Payments Modernization Act of 2019

II 116TH CONGRESS 1ST SESSION S. 2243 To amend the Expedited Funds Availability Act to require that funds deposited be available for withdrawal in real-time, and for other purposes. IN THE SENATE OF THE UNITED STATES JULY 24, 2019 Mr. VAN HOLLEN (for himself and Ms. WARREN) introduced the following bill; which was read twice and referred to the Committee on Banking, Hous- ing, and Urban Affairs 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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Payments Moderniza- 4 tion Act of 2019’’. 5 SEC. 2. FINDINGS AND PURPOSES. 6 (a) FINDINGS.—Congress finds the following: 7 (1) Families in the United States spend billions 8 of dollars in overdraft fees in part because they are 9 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 2 •S 2243 IS waiting for checks to clear over a weekend or holi- 1 day. 2 (2) The inefficient payment system in the 3 United States drives families, especially those living 4 paycheck to paycheck, to use high-cost financial 5 services to access funds more rapidly. 6 (3) A faster payment system would provide peo- 7 ple of the United States immediate access to funds 8 and relief for those who overdraw their accounts be- 9 cause their deposits are not available in real-time, 10 helping families potentially save billions of dollars 11 each year. 12 (4) The United States lags behind other coun- 13 tries in the speed and efficiency of its payment sys- 14 tem. 15 (5) Central banks around the world have al- 16 ready implemented real-time payment systems, in- 17 cluding in the United Kingdom, Australia, Mexico, 18 Poland, Japan, and South Africa. 19 (6) The Federal Reserve System was created by 20 Congress on December 24, 1913, in response to the 21 financial panic of 1907. 22 (7) Since its beginning, the Federal Reserve 23 System has played a crucial role in the payment sys- 24 tem of the United States. 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 3 •S 2243 IS (8) The role of the Federal Reserve System in 1 providing payment services is— 2 (A) to promote the integrity and efficiency 3 of the payment mechanism; and 4 (B) to ensure the provision of payment 5 services to all depository institutions on an eq- 6 uitable basis and in an atmosphere of competi- 7 tive fairness. 8 (9) The Monetary Control Act of 1980 (title I 9 of Public Law 96–221; 94 Stat. 132) provided the 10 Board of Governors of the Federal Reserve System 11 with the authority to oversee the payment system in 12 the United States. 13 (10) The Expedited Funds Availability Act (12 14 U.S.C. 4001 et seq.), enacted on August 10, 1987, 15 provided the Board of Governors of the Federal Re- 16 serve System with full authority to regulate all as- 17 pects of the payment system, including the receipt, 18 payment, collection, clearing of checks, and related 19 functions of the payment system pertaining to 20 checks. 21 (11) In a July 2018 report on financial tech- 22 nology, the Department of Treasury acknowledged 23 the important role of the Board of Governors of the 24 Federal Reserve System in bringing real-time pay- 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 4 •S 2243 IS ment settlement services to the United States when 1 the Department recommended the Board of Gov- 2 ernors work to facilitate a faster retail payment sys- 3 tem, in particular, for smaller financial institutions 4 such as community banks and credit unions, noting 5 that such institutions should also have the ability to 6 access the most innovative technologies and payment 7 services. 8 (12) The authorities described in paragraphs 9 (9) and (10) are more critical than ever given how 10 the financial services sector has been defined as a 11 vital component of critical infrastructure in the 12 United States. 