Banks in North Carolina now have expanded authority to delay certain customer transactions if they suspect financial exploitation. The new law is intended to prevent fraud, but some worry it could also delay legitimate payments.
The law allows banks and credit unions to refuse or pause transfers and withdrawals from the accounts of older adults and people with disabilities for up to 30 days. Financial can make the determination based on information gained during an interaction with the customer.
Before delaying or denying a transaction, financial institution must train employees and adopt policies governing how the law is applied. They are also required to maintain records for five years to help identify and track patterns of long-term financial exploitation.
Concerns Around Overreach
The law has raised concerns that banks could have too much authority over customers’ financial transactions. Greensboro news station WFMY reported that some people expressed concern on social media that they could be unable to pay bills on time if their bank froze access to their funds for 30 days. Adding to those concerns, the law shields financial institutions from lawsuits as long as they acted in good faith.
“The decision to hold payments based on suspected fraud requires case-by-case judgments from the FI staff, so staff training needs to be frequent and standardized to ensure consistency in application of payment holds,” said Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research. “What stuck out to me is the requirement for five years of record-keeping. Access to this level of data could be instrumental in highlighting patterns in suspicious activity or exploitation that might otherwise have been lost in the shuffle.”
Laws in Other States
Georgia passed a similar law that gives financial institutions less leeway over how long payments can be delayed. Under Georgia’s law, a hold on a transaction generally expires after 15 business days.
“I can see this becoming a larger trend,” Sando said. “Elder and vulnerable adult fraud is a serious problem, and these holds are a solid tool in managing this kind of fraud. It’s important for financial institutions to be transparent and consistent in application of holds to protect vulnerable customers without disrupting business as usual.”
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