CFPB's Chopra Calls Level of P2P Fraud 'Frightening'

Source: American Banker

The Consumer Financial Protection Bureau is exploring ways to fight a massive uptick in fraud in real-time payments, Director Rohit Chopra said Wednesday.

Speaking remotely at an event celebrating the nonprofit Public Citizen's 50th anniversary, Chopra said the CFPB is looking at the framework of the Electronic Fund Transfer Act to determine how it should apply to peer-to-peer payment providers such as Zelle, PayPal's Venmo and others. The law's implementing regulation, Regulation E, provides specific protections to consumers when they transfer funds electronically. 

Despite the increase in fraud, financial institutions have long claimed they cannot be held liable when a consumer incorrectly sends a payment to the wrong person or is tricked into sending a payment that later turns out to be a scam.

"The level of sophistication and technology use is really frightening … because there's not really that moment to hold or freeze or take back" the money, Chopra said of the tactics used by criminals to defraud consumers. "The way in which individuals are defrauded, it's become difficult to crack down."

Banks and credit unions, and their trade groups, have said they will sue the CFPB if it tries to assign broad liability for fraudulent payments that were authorized by consumers. Without specifically stating what the CFPB plans to do, Chopra implied that there are "small ways" to ensure that real-time payment providers at least investigate consumer allegations of fraud.