13 (13) The role of the Board of Governors of the 14 Federal Reserve System in the financial services sec- 15 tor will ensure the resiliency of the payment system 16 in the United States. 17 (14) The Board of Governors of the Federal 18 Reserve System should develop a real-time interbank 19 payment system to ensure that— 20 (A) consumers are prioritized; 21 (B) consumers and small businesses are 22 protected from fraud and errors, including with 23 respect to a payment initiated by a consumer or 24 small business; 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 5 •S 2243 IS (C) the payment system is open to in- 1 creased competition; and 2 (D) outsized entities do not monopolize the 3 financial infrastructure of the United States. 4 (b) PURPOSES.—The purposes of this Act are— 5 (1) to ensure that the United States has a safe, 6 fast, efficient, equitable, and fair payment system; 7 (2) to clarify that the Board of Governors of 8 the Federal Reserve System has the existing author- 9 ity to build a real-time payment system; and 10 (3) to make certain that the Board of Gov- 11 ernors of the Federal Reserve System follows 12 through on implementing the system described in 13 paragraph (2). 14 SEC. 3. DEFINITION. 15 In this Act, the term ‘‘real-time’’ has the meaning 16 given the term in section 602 of the Expedited Funds 17 Availability Act (12 U.S.C. 4001), as amended by section 18 4(a) of this Act. 19 SEC. 4. REQUIREMENT THAT FUNDS DEPOSITED BE AVAIL- 20 ABLE FOR WITHDRAWAL IN REAL-TIME. 21 (a) DEFINITIONS.— 22 (1) IN GENERAL.—Section 602 of the Expe- 23 dited Funds Availability Act (12 U.S.C. 4001) is 24 amended— 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 6 •S 2243 IS (A) by redesignating paragraphs (20) 1 through (25) as paragraphs (21) through (26), 2 respectively; and 3 (B) by inserting after paragraph (19) the 4 following: 5 ‘‘(20) REAL-TIME.—The term ‘real-time’— 6 ‘‘(A) means any time; and 7 ‘‘(B) includes a Saturday, Sunday, and a 8 legal holiday.’’. 9 (2) TECHNICAL AND CONFORMING AMEND- 10 MENT.—Section 3 of the Check Clearing for the 11 21st Century Act (12 U.S.C. 5002(2)(D)(iv)) is 12 amended by striking ‘‘section 602(24)’’ and insert- 13 ing ‘‘section 602(25)’’. 14 (b) EXPEDITED FUNDS AVAILABILITY SCHED- 15 ULES.—Section 603 of the Expedited Funds Availability 16 Act (12 U.S.C. 4002) is amended— 17 (1) in subsection (a)— 18 (A) in the subsection heading, by striking 19 ‘‘NEXT BUSINESS DAY’’ and inserting ‘‘REAL- 20 TIME’’; 21 (B) in paragraph (1)— 22 (i) by striking ‘‘Except as provided in 23 subsection (e) and in section 604, in’’ and 24 inserting ‘‘In’’; and 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 7 •S 2243 IS (ii) in the matter following subpara- 1 graph (B) by striking ‘‘not later than the 2 business day after the business day on 3 which’’ and inserting ‘‘in real-time when’’; 4 and 5 (C) in paragraph (2), in the matter pre- 6 ceding subparagraph (A), by striking ‘‘not later 7 than the business day after the business day on 8 which’’ and inserting ‘‘in real-time after’’; and 9 (2) by striking subsection (b) and inserting the 10 following: 11 ‘‘(b) PERMANENT SCHEDULE.—Funds deposited in 12 an account at a depository institution by a check drawn 13 on a local or nonlocal originating depository institution 14 shall be available for withdrawal in real-time.’’; 15 (3) by striking subsection (c); 16 (4) by striking subsection (d); 17 (5) by redesignating subsections (e) and (f) as 18 subsections (c) and (d), respectively; 19 (6) in subsection (c), as redesignated by para- 20 graph (5)— 21 (A) in paragraph (1)— 22 (i) in subparagraph (A)— 23 (I) by striking ‘‘Not more than 4 24 business days shall intervene between 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 8 •S 2243 IS the business day a’’ and inserting 1 ‘‘A’’; 2 (II) by inserting a comma after 3 ‘‘subparagraph (B)’’; 4 (III) by striking ‘‘is’’; and 5 (IV) by striking ‘‘and the busi- 6 ness day on which funds from such 