Federal Legislation Aims to Protect Consumers from Payment Fraud

August 2, 2024 — Press Release

Advocates applaud bill to increase protections on payment apps and bank accounts

WASHINGTON – Advocates at the National Consumer Law Center applauded the introduction of companion bills in the U.S. Senate and House of Representatives this week designed to protect consumers from fraud impacting payment apps and bank accounts. 

“The Protecting Consumers from Payment Scams Act will help stop consumers from losing billions of dollars each year to frauds perpetrated through person-to-person payment apps and bank accounts, and create incentives for innovations to make our payment systems safer,” said Carla Sanchez-Adams, senior attorney at the National Consumer Law Center. “I applaud Rep. Waters, Sen. Blumenthal, and Sen. Warren for introducing this important bill to protect families from literally losing their life’s savings.”  

The Federal Trade Commission (FTC) received 2.6 million fraud complaints in 2023 totaling $10 billion in reported losses, though fraud is vastly underreported. 

“Fraud loss through bank wire transfers and payment apps is surging, and current law does not adequately protect consumers from losing their entire life’s savings, or give enough responsibility to big tech and payment companies to make their systems safe,” Sanchez-Adams noted.

The bill would close loopholes and clarify the Electronic Fund Transfer Act by:

• Protecting consumers when they are defrauded into sending money to a bad actor;
• Requiring the consumer’s institution and the institution that received the fraudulent or unauthorized payment, and possibly others that helped facilitate the payment, to share responsibility, incentivizing them to strengthen fraud prevention efforts;
• Clarifying that consumers are protected from unauthorized charges, fraud and errors when they use bank wire transfers and electronic transfers authorized by telephone call;
• Ensuring that consumers have remedies if their account is frozen or closed, unless access has been denied due to a court order, law enforcement, or the consumer obtained the funds through unlawful or fraudulent means; and
• Protecting consumers when they make a mistake, such as in amount or recipient, or if they don’t receive goods or services purchased.

The United Kingdom has recently expanded protections for consumers defrauded through payment scams, and the bill follows the UK’s approach of shared responsibility, which Office of the Comptroller of the Currency Acting Comptroller Michael Hsu has encouraged.

The bill was introduced in the House by Rep. Maxine Waters (D-CA) and in the Senate by Sen. Richard Blumenthal (D-CT) and Sen. Elizabeth Warren (D-MA). The bill is supported by 49 organizations and academics. The bill follows several investigations and hearings that explored rising payment fraud, including recent hearings by the Senate’s Permanent Subcommittee of Investigations, led by Chairman Blumenthal, which issued a report following its investigation; a report by Senator Elizabeth Warren; a hearing by the Senate Banking Committee, at which NCLC’s Sanchez-Adams testified; and a hearing in the House Financial Services Committee 2022 under Rep. Waters with megabank CEOs.