Democrats ask CFPB to expand legal criteria for fraud in P2P payments

WASHINGTON — A key group of Senate Democrats urged the director of the Consumer Financial Protection Bureau to expand the agency’s definition of fraudulent fund transfers via instant payment services, an effort to expand bank liability in peer-to-peer transactions. 

In a letter addressed to CFPB Director Rohit Chopra dated Wednesday, the senators homed in on Zelle, a payments platform owned by a consortium of banks that has been subject to increasing scrutiny as a hotbed for consumer fraud. 

The lawmakers — representing half of the Democrats on the Senate Banking Committee, including Sherrod Brown of Ohio, the panel’s chair — asked Chopra to “clarify” that a fraudulent payment could be considered an “error” when “a consumer is defrauded into initiating a transfer to a scammer.” Regulators could also label certain acts of fraud an “unauthorized electronic fund transfer.” 

Sen. Sherrod Briown, D-Ohio, chair of the Senate Banking Committee, joined other Senate Democrats in asking the Consumer Financial Protection Bureau to expand banks’ liabilities for frauds linked to peer-to-peer payments systems like Zelle.

Both expansions of the criteria would increase the likelihood that financial institutions will be responsible for making consumers whole after they become victims of fraud under the Electronic Fund Transfer Act and Regulation E, the senators said. Under current regulations, consumers are generally not protected when fraudulent funds are directly transferred between accounts, which lawmakers described as “antiquated.”  

“Consumers are often on the hook because existing rules do not reflect new technological developments” the lawmakers wrote in the letter. It was signed by Sens. Brown, Jack Reed of Rhode Island, Bob Menendez of New Jersey, Elizabeth Warren of Massachusetts, Catherine Cortez Masto of Nevada and Raphael Warnock of Georgia. 

“These kinds of approaches would provide more consistent and fairer outcomes than the current rules, which offer no protections against the common scams and frauds that have proliferated on instant payment services like Zelle,” the lawmakers said. “The CFPB should send a strong signal that the agency expects banks under its supervision to bear more responsibility for letting scammers and fraudsters onto services that they developed and that they currently market as safe platforms to send and receive money.” 

The senators also argued that such changes would incentivize banks to pursue more robust methods of preventing fraud before it happens. 

“Current industry efforts are limited to boilerplate pop-up warnings and FAQs that customers should send money only to people they know and that using Zelle is akin to using cash,” the Democrats wrote. “But these low-tech methods are not suited for today’s sophisticated services.”

Zelle is run by Early Warning Services LLC, which is in turn owned by several of the nation’s largest financial institutions: Bank of America, Truist Financial, Capital One Financial, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo. 

Representatives for Early Warning Services did not respond to a request for comment.

Wednesday’s congressional letter to the CFPB is the only the latest from lawmakers concerned about consumer fraud on Zelle and other instant payment platforms, and the push from Democrats to expand institutional liability in the space appears to be gaining support. An April letter addressed to Early Warning Services raising similar concerns was signed only by Sens. Warren and Menendez. 

For more updates check below links and stay updated with News AKMI.
Life and Style || Lifetime Fitness || Automotive News || Tech News || Giant Bikes || Cool Cars || Food and Drinks


Show More

Related Articles

Back to top button

usa news wall today prime news newso time news post wall