7 deposit are available for withdrawal’’ 8 and inserting ‘‘shall be available for 9 withdrawal in real-time’’; and 10 (ii) in subparagraph (B), in the sub- 11 paragraph heading, by striking ‘‘PARA- 12 GRAPH’’ and inserting ‘‘SUBPARAGRAPH’’; 13 and 14 (B) in paragraph (2)— 15 (i) by striking ‘‘, (b), and (c)’’ and in- 16 serting ‘‘and (b)’’; and 17 (ii) in the paragraph heading, by 18 striking ‘‘TEMPORARY AND PERMANENT 19 SCHEDULES’’ and inserting ‘‘PERMANENT 20 SCHEDULE’’; and 21 (7) in subsection (d)(2), as redesignated by 22 paragraph (5), by striking ‘‘(c), or (e)’’ and insert- 23 ing ‘‘or (c)’’. 24 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 9 •S 2243 IS (c) SAFEGUARD EXCEPTIONS.—Section 604 of the 1 Expedited Funds Availability Act (12 U.S.C. 4003) is 2 amended— 3 (1) in subsection (a)— 4 (A) in paragraph (1)— 5 (i) in the paragraph heading by strik- 6 ing ‘‘NEXT BUSINESS DAY’’ and inserting 7 ‘‘REAL-TIME’’; and 8 (ii) in the matter following subpara- 9 graph (D) by striking ‘‘on the business day 10 after the business day on which such cash 11 or funds are deposited or, in the case of a 12 wire transfer, on the business day after the 13 business day on which’’ and inserting ‘‘in 14 real-time after such cash or funds are de- 15 posited or, in the case of a wire transfer, 16 in real-time after’’; 17 (B) in paragraph (2)— 18 (i) by striking ‘‘, 603(c), or para- 19 graphs’’ and inserting ‘‘paragraph’’; and 20 (ii) by striking ‘‘603(e)’’ and inserting 21 ‘‘603(c)’’; and 22 (C) by striking paragraph (3)(B) and in- 23 serting the following: 24 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 10 •S 2243 IS ‘‘(B) any such funds deposited in excess of 1 such amount shall be available for withdrawal 2 in real-time.’’; 3 (2) in subsection (b), in the matter preceding 4 paragraph (1), by striking ‘‘(c), or (e)’’ and insert- 5 ing ‘‘or (c)’’; 6 (3) in subsection (c)(1), by striking ‘‘(c), and 7 (e)’’ and inserting ‘‘and (c)’’; and 8 (4) in subsection (d), by striking ‘‘(c), and (e)’’ 9 and inserting ‘‘and (c)’’. 10 (d) MISCELLANEOUS PROVISIONS.—Section 607 of 11 the Expedited Funds Availability Act (12 U.S.C. 4006) 12 is amended— 13 (1) by striking subsections (a) and (b); and 14 (2) by redesignating subsections (c) through (f) 15 as subsections (a) through (d), respectively. 16 (e) REGULATIONS AND REPORTS BY BOARD.—Sec- 17 tion 609 of the Expedited Funds Availability Act (12 18 U.S.C. 4008) is amended— 19 (1) by striking subsections (d) and (f); and 20 (2) by redesignating subsection (e) as sub- 21 section (d). 22 SEC. 5. PAYMENTS MANDATE. 23 The Federal Reserve shall create a real-time payment 24 system that— 25 VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS 11 •S 2243 IS (1) at a minimum, conforms with the principles 1 outlined in the final report of the Faster Payments 2 Task Force of the Federal Reserve System; 3 (2) allows end users have fast access to funds 4 in real-time; 5 (3) operates as a utility, allowing end users to 6 reach any other end user, including unbanked, un- 7 derserved and cross-border end users, regardless of 8 the solution used by the end user; 9 (4) prioritizes safety and soundness, consumer 10 health, efficiency, and other relevant public interest 11 considerations; 12 (5) provides end users with the confidence and 13 trust in the safety and security of the system by en- 14 suring that— 15 (A) fraud and errors are minimized and re- 16 solved quickly; and 17 (B) the assets, accounts, and information 18 of the end user are protected, even as payments 19 cross different solutions; 20 (6) has transparent operating information; and 21 (7) ensures that there are no volume discounts 22 made that disadvantage smaller financial institu- 23 tions. 24 Æ VerDate Sep 11 2014 23:13 Jul 29, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6301 E:\BILLS\S2243.IS S2243 jspears on DSK3GMQ082PROD with BILLS