A bill backed by Rep. Maxine Waters [D-Calif.], the Ranking Member of the House Financial Services Committee, and Sen. Elizabeth Warren [D-Mass.], among others, is being introduced in Congress that aims to amend the Electronic Funds Transfer Act to protect consumers when making payments via wire transfers and apps like Venmo and Zelle.
Called the “Protecting Consumers from Payment Scams Act,” H.R. 9303 has been introduced in the House of Representatives and S. 4943 has been introduced in the Senate, by Sen. Richard Blumenthal [D-Conn.].
Details of the bill:
- Consumer protection: The bill ensures consumers are protected when they are tricked into sending payments to fraudsters.
- Shared liability: It requires financial institutions to share liability for fraudulent or unauthorized transfers, incentivizing stronger fraud prevention measures.
- Bank wire transfers: The bill clarifies that consumers are protected when using bank wire transfers and electronic transfers authorized by phone calls.
- Account access: Error resolution duties will apply if a consumer’s account is frozen or closed, except in cases involving court orders, law enforcement, or unlawful activity by the consumer.
- Error handling: The bill also covers errors made by consumers, such as mistakes in the amount or recipient of the transfer, or non-delivery of goods or services.
Why it matters: Payment fraud is escalating at an alarming rate. In 2023, the Federal Trade Commission received 2.6 million fraud complaints, resulting in reported losses of $10 billion. This figure likely underestimates the actual losses, as fraud is significantly underreported. The rise in fraud has particularly impacted users of payment apps and bank transfers, with reported losses increasing by more than 62% and 150%, respectively, compared to 2021.
What they’re saying:
- Rep. Waters: “Fraudsters are exploiting every trick in the book to steal money from hard-working consumers. It is critical to modernize our consumer protection laws to reflect today’s payment systems.”
- Sen. Blumenthal: “Zelle and the banks that own it have failed to implement adequate safeguards. Our measure takes bold action to ensure instant payments do not result in instant losses for consumers.”
- Sen. Warren: “Banks and peer-to-peer payment services like Zelle need to be held accountable for the scammers on their platforms. This bill ensures that Americans who are defrauded can be made whole again.”
