For American workers living paycheck-to-paycheck, waiting for those checks to clear can be a problem.

The Federal Reserve can take up to five days to clear a deposited check. And when bills like rent and childcare are due, some families are forced to turn to payday lenders or incur overdraft fees, as they wait for their paychecks to actually become available in their bank account for withdrawal.

Rep. Ayanna Pressley and Sen. Elizabeth Warren want to change that.

The two Massachusetts Democrats teamed up to introduce a bill Wednesday to create a national, real-time payments system, providing consumers 24/7 access to their money within seconds of a check deposit or wire transfer. For several years, the Federal Reserve has said it wants to make faster payments a reality by 2020; however, Jerome Powell, the reserve’s chairman, conceded earlier this month that the central bank would not meet that timeline.


Pressley, who pressed Powell on the delay during a July 10 hearing, says her constituents literally cannot afford to wait. The new legislation would mandate the Fed to move forward with its own system, even in the face of opposition from big banks.

“The Federal Reserve Bank has a responsibility to respond to the needs of the American public,” the 7th District congresswoman said in a statement.

“Our bill would create a national, real-time payments system so that families have faster access to the money they earned and don’t have to pay overdraft fees or rely on a shady payday lender to make ends meet,” Warren added.

The Payment Modernization Act of 2019 — which is also sponsored by Maryland Sen. Chris Van Hollen and Illinois Rep. Jesús “Chuy” García — would require the Federal Reserve’s real-time payments system to operate as a public utility, meaning that it would be accessible to the “unbanked” and “underserved.” Van Hollen, who repeatedly advocated for a faster system, says the bill would “ensure that the Fed acts without delay to develop a fast, efficient, equitable, and fair payments system.”

“Being poor is too expensive in America,” Garcia said. “People living paycheck to paycheck shouldn’t be charged overdraft fees simply because their bills are due sooner than their paycheck is deposited into their account.”


Supporters say faster access would also reduce the amount of late fees paid by consumers, as well as their reliance on risky financial products, like payday loans. And according to Pressley’s office, not only would a real-time payment system provide relief to working-class families, it could also help small businesses that currently face delays on payments to vendors and contractors more reliably and less-stressfully meet payroll.

Some Republicans have opposed the idea of a government-run system, noting that the banking industry has already launched a real-time payments system.

“I don’t see the need for it,” Sen. Pat Toomey, a Pennsylvania Republican, told Politico last week. “The private system has committed and would be obligated to be available to all regulated financial institutions.”

Twenty four of the largest banks have already invested in a private real-time payments platform called The Clearing House, which says it aims to be available to all financial institution in the United States by 2020. Many people have turned to platforms like Venmo and the Cash App to digital send and receive money. And last month, Facebook launched a cryptocurrency, Libra, which could be used to instantaneously make payments and transfers fund online.

Democrats, however, says the a real-time payments system shouldn’t be monopolized by private, for-profit interests. Retail and tech industry groups agree.

“Allowing any one for-profit operator to achieve a monopoly over a payment system would almost certainly result in loss of efficiency and ultimately an inferior product that increases societal costs,” Walmart wrote to the Fed’s board of governors last December.


The Federal Reserve already offers real-time transactions for commercial banks; the Payment Modernization Act would require the bank to use its authority to build on that existing infrastructure and offer those services for consumer banking. Several other countries, including Mexico and Japan, have real-time payment systems run by their central banks. The European Central Bank launched one as well last November.

Warren, who is running for the Democratic presidential nomination in 2020, announced earlier this month that she would only appoint Fed governors who are committed to implementing a real-time payment system, as part of a larger plan to “reign in Wall Street.”

“Big banks want to force families to use their private system,” the Bay State senator wrote on Medium. “But American families shouldn’t have to rely on giant banks for quick access to their paychecks. It’s time for the Fed to catch up and ease the burden for working families.”