Senate Needs to Protect Small Businesses When Regulating Peer-to-Peer Payments
/by Michael Cardin
In late July, the Senate Permanent Subcommittee on Investigations, led by Connecticut Senator Richard Blumenthal, held a hearing about fraud and scams on peer-to-peer payment platforms.
The Senator is right to his use office to try and protect consumers from fraud and scams that are costing them thousands of dollars, but his solution is misguided. As a small business owner who utilizes peer-to-peer payment platforms, I hope he changes course.
In the quest to fight scams, Senator Blumenthal and many of his colleagues are looking at the issue upside down. Lawmakers should be going after criminals who steal people’s money, but instead, they are attacking payment platforms like Zelle.
The Senators are ignoring the fact that Zelle already offers multiple layers of scam protection. This includes alerts and messages to be aware of scams, 100 percent reimbursement for verified unauthorized transactions, and even reimbursements for certain imposter scams.
Following the hearing, Senators Blumenthal and Elizabeth Warren from Massachusetts released new legislation, the Protecting Consumers from Payment Scams Act. The bill’s name is a misnomer, because there is virtually nothing in it that actually protects consumers from scams.
Instead of targeting scammers, the Senators’ bill would shift liability for scams onto payment services. It completely misses the mark. Scams and fraud begin long before a consumer hits send on a peer-to-peer payment platform. Targeting the services instead of the criminals does not solve any issue. It only creates new ones.
The proposed bill would require banks to reimburse users for authorized transactions in addition to unauthorized transactions. Most of the banks on the Zelle network are smaller community banks and credit unions. These institutions cannot afford to take on new liabilities. As a result, local banks would have to start charging for Zelle, change how it’s used, or eliminate it as an offering altogether. This would not only put them at a competitive disadvantage to the banks that can absorb new costs, but it would create problems for small businesses like mine.
Access to Zelle and other peer-to-peer services is a key component of my business. These services have become the new cash. Because Zelle is linked to my bank, it doesn’t take any fees that eat into my profits, unlike credit cards. Changes that would force my bank to stop offering Zelle or to start charging for it would hurt my business and many others.
“In a sign of just how misguided the new Senate bill is, many have suggested it will actually lead to more scams.”
Senator Blumenthal and others must get their priorities in place and start pushing policies that will stop the crooks. In a sign of just how misguided the new Senate bill is, many have suggested it will actually lead to more scams. For a fraudster, knowing that the government is forcing banks to cover victims’ costs is a green light to keep preying on unsuspecting people.
I appreciate our Senators’ focus, but our leaders have to get the solution right. Instead of targeting platforms, they must target the criminals. They must give law enforcement the tools they need to find and prosecute fraudsters and make it harder for scammers to hide their identifies.
The Senate should stop the scammers and fraudsters, not those of us who use the payment tools to make a living.
Michael Cardin is a small business owner from Ellington.
