Credit card companies are responsible for fraud losses, according to federal law. But there’s no penalty for big banks when reputable victims wire thousands of dollars to scammers. California lawmakers just passed a bill that could change that.
Alice Lynn has been telling her story a lot lately.
“I thought about ending my life,” Lynn said while testifying before the Assembly. “At my age, I don’t have a second chance.”
The Widow from Southern California – who cares for a disabled son – befriended a stranger through a messaging app, where he eventually convinced her to transfer her entire savings to him in a cryptocurrency scam.
“I went to the bank seven times,” Lynn explained during a recent Senate hearing.
She says the bank missed several signals and opportunities to stop her.
The bank says it tried.
Legislator joins the fight
When retiring Sen. Bill Dodd (D-Napa) heard Alice’s story, he decided to tackle elder financial abuse as one of his last acts in office.
“There are still banks that are almost aiding and abetting scammers,” Dodd said.
Dodd introduced Senate Bill 276, which was specifically tailored to Alice’s case.
The bill would require banks to establish an emergency contact program for elderly account holders and dependent adults — someone who can authorize a transfer if the bank suspects fraud or financial abuse by the elderly.
“[The bank] has not even contacted my daughter, who is the joint account holder, Alice explained in her testimony before the Senate. “If she had the last [transaction]then they would have saved me $200,000.”
The bill also gives banks the authority to delay transactions over $5,000 for three business days if they suspect fraud.
Banks oppose bill
The banking industry had its own concerns and opposed the first version of Dodd’s bill, worried about the liability that would come with slowing down transactions and keeping people from accessing their money.
“I would be very upset if a teller who is still in college told me that I can’t withdraw money from my own bank account,” Jason Lane of the California Bankers Association said during the Senate hearing.
So Dodd went back to the negotiating table and made major changes to his bill, limiting the liability of banks and delaying the bill’s implementation until 2026.
The banking industry dropped its opposition to the bill and it passed both the General Assembly and the Senate with bipartisan support.
Still, lobbyist and law professor Chris Micheli explains that the opposition may not be over yet.
“I would be surprised if a federally chartered bank did not challenge this law,” Micheli said.
Federal law protects national banks – such as Chase, Bank of America and Wells Fargo – from certain state regulations, meaning California law may not be enforceable against federal banks.
For example, when Alice sued her bank under current California law, her bank took the case to federal court, where state law may not apply.
“So what’s the point of this bill if it doesn’t have any effect by itself?” CBS News California asked Micheli.
“It could start a conversation at the federal level and in other states,” Micheli explained, noting that the law will be enforceable unless or until it is challenged.
What is the status of Dodd’s bill?
Ultimately, Micheli says, it could push Congress to act and create 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 lead to a change in policy across the country?” CBS News California asked.
“I really think so… because they want to protect their elders as well,” Dodd said.
In a rare move, a federal judge recently denied a motion by Alice’s bank to dismiss her case. Her case will continue in federal court. The next hearing is in November.
Meanwhile, Dodd’s bill is on the governor’s desk, with a deadline for signing it Monday.
Julie Watts
