Fraud’s New Frontier Payment fraud is escalating at an alarming pace — affecting consumers, businesses and financial institutions across every payment channel. While there’s no single definition, this Request for Information (RFI) defines payments fraud broadly as the use of deception or manipulation to make or receive payments for personal gain — including scams, which now account for a growing share of reported losses. Between 2020 and 2024, non-card payments fraud losses surged by 271%, and Suspicious Activity Reports for check, ACH and wire fraud rose nearly 500%. Check fraud, in particular, has reemerged as a major threat — even as check usage declines — due to the vulnerability of paper checks to theft, alteration and misuse of sensitive information. Addressing payment fraud is complex: It often spans multiple rails, institutions and regulatory jurisdictions. That’s why the Federal Reserve, FDIC and OCC are now seeking stakeholder input on whether — and how — they should take additional coordinated action to mitigate fraud risks, enhance industry collaboration and support safer payment ecosystems. On June 16, the OCC, the FDIC and the FRB issued a RFI — one in which the agencies collectively asked the public to weigh in on how they (individually or collectively) could help turn the tide on fraud involving checks, ACH, wire and instant payments. The RFI seeks comments on payment fraud generally and floats several possible options (viz., new interagency guidance, expanded education efforts, centralized fraud data collection, changes to Reserve Bank procedures and even tweaks to Regulation CC — including revisiting the “reasonable cause to doubt collectability” exception and check hold timelines). It also specifically seeks public feedback on five potential areas “for improvement and collaboration that could help mitigate risk of payment fraud.” First, the agencies look to external collaboration efforts. Collaboration is critical to meaningfully addressing payments fraud, which is increasingly complex, cross-channel and fast-moving. The Federal Reserve, FDIC and OCC are well-positioned to convene and lead coordinated efforts that foster consistency, improve data quality and enhance fraud response. These collaborative efforts relate to education, regulation, data collection and Federal Reserve tools and services. As part of collaboration, the RFI seeks comments on education related to payments fraud. Education is critical to mitigating and preventing fraud. The agencies argue that current resources fall short and tend to be passive, reactive and fragmented. They hope to receive comments on how to enhance consumer, business and industry education on payment fraud. Next, the RFI seeks comments on the “Reasonable Cause to Doubt Collectability” exception under Regulation CC. The concern is that the current framework is outdated, lacks clarity on supporting evidence and creates customer confusion and frustration. Therefore, the RFI examines how regulation and supervision can help mitigate the harms from payments fraud, including opportunities the board may have related to check processing and modernization. With payments fraud, there are many different avenues to collect and report data, but very few are centralized and timely enough to effectively mitigate fraud. In order to prevent fraud, the agencies must define fraud. As part of the RFI, the agencies propose adopting a clearer definition of fraud terminology to be used across financial institutions. The RFI suggests a more centralized, real-time fraud intelligence hub to reduce fragmentation across fraud databases and platforms. The goal is to centralize, standardize and modernize data collection and information sharing. Lastly, the Agencies seek to modernize the Federal Reserve Bank’s role in payments fraud mitigation. This may be achieved by expanding fraud reporting requirements across payment rails, establishing uniform fraud mitigation benchmarks and providing feedback loops and system-level insights to financial institutions. The Federal Reserve is uniquely positioned to enhance collective industry defenses by implementing consistent standards and improving visibility across payment channels. The alarming surge in payments fraud necessitates unified action by the agencies. While there have been some state-level efforts to thwart payments fraud, this is the first true effort by the federal financial agencies in recent years to work toward the modernization of strategies to combat the ever-growing fraud problem. This RFI represents a crucial step toward the unified goal of mitigating and preventing payments fraud through modernization and centralization. CAN REGULATORS KEEP UP WITH THE FRAUD FRENZY? By Carol Ann Warren, Associate General Counsel, Compliance Alliance Colorado Banker 22
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