913, in response to the financial panic of 1907.
Since its beginning, the Federal Reserve System has played a crucial role in the payment system of the United States.
The role of the Federal Reserve System in providing payment services is—
to promote the integrity and efficiency of the payment mechanism; and
to ensure the provision of payment services to all depository institutions on an equitable basis and in an atmosphere of competitive fairness.
The Monetary Control Act of 1980 (title I of Public Law 96–221; 94 Stat. 132) provided the Board of Governors of the Federal Reserve System with the authority to oversee the payment system in the United States.
The Expedited Funds Availability Act (12 U.S.C. 4001 et seq.), enacted on August 10, 1987, provided the Board of Governors of the Federal Reserve System with full authority to regulate all aspects of the payment system, including the receipt, payment, collection, clearing of checks, and related functions of the payment system pertaining to checks.
In a July 2018 report on financial technology, the Department of Treasury acknowledged the important role of the Board of Governors of the Federal Reserve System in bringing real-time payment settlement services to the United States when the Department recommended the Board of Governors work to facilitate a faster retail payment system, in particular, for smaller financial institutions such as community banks and credit unions, noting that such institutions should also have the ability to access the most innovative technologies and payment services.
The authorities described in paragraphs (9) and (10) are more critical than ever given how the financial services sector has been defined as a vital component of critical infrastructure in the United States.
The role of the Board of Governors of the Federal Reserve System in the financial services sector will ensure the resiliency of the payment system in the United States.
The Board of Governors of the Federal Reserve System should develop a real-time interbank payment system to ensure that—
consumers are prioritized;
consumers and small businesses are protected from fraud and errors, including with respect to a payment initiated by a consumer or small business;
the payment system is open to increased competition; and
outsized entities do not monopolize the financial infrastructure of the United States.
Purposes— The purposes of this Act are—
to ensure that the United States has a safe, fast, efficient, equitable, and fair payment system;
to clarify that the Board of Governors of the Federal Reserve System has the existing authority to build a real-time payment system; and
to make certain that the Board of Governors of the Federal Reserve System follows through on implementing the system described in paragraph (2).
3. Definition
In this Act, the term real-time has the meaning given the term in section 602 of the Expedited Funds Availability Act (12 U.S.C. 4001), as amended by section 4(a) of this Act.
4. Requirement that funds deposited be available for withdrawal in real-time
Definitions—
by redesignating paragraphs (20) through (25) as paragraphs (21) through (26), respectively; and
by inserting after paragraph (19) the following:
“(20) Real-time—The term real-time—
“(A) means any time; and
“(B) includes a Saturday, Sunday, and a legal holiday.”
Technical and conforming amendment— Section 3 of the Check Clearing for the 21st Century Act (12 U.S.C. 5002(2)(D)(iv)) is amended by striking “section 602(24)” and inserting “section 602(25)”.
Expedited funds availability schedules— Section 603 of the Expedited Funds Availability Act (12 U.S.C. 4002) is amended—
in subsection (a)—
in the subsection heading, by striking “Next Business Day” and inserting “Real-time”;
in paragraph (1)—
by striking “Except as provided in subsection (e) and in section 604, in” and inserting “In”; and
in the matter following subparagraph (B) by striking “not later than the business day after the business day on which” and inserting “in real-time when”; and
in paragraph (2), in the matter preceding subparagraph (A), by striking “not later than the business day after the business day on which” and inserting “in real-time after”; and
by striking subsection (b) and inserting the following:
“(b) Permanent Schedule—Funds deposited in an account at a depository institution by a check drawn on a local or nonlocal originating depository institution shall be available for withdrawal in real-time.”
by striking subsection (c);
by striking subsection (d);
by redesignating subsections (e) and (f) as subsections (c) and (d), respectively;
in subsection (c), as redesignated by paragraph (5)—
in paragraph (1)—
in subparagraph (A)—
by striking “Not more than 4 business days shall intervene between the business day a” and inserting “A”;
by inserting a comma after “subparagraph (B)”;
by striking “is”; and
by striking “and the business day on which funds from such deposit are available for withdrawal” and inserting “shall be available for withdrawal in real-time”; and
in subparagraph (B), in the subparagraph heading, by striking “paragraph” and inserting “subparagraph”; and
in paragraph (2)—
by striking “, (b), and (c)” and inserting “and (b)”; and
in the paragraph heading, by striking “temporary and permanent schedules” and inserting “permanent schedule”; and
in subsection (d)(2), as redesignated by paragraph (5), by striking “(c), or (e)” and inserting “or (c)”.
Safeguard exceptions— Section 604 of the Expedited Funds Availability Act (12 U.S.C. 4003) is amended—
in subsection (a)—
in paragraph (1)—
in the paragraph heading by striking “Next business day” and inserting “Real-time”; and
in the matter following subparagraph (D) by striking “on the business day after the business day on which such cash or funds are deposited or, in the case of a wire transfer, on the business day after the business day on which” and inserting “in real-time after such cash or funds are deposited or, in the case of a wire transfer, in real-time after”;
in paragraph (2)—
by striking “, 603(c), or paragraphs” and inserting “paragraph”; and
by striking “603(e)” and inserting “603(c)”; and
by striking paragraph (3)(B) and inserting the following:
“(B) any such funds deposited in excess of such amount shall be available for withdrawal in real-time.”
in subsection (b), in the matter preceding paragraph (1), by striking “(c), or (e)” and inserting “or (c)”;
in subsection (c)(1), by striking “(c), and (e)” and inserting “and (c)”; and
in subsection (d), by striking “(c), and (e)” and inserting “and (c)”.
Miscellaneous provisions— Section 607 of the Expedited Funds Availability Act (12 U.S.C. 4006) is amended—
by striking subsections (a) and (b); and
by redesignating subsections (c) through (f) as subsections (a) through (d), respectively.
Regulations and reports by Board— Section 609 of the Expedited Funds Availability Act (12 U.S.C. 4008) is amended—
by striking subsections (d) and (f); and
by redesignating subsection (e) as subsection (d).
5. Payments mandate
The Federal Reserve shall create a real-time payment system that—
at a minimum, conforms with the principles outlined in the final report of the Faster Payments Task Force of the Federal Reserve System;
allows end users have fast access to funds in real-time;
operates as a utility, allowing end users to reach any other end user, including unbanked, underserved and cross-border end users, regardless of the solution used by the end user;
prioritizes safety and soundness, consumer health, efficiency, and other relevant public interest considerations;
provides end users with the confidence and trust in the safety and security of the system by ensuring that—
fraud and errors are minimized and resolved quickly; and
the assets, accounts, and information of the end user are protected, even as payments cross different solutions;
has transparent operating information; and
ensures that there are no volume discounts made that disadvantage smaller financial institutions.