Dem Senators to CFPB: Hold Credit Unions, Banks Liable for P2P Fraud
Push to hold financial institutions accountable for peer-to-peer payment fraud is met with resistance from credit union group.
Democratic senators are pushing the CFPB to hold financial institutions accountable for the increasing fraud in the peer-to-peer payment industry.
In a letter to CFPB Director Rohit Chopra last week, four Democratic senators, led by Senate Special Aging Committee Chairman Sen. Bob Casey, D-Pa., said they would support shifting some of the burden of losses from the fraud away from consumers and on to banks and companies operating so-called P2P apps.
“Given the increased prevalence of P2P fraud against older adults, we encourage the CFPB to move forward in issuing this guidance to provide better tools to protect themselves and their families,” the senators wrote.
The letter follows a similar one sent earlier this summer by Democrats, including Banking Committee Chairman Sen. Sherrod Brown, D-Ohio.
In response, however, CUNA President/CEO Jim Nussle sent Chopra a letter last week warning him that using guidance that essentially would shift some of the financial burden to banks and credit unions would violate federal law.
Inside the Letters
Casey was joined in his letter by Sens. Elizabeth Warren, D-Mass.; Richard Blumenthal, D-Conn.; Kirsten Gillibrand, D-N.Y.; and Catherine Cortez Masto, D-Nev.
“We encourage you to move forward with the guidance under consideration, keeping in mind the disproportionate effect that frauds and scams have on communities of color and people with Limited English Proficiency,” the senators wrote.
Brown was joined in his letter by Warren, Cortez Masto, and Sens. Jack Reed, D-R.I.; Bob Menendez, D-N.J.; and Raphael Warnock, D-Ga.
“Indeed, the CFPB has options under its existing authority to protect consumers from the common frauds and scams that occur on these services,” the group wrote. “The CFPB could clarify that, in certain circumstances, a payment is an ‘error’ when a consumer is defrauded into initiating a transfer to a scammer.”
They further called on the agency to send a “strong signal” that it expects financial institutions to bear more responsibility for letting scammers and fraudsters onto their services.
Pushback from CUNA
Not so fast, countered Nussle in his letter.
“Expanding current law to punish member-owned credit unions for the actions of a rogue fraudulent actor, despite no fault of the credit union or other members, is not only unwise: it is unlawful,” the CUNA leader wrote.
Nussle said Congress would need to provide the CFPB with additional authority to impose liability in one instance or the agency would need to go through the formal rulemaking process if it intends to use a different section of law.
“The expansive burden on credit unions that would stem from having to pay for the misdeeds of fraudulent actors that has been discussed by the CFPB for those working with P2P services, would put a major strain on credit union resources and their ability to collaborate with payments platforms and expand consumer choice,” he stated.