WASHINGTON– The Defense Credit Union Council has sent a letter to Sens. Richard Blumenthal (R-CT) and Elizabeth Warren (D-MA) expressing opposition to the Protecting Consumers from Payment Scams Act, which if enacted would expand the scope of the Electronic Fund Transfer Act (EFTA).
The DCUC said it has “significant concerns” about the potential impacts of the proposed changes, arguing expansion of EFTA could “hinder credit unions' ability to offer innovative payment solutions, which are crucial for competing with larger financial institutions and meeting the needs of service members and their families.”
The Defense Council told Congress its member CUs are committed to consumer protection and fraud prevention and to investing in advanced security technologies, but that extending liability under EFTA for fraudulently induced transfers could create “financial challenges for smaller credit unions and may not effectively address the complex nature of modern scams.”
Instead of enhancing protection, the legislation may inadvertently increase consumer risk by failing to address the sophisticated methods employed by fraudsters, DCUC wrote.
‘Continuous Investment’
“DCUC’s members continuously invest in payment security and fraud mitigation technologies to shield their members from fraud and scams,” DCUC Chief Advocacy Officer Jason Stverak said in a statement. “However, our members' capacity to absorb losses for authorized payments is limited. DCUC member institutions are significantly smaller and particularly sensitive to new regulatory expectations that modify liability under the EFTA and Regulation E.
“Moreover, a substantial portion of scams originate outside of the financial sector, with criminals targeting online marketplaces, cryptocurrency investments, and other forms of non-regulated sectors —all areas beyond our control,” Stverak continues. “Therefore, the legislative proposal to extend liability under EFTA to include fraudulently induced transfers initiated by consumers is alarming to our members.”
‘Comprehensive Approach’ Recommended
DCUC called on the senators to take a more comprehensive approach to combating fraud and called for the proposal a private-public sector task force under the Treasury Department to improve scam prevention through collaboration and innovative strategies.