U.S. Act of Congress: HR 117 PENDING – Protecting Consumers from Payment Scams Act

An overview and analysis of the Revision of the Electronic Fund Transfer Act

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Protecting Consumers from Payment Scams Act Analysis

The “Protecting Consumers from Payment Scams Act” is designed to address the growing issue of fraud in peer-to-peer (P2P) payment systems and electronic fund transfers. This legislation aims to amend the Electronic Fund Transfer Act (EFTA) to expand consumer protections and clarify the responsibilities of financial institutions in cases of fraudulently induced payments.

Key Provisions of the Protecting Consumers from Payment Scams Act

Expanded Consumer Protections: The act ensures that consumers are protected from unauthorized charges, fraud, and errors when using bank wire transfers and P2P payment systems. This includes transactions authorized by telephone calls.

Shared Responsibility: It requires both the consumer’s financial institution and the institution that received the fraudulent payment to share responsibility. This aims to incentivize institutions to strengthen their fraud prevention efforts.

Remedies for Frozen Accounts: The act provides remedies for consumers if their accounts are frozen or closed unless the action is due to a court order, law enforcement, or fraudulent activity by the consumer.

Protection for Mistaken Transactions: Consumers are also protected when they make mistakes, such as sending the wrong amount or transferring money to the wrong recipient, or if they do not receive goods or services purchased.

Why Protecting Consumers from Payment Scams Act Is Needed

The rise in fraud through P2P payment apps and bank transfers has led to significant financial losses for consumers. The Federal Trade Commission (FTC) reported $10 billion in fraud losses in 2023, highlighting the urgency for more robust protections. Current laws do not sufficiently cover these modern payment methods, leaving consumers vulnerable to losing their entire life’s savings to scams.

Positive Attributes:

Increased Consumer Protection: The act provides comprehensive protections for consumers using modern payment systems, reducing their risk of financial loss.

Institutional Accountability: By mandating shared responsibility, the act pushes financial institutions to improve their fraud detection and prevention mechanisms.

Remedies and Error Correction: The act offers clear remedies for common issues like account freezing and transaction errors, ensuring consumers are not left without recourse.

Negative Attributes:

Implementation Complexity: The requirement for shared responsibility might create implementation challenges for financial institutions, potentially leading to delays in resolving fraud cases.

Increased Costs: Strengthening fraud prevention efforts could result in higher operational costs for financial institutions, which might be passed on to consumers in the form of higher fees.

Regulatory Burden: The act imposes additional regulatory burdens on financial institutions, which could face compliance challenges, especially smaller banks and credit unions.

In conclusion, the “Protecting Consumers from Payment Scams Act” aims to modernize and strengthen consumer protections in the face of evolving financial technologies. While it offers significant benefits in terms of enhanced security and accountability, it also poses challenges related to implementation and costs. Nonetheless, it represents a crucial step towards safeguarding consumers in the digital financial landscape​ (NCLC)​​ (Buckley LLP)​.

SCARS Institute Position of Protecting Consumers from Payment Scams Act

Position Statement: SCARS Institute Fully Supports the Protecting Consumers from Payment Scams Act

Call to Action: Urge Congress to Pass the Protecting Consumers from Payment Scams Act that amends the Electronic Fund Transfer Act (EFTA)

The Society of Citizens Against Relationship Scams Inc. (SCARS Institute) stands in full support of the “Protecting Consumers from Payment Scams Act.”

This landmark legislation represents a critical step forward in ensuring the safety of those who fall victim to scams and provides an ability to recover their money. It places significantly more responsibility on financial institutions to play a role in preventing scams and fraud.

Why SCARS Supports the Protecting Consumers from Payment Scams Act:

At SCARS, we have seen firsthand the devastating effects that online scams, exploitation, and harmful content can have on individuals and families. The Protecting Consumers from Payment Scams Act addresses the issues of money recovery head-on, providing a framework to protect every member of our society from the extreme manipulation, coercion, and control that these criminals have over their victims. It takes what we have learned over the past 25 years and updates it for the present threat environment.

This legislation is not just a policy; it is a commitment to creating a safer financial world where scam victims can live with the knowledge that their financial institution has their back for a change!

Call to Action:

We urge all our supporters, members, and the broader community to take immediate action. Contact your congressperson today and express your strong support for the Protecting Consumers from Payment Scams Act amendment to the Electronic Fund Transfer Act (EFTA). Let them know that this legislation is crucial for the safety and well-being of our children.

By passing this Act in the U.S. House of Representatives and sending it to the President for his signature, we can make a significant impact on the safety and security of scam and financial fraud victims.

How You Can Help:

1. Contact Your Congressperson: Reach out to your local representatives and urge them to support the Protecting Consumers from Payment Scams Act. Your voice matters, and together we can drive this critical legislation forward.
2. Spread the Word: Share this position statement with your friends, family, and social networks. Encourage others to join the cause and advocate for the victims of scams and financial fraud.
3. Stay Informed: Follow SCARS and other advocacy groups to stay updated on the progress of this legislation and other initiatives aimed at protecting all scam victims.

At SCARS, we are committed to the safety and well-being of every individual. The Protecting Consumers from Payment Scams Act is a vital step toward a safer digital future for ourselves, our families, friends, and communities. Let’s work together to ensure its passage and create a safer online world for all.

For more information or to get involved, please contact your Representative directly. You can find them here: Find Your Representative | house.gov

Together, we can make a difference.

Sincerely,

Tim McGuinness, Ph.D., DFin, MCPO, Manth
Director,
SCARS Institute™
Society f Citizens Against Relationship Scams Inc.