Credit card companies are liable for fraudulent losses, according to federal law. But there is no punishment for the big banks when their respected victims send thousands of dollars to the scammers. California lawmakers just passed a bill that could change that.
Alice Lynn has been telling her story lately.
“I thought about ending my life,” Lynn said in testimony before the Assembly. “At my age, I don’t get a second chance.”
At Widow of Southern California – who cares for his disabled son – befriends a stranger in a messaging app where, over time, he convinces her to wire him his life savings in a cryptocurrency scam.
“I went to the bank again and again, seven times,” Lynn explained during a recent state senate hearing.
He said the bank missed several red flags and an opportunity to stop him.
The bank said it was trying.
Lawmaker joins the fight
When out State Sen. Bill Dodd (D-Napa) heard the story of Alice, he decided to address the financial abuse of the elderly as one of the last actions in the state office.
“There are still banks that are almost aiding and abetting … scammers,” Dodd said.
Dodd introduced Senate Bill 276 that was relevant to Alice’s case.
The bill would require banks to create an emergency contact program for elderly account holders and dependent adults — one that would approve transfers if the bank suspects fraud or financial abuse.
“(The bank) didn’t even contact my daughter, who is a joint account holder, Alice explained in her senate testimony. “If they even stopped (the) last transaction, they would have saved me $200,000.”
The bill also authorizes banks to suspend transactions of more than $5000 for three business days if they suspect fraud.
Banks fight the bill
The banking industry has its own concerns, fighting early versions of Dodd’s bill because of concerns about liability for delaying transactions and keeping people out of money.
“I think I’m going to be upset if a teller who works at a college tells me I can’t withdraw my own money,” Jason Lane with the California Bankers Association said during the senate hearing.
So Dodd went back to the bargaining table, making major amendments to his bill, limiting banks’ liability and delaying the bill’s implementation until 2026.
The banking industry overcame opposition to the final bill, and it passed the Assembly and Senate with bipartisan support.
Still, lobbyist and law professor Chris Micheli explained that the opposition may not be over.
“It would be surprising if a federally chartered bank didn’t challenge this law,” Micheli said.
Federal law shields national banks — like Chase, Bank of America and Wells Fargo — from some state regulations, meaning California law may not apply to federal banks.
For example, when Alice sued her bank under current California law, her bank sent the case to federal court where state law may not apply.
“So what’s the point of this bill, if it’s just toothless?” CBS News California asked Micheli.
“It’s possible to start that conversation at the federal level and among other states,” Micheli said, noting that he would do so unless or until challenged.
What is the status of the Dodd bill?
In the end, Micheli said he could get Congress to act and enact a federal version of the state law — allowing Dodd to leave a lasting legacy for his last act in office.
“Do you think this will ultimately change policy across the country?” CBS News California asked.
“I really do … because they want to protect the seniors as well,” Dodd said.
In a rare move, a federal judge recently denied a motion by Alice’s bank to have her case dismissed. Her case will move forward in federal court. The next hearing is in November.
Meanwhile, Dodd’s bill sits on the governor’s desk, and the deadline to sign it is Monday.
Julie Watts
