29 THE NAFCU JOURNAL NOVEMBER–DECEMBER 2022 GET THE LATEST NEWS ON COMPLIANCE TOPICS The NAFCU Compliance Team regularly writes about different Consumer Financial Protection Bureau topics, including Regulation E, in the compliance blog located at www.nafcu.org/compliance-blog. Select “Accounts,” in the “Categories” menu at the right of the page to find CFPB-related articles. EFTs are initiated using the access credentials for the real account. In this case, the member did not authorize the EFTs and received no benefit from the transaction, Regulation E limits liability to the member. However, if the member agrees to deposit a check for someone, withhold some funds for their own benefit, and send another amount back to the person, the member is responsible for the full amount because the transaction was authorized by the account holder and anticipated gain from the transaction. “If the CFPB changes the language of Regulation E and significantly undermines the language in the definition of an unauthorized EFT in a manner that weakens the bulwark this language provides against the moral hazard problem, this will significantly degrade a credit union’s ability to manage fraud risk associated with EFTs,” said Thomson. “It may significantly increase the amount of fraud experienced by the credit union and undermine the economic viability of offering EFT and P2P payment systems.” Member Involvement Essential “We cannot address fraudulent activity alone,” said Doug Wright, chief financial officer for Mission Federal Credit Union. “Consumers must be our first line of defense by reviewing their statements and evaluating transactions and potential recipients carefully.” It’s also important for members to be aware of potential fraud, understand that credit union staff will not call for personal information including access credentials and take steps to prevent access to their accounts. “However, if CFPB changes the language to remove liability for their actions, there is little incentive to be vigilant,” he said. “P2P investigations will continue to be challenging because credit unions have no visibility into the transactions, and we do not know what steps services such as Venmo take to mitigate risk.” Mission Fed has taken steps to minimize fraud loss while still providing excellent member service. “We have invested in better tools, using artificial intelligence and machine learning to review transaction activity, and we’ve hired more staff,” said Wright. Over the years, Mission Fed staff involved in fraud monitoring and investigations has grown from one or two people 20 years ago to 10 to 12 people in recent years. “You must have human intervention to monitor and review flagged transactions to determine if it is suspicious. It’s part of balancing the need to provide reasonable, quality member service with the need to protect the credit union from fraud loss.” While NAFCU and other industry associations are actively advocating for reasonable updates to guidance that reflect the risks for increased fraud with new technology and minimization of consumer liability, it is important for individual credit unions to act as well, suggested Wright. “We need to educate our employees and our members to make sure our side of the story is told, and we need to take the message to the community as well,” he said. “As fraud risk increases and if CFPB guidance changes, credit unions may have to spend more money on tools and staff to monitor transactions, and we may have to tighten controls to stop some transactions. This could impact our members, which none of us want to happen.” “ Passing up the opportunity to offer this innovative product runs the risk of losing members and revenue to fintechs or other institutions offering it. We tell credit unions to evaluate it carefully to decide if it is right for their organizations. ” DOUG WRIGHT, CHIEF FINANCIAL OFFICER, MISSION FEDERAL CREDIT UNION
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