Chairman Blumenthal, Ranking Member Johnson, and distinguished Members of the Committee, the American Bankers Association[1] (ABA), the Bank Policy Institute[2] (BPI); Consumer Bankers Association[3] (CBA), and the National Bankers Association[4] (NBA) (hereinafter, Associations) appreciate the opportunity to submit a statement for the record for the July 23, 2024, hearing: “Instant Payments, Instant Losses: Zelle and the Big Banks Fail to Protect Consumers from Fraud.”
Introduction
From using breakthrough technologies such as generative artificial intelligence (AI) to old fashioned theft of checks out of mailboxes, criminals are relentless in their efforts to steal money from the bank accounts of consumers and small businesses. As outlined in our May 21, 2024, statement for the record[5], banks have a long history of improving and innovating to protect their customers, including the adoption of chip-enabled credit cards, the use of multi-factor authentication to protect user accounts, and the use of advanced AI tools to prevent and warn customers about potentially fraudulent transactions. Banks work tirelessly to identify and report suspicious accounts to law enforcement; to help educate and warn their customers about common scams, and to root out accounts that have been used by criminals. Banks, however, cannot win this fight on their own—it is going to take a cross-industry effort to stay ahead of fraudsters and scammers.
The activities of these criminals touch more than just the banking industry, and the efforts to counter frauds and scams must similarly be cross-industry. Each step in the scam ecosystem—from how a scammer identifies consumer targets, to how a scammer communicates instruction to a victim, to how the money is processed—offers an opportunity to stop the flow of funds to the criminal. Focusing on only one aspect or one step in the process will not stop this surge of scams. Rather, a holistic approach to address all the entities and elements of a scam has the best chance of being successful.
Banks are but one contributor to the overall safety and security of the payments ecosystem, and cannot single-handedly prevent criminals from defrauding consumers or financial institutions. Government must also play a role to protect the payments ecosystem. Banks are investing heavily in new technologies and capabilities to try to thwart criminals, and some hold great promise, but when customers are deceived into transferring their money to criminals or mailing packages containing checks or sensitive consumer information is stolen from a post office, there are limits to what banks can do to protect consumers. Reversing this trend requires work in the following areas:
- Enhancing collaboration with law enforcement and regulators[6]
- Increasing consumer education
- Developing a national strategy for scam and fraud prevention and response
- Involving other sectors to protect consumers from scams
- Preventing risky data scraping practices
- Facilitating improved information sharing
Enhancing Collaboration with Law Enforcement and Regulators
The rising tide of fraud cannot be fixed by banks alone. The criminals executing this fraud need to be caught, prosecuted, and sentenced so that they no longer commit these crimes. Banks have a history of partnering with law enforcement and the public sector on education and outreach activities along with identifying potential improvements in addressing fraud.
Some of the losses Americans experience goes to US-based criminals, but large amounts are being transferred overseas and potentially by and to those who threaten our national security. The lack of a centralized fraud response and tracking capability within the US government hinders the ability to spot trends, track tactics, techniques, and procedures, as well as the ability to recover funds for Americans when fraud has been identified.
We applaud efforts by government agencies to educate the public regarding fraud and scams. The banking industry participates in both proactive and reactive initiatives through various agency projects such as the FTC’s Stop Senior Scams Advisory Group, the Federal Reserve Bank of Boston’s Scams Definitions and Information Sharing Working Group and the CFPB’s activity on elder fraud prevention tools.[7] We continue to support work on innovative programs to defeat fraud and recover funds.
To access the full statement, please click here.
[1] The American Bankers Association is the voice of the nation’s $23.7 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $18.8 trillion in deposits and extend $12.5 trillion in loans.
[2] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
[3] The Consumer Bankers Association is the only national trade association focused exclusively on retail banking. Established in 1919, the association is a leading voice in the banking industry and Washington, representing members who employ nearly two million Americans, extend roughly $3 trillion in consumer loans, and provide $270 billion in small business loans.
[4] Founded in 1927, the National Bankers Association is the voice for the nation’s minority depository institutions (MDIs), and the only organization focused solely on the survival and strengthening of MDIs. Its members include Black, Hispanic, Asian, Pacific Islander, Native American, and women-owned and -operated banks across the country, all working to help low- and moderate-income communities who are underserved by traditional banks and financial service providers. MDIs are located in 32 states and territories. Learn more at nationalbankers.org.
[5] Statement for the Record on Behalf of the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, and National Bankers Association before the Permanent Subcommittee on Investigations of the U.S. Senate Committee on Homeland Security and Governmental Affairs, May 21, 2024 https://www.aba.com/advocacy/policy-analysis/sfr-fraud-alert-zelle
[6] Read more in February 1, 2024, testimony before the Senate Banking Committee for a hearing titled “Examining Scams and Fraud in the Banking System and Their Impact on Consumers,” where ABA provided a comprehensive summary of the challenges fraud poses for consumers and the industry across the board and includes detailed suggestions and action items to accomplish this goal. See: https://www.aba.com/advocacy/policy-analysis/aba- testimony-on-scams-and-frauds-in-banking-system
[7] https://files.consumerfinance.gov/f/documents/cfpb_trusted-contacts-fis_2021-11.pdf
