Page 5 - August 22, 2024 Bulletin

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must assess borrowers’ ability to repay loans, provide informative One challenge cited is raising awareness among customers about the
and accurate disclosures, and limit “balloon” payments that prevent prevalence of scams. “Despite efforts to educate consumers, financial
buyers from even getting the full legal title of their homes, according institution representatives told us many consumers believe they
to the bureau. will not fall victim to fraud,” GAO said. “Institutions reported that
consumers often ignore scam warnings until it is too late.”
The CFPB also released a separate report concluding that contract-
for-deed loans are disproportionally concentrated in low-income, Another challenge is preventing customers from sending fraudulent
Black, Hispanic, immigrant and some religious communities. The payments even after they have been warned about the scam.
report also concluded that the deals “can harm housing markets by “Sophisticated social engineering tactics manipulate victims,
causing or perpetuating substandard housing stock, inflated home sometimes making them unwilling to believe they are being
prices and less access to mainstream mortgage credit.” scammed,” the agency said. “Further, financial institutions may
hesitate to intervene, such as by refusing to complete the transaction,
Read more: https://files.consumerfinance.gov/f/documents/cfpb_
contract-for-deed_advisory-opinion_2024-08.pdf for fear of losing the customer.”
The report noted that financial institutions seek to reduce scams
FDIC Alerts Banks About New through consumer education, staff training, and process and

QPAM Exemption Changes technology solutions. However, financial industry representatives
emphasized that the problem requires a multisector approach.
The FDIC issued a financial institution letter to notify banks about Telecommunication and social media companies could play a
recent amendments to the prohibited transaction class exemption greater role in reducing these scams by making it more difficult
84-14 rule, better known as the QPAM exemption. for scammers to communicate with potential victims, they said.
Law enforcement also could play more of a role in deterring scams
The Department of Labor in April adopted amendments to the involving fraudulently induced payments by increasing the number
exemption that, among other things, require QPAMs to register of investigations and prosecutions of such payments.
with DOL through a one-time notice that the QPAM is relying on
the QPAM exemption. The FDIC noted the new requirement in its Read more: https://www.gao.gov/products/gao-24-107107
letter, pointing out that banks have until Sept.15 to notify DOL of
their intent to rely upon the exemption. Debit Card Use Grew in 2023
Other amendments made by the DOL included an update of the list U.S. consumers are using debit cards for more transactions and
of crimes to expressly include foreign crimes, an expanded list of the spending more when they make purchases, according to a new
circumstances that may lead to QPAM ineligibility, and a one-year survey of banks and credit unions by the debit payments network
winding down period to help pension plans and IRAs transition to a Pulse. The survey found that debit transactions and dollar volume
new asset manager in the event a QPAM becomes ineligible. grew by 4% from 2022 to 2023.
Read more: https://www.fdic.gov/news/financial-institution- Active cardholders completed 34.6 transactions per month in 2023,
letters/2024/qualified-professional-asset-manager-qpam-exemption including 30.7 point-of-sale, or POS, transactions, two account-
to-account transfers and 1.9 ATM transactions, according to Pulse.
Financial Institutions Face POS use grew at an average annual rate of 4.4% between 2018 and
Challenges in Warning 2023. The average debit ticket size was $46.89 in 2023, an average
Consumers About Payment increase of 3.4% per year over the period. Annual spending per
active card was $17,274, up an average of 8.1% per year during the
Scams same period.

Financial institutions face a challenge in effectively conveying to Card issuers reported a debit penetration rate – the percentage of
consumers fraud warnings and helping consumers better understand accounts with an associated debit card – of 80.5%, improving by an
how scams play out, according to a recent report on payment scams average of 0.6% per year between 2018 and 2023. Debit card active
authored by the Government Accountability Office. The report rates – the percentage of debit cards used regularly – declined 0.2%
covers the characteristics of payment scams and the role of financial per year to 66.3% in 2023.
institutions in preventing, detecting and recovering from scams. As Mobile devices originated 7% of all debit transactions and 15%
part of its research, the GAO interviewed representatives from banks of in-store contactless payments in 2023, according to the survey.
and credit unions about the challenges they face in mitigating the Apple Pay was the most popular digital wallet.
problem.
Read more: https://www.pulsenetwork.com/public/debit-issuer-
study/

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