Frauds and scams in the banking system cost Americans billions in 2022, experts told a Senate panel on Thursday. And that number will continue to rise unless Congress makes needed updates and holds companies more accountable.
The median amount of money lost in fraud cases has more than doubled from 2020 to 2022, going from $311 to $650, and the total amount of money lost went from $3.3 billion to $8.8 billion in the same period. That’s according to John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League.
Congress “can and should” be playing a bigger role in updating laws and creating incentives for companies to prevent fraud, Breyault said.
“(Companies) bear little of the costs of fraud that occur on their systems. Instead the liability for fraud falls on those who can least afford to absorb the losses, individual consumers,” Breyault said. “No amount of voluntary consumer education, better disclosure or friction put into payment flows will solve this problem. We believe the payment platforms where fraud occurs must have a bigger financial incentive to stop scams before they happen.”
Senate Banking, Housing and Urban Affairs Committee Ranking Member Tim Scott (R-S.C.) advocated primarily for education. He said the current Consumer Financial Protection Bureau is too busy creating "Washington red tape" instead of "focusing on real crimes."
"Unfounded bureaucratic regulations take resources away from financial innovation and education, both of which can help lift up underserved and minority communities," Scott said.
But Chairman Sherrod Brown (D-Ohio) said it was time to empower the Consumer Financial Protection Bureau and make companies more responsible for paying customers back for fraud.
He said that people shouldn't have to rely on financial education to avoid being harmed by scams.
"Americans don't have the time for that," Brown said. "They have jobs and kids and bills to worry about. It's not on them. It's on the companies that allow the scam."
Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center, said the current policies are outdated and have loopholes that leave many Americans unprotected.
She noted there are two types of fraud, unauthorized and fraudulently induced transactions. Criminals make unauthorized transactions by obtaining information and making a transaction without the customer's knowledge. Fraudulently induced transactions are made by convincing the individual to make a false payment.
While most unauthorized transactions are protected, most fraudulently induced transactions are not.
If a person falls victim to fraudulently induced transactions, "You are going to hear 'too bad, so sad,' because there are no clear protections currently under federal or state law," Sanchez-Adams said.
Scams especially affect vulnerable groups, Sanchez-Adams said. Older adults often lose the most money, but young people are the most likely to be scammed.
"The impacts of payment fraud are keenly felt by certain low-income communities, older Americans and communities of color," Sanchez-Adams said. "These communities who are already struggling and often pushed out of the traditional banking system can least afford to lose money due to payment fraud and errors."
Being scammed should have nothing to do with savviness or education, Brown said.
"When these incidents happen, people lose their hard-earned money," Brown said. "They're often made to feel ashamed and embarrassed. No one ever tells the victim of hold up or break in at their home that they were stupid or should have known better than to be wrong. That's exactly what consumers who are scammed too often hear."
Breyault urged the senators to take the lead in strengthening the Electronic Fund Transfer Act to allow Americans to be protected for more fraud cases and to pass incoming bills like Sen. Elizabeth Warren’s (D-Mass.) Digital Asset Anti-Money Laundering Act, which would try to make it easier to track cryptocurrency scams.
Cryptocurrency has become a popular payment method for international scammers and seen significant cost increases from 2020 to 2022, Breyault said. Losses involving cryptocurrency increased from $129 million to $1.59 billion in two years.
“We can't keep making it easy for criminals and for countries like North Korea to defraud Americans out of their hard-earned money,” Warren said.
Americans lose billions as expert says median fraud losses double
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02.02.2024
Frauds and scams in the banking system cost Americans billions in 2022, experts told a Senate panel on Thursday. And that number will continue to rise unless Congress makes needed updates and holds companies more accountable.
The median amount of money lost in fraud cases has more than doubled from 2020 to 2022, going from $311 to $650, and the total amount of money lost went from $3.3 billion to $8.8 billion in the same period. That’s according to John Breyault, vice president of public policy, telecommunications and fraud at the National Consumers League.
Congress “can and should” be playing a bigger role in updating laws and creating incentives for companies to prevent fraud, Breyault said.
“(Companies) bear little of the costs of fraud that occur on their systems. Instead the liability for fraud falls on those who can least afford to absorb the losses, individual consumers,” Breyault said. “No amount of voluntary consumer education, better disclosure or friction put into payment flows will solve this problem. We believe the payment platforms where fraud occurs must have a bigger financial........
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