The trade group is urging the CFPB not to issue credit to banks for fraudulent P2P payments | So Good News


The American Bankers Association has sent a letter to CFPB Director Chopra urging the CFPB not to transfer loans to banks for peer-to-peer (P2P) payments using an online money transfer system where the buyer who agreed to pay later claims. designed to be a scammer.

The ABA sent its letter following a meeting with CFPB staff to discuss the financial implications of P2P payments. It also cites recent reports that the CFPB is considering issuing new guidelines that would require banks to refund money to victims of scams that trick consumers into sending money to other people using an online money transfer system. Under the Electronic Fund Transfer Act (EFTA) and Regulation E, an unauthorized electronic fund transfer (EFT) is an EFT from a consumer’s account initiated by a person other than the consumer without actual authority to initiate the transfer and where the consumer receives no benefit. The Official Staff Commentary specifically states that an illegal EFT includes a transfer initiated by a person who obtained an electronic instrument from a consumer through fraud or theft, omitting to conceal the consumer’s fraudulent activity.

Under EFTA and Regulation E, consumers who provide a bank with timely notification of an error that the bank deems to be an unauthorized EFT are entitled to the protections of EFTA/Regulation E. If the CFPB were to issue the proposed guidance, it would go against the statutory text by requiring banks to review transactions. Fraudulent transactions such as illegal EFTs even if initiated by consumers are consequences that banks will have to pay back. the number of such events for consumers.

In its letter, the ABA discusses the popularity of P2P services with consumers due to the speed and consistency of payments and the de minimus amount of fraud compared to the amount of transactions. The ABA also discusses the significant investments banks have made in fraud prevention and consumer education. In addition, the ABA indicates a limited ability for banks to intervene in the payment decisions of consumers using P2P services.

In the case of credit transfers to banks for P2P payments made to scammers, the ABA explains that if banks are responsible for reimbursing consumers for such payments, banks must change their business practices to reflect the risks and potential losses. the cost of investigating complaints and compliance. This may require banks to consider whether to pay P2P fees, which are often free, limit access to P2P services, reduce the frequency and amount of P2P payments, and/or close accounts. Other options that banks may need to consider are: depositing money sent by P2P, thus changing the value and attractiveness of the product; make account opening requirements more stringent in order to better expose fraudsters, thereby preventing some consumers who may manage and benefit from bank accounts from accessing them; and reduce competition by forcing some smaller banks out of the P2P payment business.

Finally, the ABA suggests that the move by banks will also increase fraud and fraud. Specifically, fraudsters can use the government’s policy that consumers have the right to refund money sent to scammers as an incentive for consumers to send money (because the scammers assure consumers that they are risk-free). In addition, fraud will increase as consumers will have little incentive not to send money even if there are questionable conditions.


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