U.S. Rep. Young Kim (R-CA) recently introduced legislation that would allow banks and other financial institutions to place extended holds on suspicious checks and wire transfers while potential fraud is investigated.
Kim, a member of the U.S. House Financial Services Committee, introduced the Strengthening Transaction Oversight and Preventing (STOP) Payments Fraud Act, H.R. 9331, on June 18. The bill closes a gap in current law that requires financial institutions to make funds available within a prescribed timeframe, even when a transaction raises red flags, potentially forcing the release of funds before a suspicious check or wire transfer can be fully investigated.
Consumers and financial institutions lost more than $1.3 billion in 2023 and 2024 due to the rise in check fraud.
“Check fraud can wipe out a family’s savings overnight while leaving financial institutions responsible for covering the losses,” Kim said. “Our laws shouldn’t force banks to release funds before they have the opportunity to investigate suspicious transactions. The STOP Payments Fraud Act gives financial institutions the time they need to stop fraud before it happens and better protect Americans’ hard-earned money.”
By giving institutions additional time to investigate flagged transactions before releasing funds, Kim said the bill aims to prevent fraud before consumers suffer financial losses.