Over the last several years, there’s been a change in the financial sector. As cash and checks have started to fall by the wayside, things like peer-to-peer payment systems and cryptocurrency have become more prevalent.
For many, these new payment methods have brought convenience. Unfortunately, they have also opened a new avenue for fraudsters and scammers to exploit. New scams like email phishing and impersonation scams are now commonplace.
Earlier this year, a Maryland woman found herself scammed out of $18,000. A spoof phone call mimicking a U.S. Customs Official led to her depositing the money into a Bitcoin ATM. Across the state, Marylanders lost over $160 million to the crimes last year.
As a member of the Maryland House of Delegates, my office is often on the receiving end of calls from constituents who have fallen victim to fraud and scams. Though we have emphasized consumer education and ensuring that Marylanders know how to protect themselves, there’s still much more that can be done.
The ongoing discussion in the United States Senate over fraud and scams and the best ways to eliminate them is an important one. Just as important is the Senate embracing the right solutions.
For the last several months, the spotlight has been on fraud and scams on peer-to-peer platforms like Venmo and Cash App, with a particular focus on Zelle. Some Senators have introduced a proposal that would shift attention away from scammers and fraudsters and instead place blame on peer-to-peer platforms. The legislation in question would greatly expand the liability of peer-to-peer platforms, including Zelle banks, to reimburse consumers who lose money due to scams and fraud.
This proposal, while well-intended, is bad for Maryland for a few reasons.
Over 95 percent of the banks that offer Zelle are local banks and credit unions. Maryland alone has 20 of these institutions. Shifting more liability for fraud and scams to these smaller local banks would threaten their ability to continue offering peer-to-peer payment systems. It would likely force many to begin charging for what has been a free service or stop offering it at all. In response, some consumers would likely take their banking business to larger entities that could better absorb new costs.
Importantly, it wouldn’t just be banks who would suffer. As a pastor at a church that accepts tithes and donations through Zelle and other peer-to-peer platforms like Venmo and Cash App, we could lose access to this tool and be forced to use other platforms that cost money.
Perhaps the biggest issue is that the legislation fails to do anything to reign in criminals, who are the real cause of fraud and scams. The bill does not offer any help to victims of scams that involve crypto, checks, or gift cards. Even worse, it creates a mandate that platforms and banks fund the actions of criminals. Why would crooks stop preying on Marylanders when the federal government has mandated that banks cover their crimes?
This is not to say that peer-to-peer platforms aren’t a piece of the puzzle when it comes to fighting fraud. They are, and the best are already doing a lot. Zelle banks reimburse beyond what the law requires. They also offer educational tools and routinely remind their users to only send money to people who are known and trusted. As a result, just three percent of Zelle users have reported being the victim of a scam, compared to five percent with other platforms.
The Senate is right to try and tackle the growing problem of fraud and scams, but we need our leaders like Senator Chris Van Hollen to push the conversation in a new direction. Fraud and scams don’t originate on peer-to-peer platforms nor are they limited to these services. Legislation to stop these crimes needs to reflect these truths.
The Senate must look beyond peer-to-peer platforms and take a broader, more holistic approach to fighting fraud and scams. This more comprehensive approach would give law enforcement more tools to fight criminals and provide additional financial education for consumers about how to protect themselves against scams and fraud. Otherwise, this problem will only grow.
Delegate Jeffrie E. Long, Jr., represents District 27B in Calvert County and Prince George’s County in the Maryland House of Delegates.
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