Truth Social faces scrutiny after its users fell for a variety of scams on its platform, resulting in losses of up to hundreds of thousands of dollars. For context, an estimated $10 billion was lost due to fraud last year, illustrating the very real threat scammers pose. We all want to stop consumers from being harmed – but Truth Social offers a teachable moment on why legislation such as Elizabeth Warren’s “Protecting Consumers from Payment Scams Act” is not the answer.
It’s easy to poke fun at Truth Social given its CEO, former Congressman-turned-tech-executive Devin Nunes, is not someone most would identify as ‘the next Mark Zuckerberg.’ But on the subject of fraud, let’s concede there is only so much they, or any other social media company, can do.
We all endure the daily harassment of scammers, whether it be over the phone, in spam emails, through text, or in direct messages on social media. Let’s face it, they have countless ways of getting to us.
Not only that, complicating matters further is, we have countless ways of paying them.
As in the case of Truth Social, users were scammed out of money largely through various cryptocurrency schemes. Here in 2024, we have entered a new frontier in terms of digital payments, with so many different platforms and means to send liquidity. Many of them are fresh in existence.
In an effort to reduce consumer fraud losses, Senator Elizabeth Warren (D-MA) and Senator Blumenthal (D-CT) introduced the Protecting Consumers from Payment Scams Act (S. 4943.)
The problem? The payment platforms the bill punishes are generally the safer ones.
S.4943 seeks to prevent fraud by forcing banks to recoup accountholders whenever a scam takes place over a person-to-person (P2P) digital payment system such as Zelle, Square, or Venmo.
In using these services, one directly transfers money at their own behest – therefore authorizing the payment themselves. Sens. Warren and Blumenthal believe banks should be forced to pay for anyone’s mistake – in essence, making banks go as far as to foot the bill for crimes they did not commit, and act as police for every peer-to-peer transaction.
The result would be cruel to users of these platforms, who would inevitably face added costs or reduced services after subsidizing losses every time a lonely man sends twenty grand to his overseas “girlfriend.”
The winner? Scammers themselves – who will have even greater financial incentive to target P2P platforms, knowing they are the ones where a reimbursement is guaranteed.
Scammers will doubly benefit from a moral hazard, as this invites more recklessness from customers when we ought to be preaching a higher level of prudence when making digital payments.
Zelle, Square, or Venmo already contain industry-leading tools to make transactions safer and help ensure they reach the correct recipient. But whether you are Truth Social or a Big Bank, the simple fact is that we cannot prevent everyone’s mistakes. Believing a bill from Congress could stop people from falling for scams neglects the often significant hoops people jump through to fall for them.
All Congress can do is make the rest of us pay for it.
