ICBA: Bill targeting financial fraud would increase scams

ICBA and other groups told members of Congress that their legislation to shift liability for authorized transactions to financial institutions would increase scams.

Background: The Electronic Funds Transfer Act and Regulation E limit a consumer’s liability for unauthorized transactions, but not authorized transactions that the consumer voluntarily initiates.

New Legislation: Introduced by Sens. Richard Blumenthal (D-Conn.) and Elizabeth Warren (D-Mass.) and Rep. Maxine Waters (D-Calif.), the Protecting Consumers from Payment Scams Act (S. 4943/H.R. 9303) would limit the consumer’s liability in such instances and shift it to the financial institutions involved in the transaction.

ICBA Response: In a joint letter to the lawmakers, ICBA and other groups said the bill would do nothing to stop the criminals that are committing these scams. Further, it would require community financial institutions with less ability to shoulder higher fraud losses to restrict consumers’ access to deposit accounts, they said.

Alternative Approach: Instead, the groups said a coordinated National Scam and Fraud Prevention strategy is needed to stop scams and assist consumers affected by scams. The strategy should include reducing the ability of criminals to use impersonated social media accounts or fake caller ID and text messages, they said.

Previous Efforts: Warren in 2022 issued a report calling on the Consumer Financial Protection Bureau to strengthen Reg E to require banks to reimburse customers who authorized fraudulent peer-to-peer payments. In response, ICBA said it opposes unlimited liability for P2P fraud and encouraged policymakers to focus on the fraudsters themselves.

Outlook: ICBA will continue raising concerns with policymaker calls for expanding legal liability to reimburse consumers for authorized transactions.

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