Blumenthal, Warren, & Waters Introduce Legislation to Protect Consumers from Payment Scams

[Hartford, CT] - Today, U.S. Senators Richard Blumenthal (D-CT), Chairman of the Senate Permanent Subcommittee on Investigations, and Elizabeth Warren (D-MA) joined Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, to announce introduction of the Protecting Consumers from Payment Scams Act, legislation to better protect consumers making online payments through digital payment platforms like Zelle.

As payment fraud skyrockets, the legislation would update the Electronic Fund Transfer Act (EFTA) to clarify ambiguities and strengthen the law to better protect consumers harmed when they make payments. Specifically, it would protect consumers when they are defrauded into initiating a payment sent to a bad actor, when they lose funds through fraudulent bank wire transfers, and when their accounts are inexplicably frozen or closed.

“Zelle’s speed and convenience have made it a target for bad actors looking to trick unsuspecting consumers out of their hard-earned money,” said Senator Blumenthal. “Despite this growing threat, Zelle and the banks that own it have failed to implement adequate safeguards and reimbursement policies to make consumers whole when they fall victim to scams and fraud. Our measure takes bold action where Zelle’s efforts at self-regulation have fallen short, ensuring that instant payments do not automatically result in instant losses for consumers.”

“Right now, fraudsters are using every trick in the book to steal money from hard-working consumers through payment apps like Zelle, Venmo, or old-fashion bank wire transfers. That’s why it is absolutely critical that we move quickly to modernize our consumer protection laws to reflect the realities of today's payment systems,” said Congresswoman Waters. “The ‘Protecting Consumers from Payment Scams Act’ will clarify critical provisions in law to give consumers the peace of mind to know they are protected if they are tricked into sending money to fraudsters. I want to commend Senator Blumenthal for his subcommittee’s work to shine a light on these payment scams and Senator Warren for her continued commitment on this issue, and I thank them for working with me to introduce this crucial piece of legislation to give American consumers the financial security they deserve.”

“Americans are sick and tired of these scams. Banks and peer-to-peer payment services like Zelle need to be held accountable for the scammers that are operating on their platforms,” said Senator Warren. “I’m happy to join Senator Blumenthal and Ranking Member Waters in this effort to make sure Americans who are defrauded can be made whole again.”

Today, scammers are exploiting various payment systems such as mobile wallets, payment apps, and wire transfers to steal money from unsuspecting consumers. In 2023 alone, the Federal Trade Commission received 2.6 million fraud complaints, resulting in reported losses of $10 billion—a figure that experts believe significantly underrepresents the actual losses experienced by consumers since fraud is vastly underreported.

This year, the Senate Permanent Subcommittee of Investigations (PSI), led by Blumenthal, held hearings and issued a staff report detailing failures by Zelle and its three largest owner banks, JPMorgan Chase, Bank of America, and Wells Fargo to reimburse consumers despite existing requirements to do so in many cases.

PSI’s investigation has found that Zelle’s three largest owner banks reimbursed victims who reported fraud only 38 percent of the time in 2023—a decline from 62 percent in 2019. In terms of dollar value, this translates to over $100 million worth of transactions disputed as fraud not reimbursed each year from 2021 through 2023.

PSI also found that, in 2020, JPMorgan reimbursed just three transactions out of 41,390 scam disputes that year, Wells Fargo did not reimburse any of the 25,061 scam disputes, and Bank of America did not track scam data as a separate dispute category until the second half of 2020. In 2023, the Three Banks reimbursed victims of scams only 12 percent of the time.

The Protecting Consumers from Payment Scams Act would:

• Protect consumers when they are defrauded into sending a payment to a bad actor, and require relevant firms that facilitate these payments to share liability;
• Clarify that consumers are protected when they use bank wire transfers and electronic transfers authorized by telephone call; and
• Ensure that error resolution duties apply if the consumer’s account is frozen or closed, unless access has been denied due to a court order, law enforcement, or the consumer obtained the funds through unlawful or fraudulent means.

A one pager on the bill is available here.

49 consumer advocates, experts, and other stakeholders have endorsed the bill, including: Americans for Financial Reform; Barthel Legal, APC; Center for Economic Integrity; Center for Economic Justice; Citizen Action/Illinois; Community Legal Services of Philadelphia; Consumer Action; Consumer Federation of America; Consumer Reports; Dombrow Law Firm; Dr. Irene E. Leech, Virginia Tech; Economic Empowerment Center DBA Lending Link; Economic Action Maryland; Georgia Advancing Communities Together, Inc.; Georgia Watch; Jacksonville Area Legal Aid, Inc.; Law Office of Larry Jenkins; Legal Aid Center of Southern Nevada; Legal Aid Justice Center; Maine People's Alliance; Maui Economic Opportunity, Inc.; Mobilization for Justice; National Association of Consumer Advocates; National Association for Latino Community Asset Builders (NALCAB); National Consumer Law Center (on behalf of its low-income clients); National Consumers League; New Economy Project; New Jersey Appleseed Public Interest Law Center; New Yorkers for Responsible Lending; North Carolina Justice Center; Oregon Consumer Justice; Oregon Consumer League; Prof. Alysson Snow, University of San Diego School of Law Housing Rights Legal Clinic; Prof. Annie Harper, Assistant Professor of Psychiatry, Yale School of Medicine; Prof. Emeritus Mark Budnitz, Georgia State University College of Law; Prosperity Works; Public Citizen; Public Good Law Center; Public Justice Center; SmithMarco, P.C.; South Carolina Appleseed Legal Justice Center; Tatar Law Firm, APC; Terrell Marshall Law Group; Texas Appleseed; Tzedek DC; U.S. PIRG; Virginia Citizens Consumer Council; William E. Morris Institute for Justice; and Woodstock Institute.

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