Legislation claiming to tackle fraud costs “instead threatens to upend the financial services marketplace as we know it, with community institutions like credit unions—and the people they serve—hardest hit.” That’s the assessment shared by America’s Credit Unions Senior Vice President of Advpcacy Greg Mesack in CUInsight Tuesday.
Credit unions have come out in strong opposition to House and Senate bills that would expand liability under the Electronic Funds Transfer Act to financial institutions.
“Let’s take a second to think about what this extreme shift in liability and costs would mean … A credit union would be responsible for losses on undelivered goods, misdirected payments due to consumer errors, and other transactions due to no fault of the credit union,” Mesack wrote, adding, “this bill fundamentally fails to recognize root causes of rising fraud costs and how to address it.
“Instead, credit unions would foot the bill for fraud in areas it has nothing to do with, and this legislation would neither prevent fraud nor incentivize coordination between regulators, law enforcement, or other entities,” he notes.
Mesack added that these increased costs would dwarf the increased costs that would result from proposed limits to debit and credit interchange fees.
“The proposed plan isn’t sustainable, does not tackle the heart of the problem, and it’s certainly not the kind of policy that increases financial inclusion,” he wrote.
Mesack added that the real solution is preventing fraud before it occurs with more resources for law enforcement, more education for consumers, and creating a level playing field between insured depository institutions and under-regulated companies.
