GOP fraud plan: More tools for banks, no scam liability

• Key insight: The report gives banks funds-availability flexibility and information-sharing safe harbors while declining to shift authorized-scam liability onto them.
• What's at stake: The report signals which fraud bills have committee momentum and tells banks the line on reimbursing authorized scams is holding.
• Expert quote: Texas A&M law professor Christopher Odinet says the report treats a "very live policy debate" as though "it's settled."

Overview bullets generated by AI with editorial review.

House Financial Services Committee Republicans endorsed much of banks' fraud-fighting wish list this week in a partisan report featuring policy changes that would give financial institutions more tools against the multibillion-dollar scourge.

In the report, committee Republicans led by Chairman French Hill, R-Ark., signaled support for letting banks slow suspicious payments, providing legal cover to share fraud data and establishing a fraud-technology pilot for smaller institutions.

The committee's majority staff released the report, "Fighting Back: A Policy Framework for Combating the Rise of Financial Fraud & Scams," on Wednesday. It addresses unauthorized fraud, in which a bad actor takes money from the victim's account without the victim knowing (such as with a stolen credential), and authorized fraud, in which a bad actor tricks the victim into sending the money of their own volition.

The report from Hill and Dan Meuser, R-Pa., chairman of the Oversight and Investigations Subcommittee, contains 16 findings and 16 recommendations drawn from a year of hearings and roundtables with banks, law enforcement and telecom and social media firms.

The report endorses bills and rule changes pushed by bank lobbyists.

The report also tells banks that, despite lobbying efforts domestically by consumer advocates and precedent-setting changes abroad, the line between fraud and scams — the line separating what they must repay from what they need not — is staying put.

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What banks get

Most notably, the report suggests letting banks slow funds availability when they suspect fraud.

Federal rules generally require banks to make deposited money available quickly, which gives criminals a head start on moving stolen funds out of reach. To change that, the report endorses the STOP Payments Fraud Act, which would give banks more room to place holds.

That idea circulated as an unsponsored draft bill when the subcommittee held a hearing on fraud in March. Committee member Young Kim, R-Calif., then introduced it as a formal bill in June.

The Independent Community Bankers of America has pressed regulators on this matter, asking them to spell out banks' authority to hold suspicious deposits under Regulation CC, the rule that sets when deposited money must be made available.

The Wednesday report also backs the Bank Fraud Technology Advancement Act, which would create a fraud technology pilot for community banks.

The framework additionally calls for stronger legal protection for banks that share fraud information with one another. It treats guidance the Financial Crimes Enforcement Network, or Fincen, issued in June as a first step.

That guidance asserted that banks may share fraud data in near real time under Section 314(b), a provision of the USA Patriot Act that lets financial institutions exchange information about suspected fraud and money laundering.

The law does not cleanly support that assertion by a regulator about what banks are legally protected to do, so the report urges Congress to write the protection into statute such that a future administration cannot rewrite it.

The Bank Policy Institute has argued the same, telling bank regulators that fraud information-sharing needs a clear statutory safe harbor, not just guidance.

The line the report won't cross

In the report, Republicans recommended against shifting scam liability onto banks, diverging from the Democratic position and the direction in which other countries have moved in recent years.

Under U.S. law, banks must reimburse customers for unauthorized transactions, which are payments made by a thief who got into an account (for example, with stolen credentials). Banks generally do not have to cover authorized transactions, in which the customer gets tricked into sending the money.

The report keeps that line and rejects proposals to move authorized-scam losses onto banks. Making banks pay for authorized scams, the report says, would invite abuse, including customers falsely claiming they got tricked.

Committee Democrats are pushing the Protecting Consumers from Payment Scams Act, which would split the loss among the banks and other parties that handled the payment.

Supporters of that approach point to the United Kingdom, which in 2024 began requiring the sending and receiving banks to share the cost of reimbursing scam victims. That model has come to frame the U.S. debate.

Committee Democrats did not respond to a request for comment on the majority's report.

An unsettled debate, called settled

The report's lean toward leaving authorized-scam losses with customers is open to challenge, according to Christopher Odinet, a law professor at Texas A&M University who studies consumer finance and payments and has testified before the committee.

The split between authorized and unauthorized transfers is "defensible as an accounting convention but pretty increasingly indefensible as a loss theory," Odinet told American Banker.

The Electronic Fund Transfer Act was written in 1978, largely for ATM cards, and its test for whether a transfer was authorized now "tracks the plumbing of the scam rather than anything about the victim's actual consent," Odinet said.

A customer phished into typing credentials on a cloned bank site has protection because the criminal moved the money. A customer talked through a deepfaked phone call into pushing the payment is not.

"Same deception, same criminal, same money gone," Odinet said. The only difference is "whose fingers were on the keyboard."

Odinet voiced a sharper objection to how the report frames the choice. Congress in the 1970s "was just drawing a line when it came to who initiated the transfer," Odinet said, not making a considered judgment about modern scams.

Casting the 1970s law as drawing a careful distinction "is just retrofitting," Odinet said, which "takes what I view as a very live policy debate and makes it seem like it's settled."

On the rules about fund availability schedules, Odinet said the current regime exists because banks once used long holds as a "float and fee practice" that fell hardest on people living on the margins.

Any new authority to slow payments "just needs to be disciplined with some guardrails" from the Consumer Financial Protection Bureau, Odinet said. "The devil is in the details."

Reaction and what's next

The industry's trade groups, representing banks both big and small, broadly welcomed the committee's efforts.

The American Bankers Association said the report "recognizes that fighting fraud and scams requires a whole-of-ecosystem response" and backed the bipartisan SCAM Act aimed at fraudulent social media advertising. The Consumer Bankers Association also commended the committee.

The committee made "the right call" in declining to shift authorized-scam losses onto banks, according to a spokesperson for the Bank Policy Institute, or BPI.

Doing so "would not stop scams at the source" and would "lead to greater scam activity, because it would reduce customer incentives to remain vigilant," the spokesperson told American Banker. Shifting the losses would also "harm consumers and smaller banks by raising the cost of payment services."

The Independent Community Bankers of America, or ICBA, also opposed shifting scam losses onto banks along similar lines, according to Scott Anchin, the group's senior vice president of strategic initiatives and policy.

At some community banks, fraud losses "now exceed their loan losses," Anchin told American Banker.

Community banks welcomed the report's fraud-technology pilot because the most advanced detection tools are "often built and priced for the largest institutions," according to Anchin.

ICBA and BPI both backed the STOP Payments Fraud Act, which would amend funds-availability schedules. But the bill would not settle who is liable for a fraudulent check, so Anchin wanted regulators to clarify Regulation CC and address check-fraud liability alongside it.

On information sharing, BPI wanted the report to go further. Fincen's June guidance was "a critical step," but other regulators should "follow suit," and Congress should expand fraud-data safe harbors both between banks and "across sectors," the spokesperson said.

The report changes no law on its own; it simply signals which bills the majority will push and tells banks the GOP will hold the line on reimbursements.

Beyond that, the report has essentially no sway over how courts litigate ongoing scam liability matters, and regulators "will care some," Odinet said, "but probably not as much as the report authors would like."