Credit card companies are liable for fraud losses under federal law. But big banks aren’t penalized when vengeful victims wire thousands of dollars to crooks. 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 in testimony before the Assembly. “At my age, I don’t get a second chance.”
THE Southern California Widow – who cares for a disabled son – befriended a stranger on a messaging app where, over time, he convinced her to transfer all of her savings to him in a cryptocurrency scam.
“I went to the bank over and over, seven times,” Lynn said during a recent state Senate hearing.
She claims the bank missed several warning signs and missed several opportunities to stop her.
The bank says it tried.
Lawmaker Joins Fight
When outgoing Sen. Bill Dodd (D-Napa) heard Alice’s story, he decided to tackle elder financial abuse as one of his last acts in state office.
“There are still banks that are almost aiding and abetting… the crooks,” Dodd said.
Dodd introduced Senate Bill 276, which was tailored to Alice’s case.
The bill would require banks to create an emergency contact program for elderly account holders and dependent adults — a person responsible for approving a transfer if the bank suspects fraud or financial abuse against the elderly.
“[The bank] I didn’t even contact my daughter, who is the joint account holder,” Alice said in her Senate testimony. “If they even stopped the last one [transaction]they would have saved me $200,000.
The bill also allows banks to delay transactions over $5,000 for three business days if they suspect fraud.
Banks oppose bill
The banking industry had its own concerns, opposing the initial version of Dodd’s bill over concerns about liability for delaying transactions and depriving people of their money.
“I think I would be pretty upset if a teller who worked while in college told me I couldn’t withdraw money on my own,” Jason Lane of the California Bankers Association said during the Senate hearing.
So Dodd returned to the negotiating table, making major amendments to his bill, limiting bank liability and delaying the bill’s implementation until 2026.
The banking industry lifted its opposition to the final bill, and it passed the Assembly and Senate with bipartisan support.
However, lobbyist and law professor Chris Micheli says the opposition may not be over.
“I would be surprised if a federally chartered bank did not 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 federally regulated banks.
For example, when Alice sued her bank under an existing California law, her bank had the case transferred to federal court where state law may not apply.
“So what’s the point of this bill if it doesn’t have any power on its own?” CBS News California asked Micheli.
“This could start that conversation at the federal level and among other states,” Micheli said, noting that the law will be enforceable unless challenged.
What is the status of the Dodd bill?
Ultimately, Micheli says, this could prompt Congress to act and craft a federal version of the state law, allowing Dodd to leave a lasting legacy for his final act in office.
“Do you think this will ultimately change politics across the country?” CBS News California asked.
“I really think so…because they also want to protect their elders,” Dodd said.
In a rare move, a federal judge recently denied a motion by Alice’s bank to dismiss her case. Her case will now be heard in federal court. The next hearing will be in November.
Meanwhile, Dodd’s bill sits on the governor’s desk, and the deadline to sign it is Monday.
Julie Watts
