RICHMOND, Va.—NAFCU, CUNA, and the Virginia Credit Union League have filed a joint amicus brief in the 4th Circuit Court Appeals case, Studco Buildings Systems v. 1st Advantage Federal Credit Union.
The case centers on a fraud credit unions and other organizations have increasingly faced, a business email compromise (BEC) aimed at fraudulently misdirecting payments via ACH.
In the brief, the associations said they have sought to highlight the regulatory burdens credit unions face and the “clear indication that reducing those burdens would benefit the 138 million Americans who use credit unions for their financial services needs.”
NAFCU noted, for example, that a 2017 survey of credit union CEOs that asked where they would reallocate funds earmarked for regulation if they could found many focused on items that would increase member benefits.
‘Must be a Limit’
“Credit unions support their members but there must be a limit to liability for fraud that is out of the credit union’s control,” said NAFCU President and CEO Dan Berger, CUNA President and CEO Jim Nussle, and VACUL President and CEO Carrie Hunt in a joint statement. “We maintain that the judge got it wrong in this case. Financial institutions rely on automation to sort through billions of ACH transactions each year. For perspective, some 30 billion payments moved through the ACH network operators in 2022.
“While the ACH system is designed to flag transactions that warrant closer scrutiny, it is unrealistic to think any financial institution handling a significant volume of ACH transactions can manually monitor fraud,” the statement continued. “While fraud is on the rise and unfortunate, credit unions cannot be held accountable for events out of their control. Our financial system would collapse if that were the case.”
The trade associations argued there are critical policy questions at the heart of the case that warrant the attention of every credit union, including protecting the ability to rely on automation to make possible the processing of payments across a wide number of platforms.
‘Growing Legal Threats’
“This case is further evidence of the growing legal threats to financial institutions, including frivolous lawsuits, issues arising from the expansion of the depth and breadth of regulation, and the challenges presented by technology and fraud,” NAFCU noted.
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