WASHINGTON, D.C. — U.S. Sen. John Fetterman is urging the Federal Reserve to rewrite decades-old banking rules that allow financial institutions to hold deposited funds for days, arguing that faster payment technology should translate into quicker access to paychecks and deposited money for American consumers and businesses.
In a letter sent last week to Federal Reserve Chairman Kevin Warsh, the Pennsylvania Democrat called on the central bank to begin rulemaking under the 1987 Expedited Funds Availability Act (EFAA), which directs regulators to reduce funds availability periods “to as short a time as possible.”
Fetterman argued that existing regulations have failed to keep pace with technological advances in electronic payments and check processing, leaving workers, retirees, and small businesses waiting days to access money that could be made available much sooner.
“Speeding up checks and Direct Deposit through the Fed’s EFAA mandate would be a lifeline to millions of American hard-working families, seniors, and small business owners,” Fetterman wrote.
The senator cited financial pressures facing many households, noting that most Americans would need to borrow money to cover a $500 emergency expense and that nearly eight in 10 would experience financial hardship if a paycheck were delayed by a week.
The letter also argues that the United States lags behind other developed economies in adopting instant payments systems. Fetterman pointed to the United Kingdom’s Faster Payments Service and the European Union’s SEPA Instant Credit Transfer network as examples of payment systems that move money more quickly to workers and businesses.
The EFAA, enacted in 1987, gave the Federal Reserve authority to shorten the amount of time banks can hold customer funds before making them available. The Fed’s implementing regulation, known as Regulation CC, generally established a two-business-day availability standard for local checks.
Fetterman contended that subsequent technological changes, including the 2003 Check 21 Act, which authorized electronic check processing, and the widespread adoption of electronic deposits and real-time payment systems, have rendered those timelines outdated.
According to the senator, only about 3% of Americans are still paid by paper check, while most deposits are now handled electronically.
The letter also references a previous petition asking the Federal Reserve and the Consumer Financial Protection Bureau to modernize funds availability rules. Fetterman noted that while the CFPB responded to the petition and agreed that the issue warrants review, the Federal Reserve has yet to provide a response.
“I urge the Fed to provide a detailed response to that petition and to begin the mandated rulemaking process to lower check and Direct Deposit times, in order to give working families, seniors, and small businesses access to their hard-earned money more quickly,” Fetterman wrote.
The Federal Reserve has not publicly indicated whether it intends to pursue rulemaking on the issue. Any changes to funds availability regulations would likely require a formal rulemaking process and could have broad implications for banks, employers, and payment systems nationwide.
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