Regulation E and P2P Payments Fraud

Position

• With a direct stake in the security of consumer financial transactions, ICBA and the nation’s community banks are outraged by the increase in fraud, including fraud that abuses money-transfer services provided by P2P platforms.
• ICBA supports the full application of Regulation E and all consumer regulations to payment platforms/apps that allow consumers to move money. ICBA further supports requiring P2P technology vendors to take steps to maximize consumer awareness of fraud schemes and implement safeguards to reduce consumer approvals of fraudulent transactions without creating delays in consumer access to their funds.
• ICBA opposes “unlimited liability” for P2P fraud under Regulation E as it would have a chilling and disproportionate impact on community banks.
• ICBA vehemently disagrees with the CFPB’s interpretation that fraudulently induced transactions approved by consumers are considered unauthorized. The CFPB’s position contradicts existing federal laws, which focus on unapproved transactions.

Background

Cyber-related scams have become more sophisticated, and consumers are falling prey to both authorized and unauthorized transactions scams perpetrated over P2P payments services.

While Regulation E dictates a financial institution’s duty regarding unauthorized transactions, regulators are considering widening the scope of Regulation E by requiring banks to reimburse customers for authorized transactions that result in fraud losses. Widening the scope of regulation E will result in unlimited liability imposed on community bankers, an unacceptable result that would damage their ability to serve consumers.

Regulations and knee-jerk restrictions are not a solution because they will never keep pace with evolving fraud and will disrupt banking services, forcing consumers to look to nonbank money transmission services that operate outside of the banking sector.

Community banks continue to stand strong against fraudsters and work hard to protect their customers against these criminals on money-transfer platforms. Community banks follow strict federal electronic funds transfers regulations; offer educational resources to help customers understand and avoid potential scams; and, when fraud does occur, work with customers to mitigate the impact and determine next steps.