December 2, 2023


Dive Brief:

  • Low-income consumers are not properly protected against the harms of new digital payment systems, according to a recent analysis by Mark Budnitz, a Georgia State University emeritus law professor. Existing laws, such as the Electronic Funds Transfer Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Uniform Commercial Code, are missing key protections to help those with the least amount of money, the analysis paper published in a winter 2023 issue of the Georgetown Journal on Poverty Law & Policy asserted.
  • The EFTA, which governs electronic fund transfers, has not been updated to cover new types of companies, such as financial technology firms, according to the paper. The 2010 Dodd-Frank law does not give consumers the right to sue in a court to settle a dispute with a company providing financial services, and neither Dodd-Frank nor the Federal Trade Commission Act have privacy or security requirements, the paper said.   
  • “The problem is big gaps in the law,” Budnitz said in an interview Friday. “They don’t protect consumers very well at all. And it’s low-income consumers that get hurt the most.”

Dive Insight:

The piece by Butnitz describes how low-income consumers use digital payment systems, and how poverty affects their ability to benefit, or not, from digital financial services. It also examines whether current laws protect low-income consumers, and analyzes three ways that could potentially protect low-income consumers using the payment systems.

Budnitz’s paper suggests the FTC and the Consumer Financial Protection Bureau can, and should be, looking out for low-income consumers’ interests. The CFPB has engaged in a flurry of activity this month, taking aim at “junk fees,” warning against immigration status-based discrimination in lending and unveiling an open-banking proposal meant to help consumers break up with banks over bad service. 

In his paper, Budnitz called on the CFPB to do more. In particular, the government agency should require services like Zelle, a peer-to-peer payment tool offered by the company Early Warning Services, to provide warnings to consumers. The agency should also monitor these services and amend regulations to provide the same level of protections afforded by checks and credit cards, the paper said.

“Current laws do not adequately protect low-income consumers,” the paper said. “Legislators and agencies need to update statutes and regulations. In addition, lawmakers must amend statutes to clearly cover new payment services. Furthermore, agencies need specific statutory authorization and adequate resources to enforce updated laws.”


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