Acting Comptroller of the Currency Michael Hsu indicated he supports requiring banks to reimburse customers tricked into sending money to fraudulent accounts.

Hsu Remarks: In a speech on artificial intelligence and fraud, Hsu said:

  • Under a new policy in the United Kingdom, the customer's bank and the receiving bank must reimburse defrauded customers for losses, with the reimbursement cost split 50-50 between each bank.

  • This arrangement incentivizes banks to develop and implement effective fraud controls.

  • This liability model deserves greater discussion in the United States.

  • In cases where AI plays a role in the fraud, splitting the liability evenly among the customer’s bank, the receiving bank, and the AI platform is worth considering.

Fraud Liability Debate: Hsu’s remarks are the latest salvo in the debate over who is liable for customers duped into authorizing payments to scammers, which has largely been centered on fraud conducted via peer-to-peer payments apps.

  • Sen. Elizabeth Warren (D-Mass.) in 2022 issued a report calling on the CFPB to strengthen Regulation E to require banks to reimburse customers who authorized fraudulent payments.

  • In response, ICBA said it opposes unlimited liability for P2P fraud and encouraged policymakers to focus on the fraudsters themselves.

Outlook: ICBA will continue raising concerns with policymaker calls for expanding legal liability to reimburse consumers for authorized transactions.