CBA, ABA URGE FEDERAL RESERVE TO STRENGTHEN SAFEGUARDS FOR PROPOSED PAYMENT ACCOUNTS

The following information was released by the Consumer Bankers Association:

The Consumer Bankers Association (CBA) and American Bankers Association (ABA) today submitted ajoint comment lettersupporting the Federal Reserve's proposed Payment Account framework as a prudent approach to responsible innovation if additional safeguards are adopted to protect the safety, soundness and integrity of the U.S. payments system.

The associations said the proposal represents a measured approach to expanding payment system access but stressed that any framework must be accompanied by strong risk management requirements, direct federal oversight and transparent application standards.

In the letter, ABA and CBA urged the Federal Reserve to:

Maintain key safeguards included in the proposal, including prohibitions on interest payments, daylight credit, discount window access and FedACH access.

Require clear, transparent and publicly available eligibility and review criteria for all Payment Account applicants.

Condition access on demonstrated capabilities in governance, independent risk management, BSA/AML/CFT compliance, sanctions compliance, cybersecurity and operational resilience.

Require all Payment Account participants to be subject to direct federal banking agency supervision as a condition of access.

Adopt a conservative, phased implementation approach that increases activity only after institutions demonstrate sustained compliance and effective controls.

Prohibit "nesting" arrangements and other activities that could allow third parties to circumvent Payment Account limitations.

Develop meaningful enforcement, recovery and resolution expectations for account holders.

Preserve the distinction between Payment Accounts and Master Accounts, with Master Account access remaining limited to federally supervised institutions with federally insured deposits.

The associations said legal eligibility alone should not guarantee access to a Payment Account and emphasized that the Federal Reserve must continue to evaluate applicants' risk profiles, governance structures and supervisory oversight.

CBA and ABA noted that the proposal's core guardrails, including prefunding requirements, no overdrafts, no interest and no access to Federal Reserve credit, are essential components of a framework that appropriately balances innovation and risk management.

The full comment letter was submitted in response to the Federal Reserve's request for comment on proposed revisions to its Payment System Risk policy, the Guidelines for Account and Service Requests, Regulation A and Regulation D.