Some Consumer Protection Advocates Want 1978 Banking Law to Be Updated to Protect More Victims of Fraud

As data breaches proliferate and fraud losses rise, some consumer protection advocates want to update federal banking laws to include victims tricked into sending money to scammers.

Victims like Carly Hurt, a 22-year-old Virginia woman who said she lost $12,000 to someone posing as a bank employee on a spoofed phone call earlier this year. 

For Hurt, the saga began when her phone rang in January, showing a Chase Bank number. She said the man on the line said he was with the fraud department and proceeded to verify her banking information without her needing to provide her personal details. 

He knew “my address, my debit card number and my account and routing numbers for both of my accounts,” she told News4, adding, “I did not have to confirm anything with this individual.”

The caller said the bank had spotted fraudulent activity on her account. Hurt checked her banking app and found an unapproved charge. Next, the man told her someone was trying to withdraw the $12,000 she and her husband had been saving for a new house. And that to protect it, the bank needed to “reverse wire transfer” the funds to a new account in her name. 

“My guard was let down at that point because there was fraud,” Hurt said, referring to the unapproved charge. 

The man walked her step-by-step through the process of wiring the money from her old account into a new one, she said. Once she hit send, the man hung up. When she called the number back, Hurt said she was connected to the real Chase fraud department.

The bank did try to recall the funds, but Hurt said that’s where the help ended, because – to Hurt’s surprise – there’s little relief for people tricked into sending money to scammers. 

“They said, ‘We acknowledge that you are a victim of fraud but we will not credit you the money because you voluntarily sent it,’” Hurt said. 

By clicking send on that transaction, Hurt not only lost her money, but lost her protection under federal law when it comes to banking fraud. That’s because under a 1978 law called the Electronic Fund Transfer Act (EFTA), only certain unauthorized charges are protected, such as when someone steals a debit card to make purchases. 

Experts explain the law doesn’t cover people tricked into sending money, because that’s considered an “authorized” payment. Nor does it cover wire transfer fraud. 

“There are unfortunate gaps in this law that leave consumers at risk,” said Rachel Gittleman, the financial services outreach manager for the Consumer Federation of America. 

Gittleman said even though scams have evolved, the laws protecting consumers haven’t kept pace. She said that’s especially troubling in a time of data breaches, which can leave a person’s financial privacy at risk. Her organization is pushing to update banking laws like EFTA to include wire transfers and protections for people tricked into sending money. 

“They’re being coerced and deceived into giving consent and transferring funds, so it’s an unauthorized transfer because they’re not in good faith giving consent,” she said. 

Consumer fraud continues to rise, with Americans losing nearly $8.8 billion to scammers last year, according to the Federal Trade Commission. In 2022, consumers lost $2.6 billion alone to impostor scams like Hurt’s. That figure is up from $2.4 billion in 2021. The FTC also reports that of the 2.4 million consumer fraud reports it received last year, imposter scams were the most common.

The American Bankers Association declined an interview but pointed News4 to its prior statements on why reimbursing customers who lose money to this type of fraud is complicated.

“Banks …  typically have no knowledge about the relationship between the sender and the recipient, the reasons the consumer is sending money, or the context of the payment,” the ABA said in an October 2022 letter to the Consumer Financial Protection Bureau.

The ABA added, “Shifting liability for payments the customer has authorized and later claims were made to a scammer will harm consumers in the form of higher costs, fewer options and less competition.”  

That’s why banks have so far focused on educating their customers about how to spot these schemes, such as through the ABA’s #BanksNeverAskThat campaign. 

Hurt, who said she and her husband hoped to use the money toward a new home with their baby, still doesn’t know how the fraudster obtained her private banking information or if it was part of a breach. She said she also knows it’s unlikely she will see her money again. 

Though Chase tried to recall the wire transfer, Hurt said it was only after News4 got involved that Chase filed what’s called a “hold harmless letter” required by the other bank to try to recover her funds. 

In a statement to News4, Chase said her case is “ongoing” and “if funds are obtained, we will automatically credit her account.” 

Until then, the stay-at-home mom and fulltime student said she’s gone back to work to try and recoup what her family lost. 

This story was reported by Susan Hogan, produced by Katie Leslie, shot by Lance Ing and Steve Jones, and edited by Steve Jones.