Government, Banks Push for Action on Internet Scams

Americans are losing billions to online scams while the government and banks push each other to take action.

At a Glance

Nearly 1 in 3 Americans have been scammed in the past year, with an average loss of $1,600 per person.
Consumers reported over $10 billion in losses from online scams last year.
The most common type of fraud is bank or credit fraud, affecting 26% of Americans.
Elder fraud complaints and losses have risen significantly.
Both banks and the government are calling for action from each other.

The Scam Epidemic

The United States is facing a crisis as online scams continue to devastate American families and drain billions from the economy. With an aging population and rapidly advancing technology, scammers are finding more sophisticated ways to target vulnerable individuals. The impact is staggering: nearly one-third of Americans fell victim to scams in the past year alone, with average losses of $1,600 per person.

The scope of the problem is further illustrated by federal data, which shows that consumers reported over $10 billion in losses from online scams last year. Of particular concern is the $210 million lost through payment apps, highlighting the evolving nature of these fraudulent schemes.

Targeting the Vulnerable

While scammers don’t discriminate, certain demographics are particularly at risk. Older Americans, who often have substantial savings and may be less tech-savvy, are prime targets. The impact on this group can be especially devastating, as they have less time to recover financially from such losses.

Bank and credit fraud top the list of scams, affecting 26% of Americans overall and a whopping 37% of those over 65. Romance scams, while less common, disproportionately target younger individuals, with 10% of 18-29 year-olds falling victim compared to just 4% of those over 65.

A System Overwhelmed

Law enforcement and the justice system are struggling to keep pace with the flood of scams. Many police departments don’t prioritize financial fraud cases, and victims often feel discouraged from reporting. The sheer volume of scams, particularly those originating overseas, has left authorities overwhelmed.

Even when cases are pursued, convictions are rare. The rapid conversion of stolen funds to cryptocurrency or their transfer to foreign accounts makes recovery extremely difficult. This reality has led to a finger-pointing match between the government and the banking industry over who should bear responsibility for protecting consumers.

Banks vs. Government: Who’s Responsible?

As the scam problem persists, the government and the banks are reportedly placing the responsibility of fixing the issue with each other.

The banking industry, represented by the American Bankers Association (ABA), is calling for a comprehensive federal response to combat online financial fraud. Their proposals include developing a national strategy, creating new federal offices, and updating fraud laws to address modern scamming techniques.

Meanwhile, the government, particularly the Consumer Financial Protection Bureau,has pushed for banks to do more to compensate victims. It is investigating major banks like JP Morgan, Bank of America, and Wells Fargo regarding their handling of disputed transactions on platforms like Zelle. This scrutiny comes as reimbursements for disputed Zelle transactions have decreased from 62% in 2019 to just 38% in 2023.

Proposed Solutions

As the debate continues, various solutions are being proposed. A bill aims to update the 1978 Electronic Fund Transfer Act, potentially making financial institutions share more responsibility for fraud losses. The ABA suggests creating a federal database of reported spam text messages to help banks monitor scams and educate customers.

A coordinated, multi-faceted approach involving both the public and private sectors may be necessary to combat this growing threat. As technology evolves, so too must our strategies for protecting American consumers from sophisticated scammers who show no signs of slowing down.