House Subcommittee Tackles Financial Fraud Hearing With Three Bills on Deck

Why it matters

The House Financial Services Committee's Subcommittee on Financial Institutions convened a financial fraud hearing on March 5, 2026, examining why banks, credit unions, and consumer advocates say the current legal framework is failing to keep pace with a fraud crisis costing Americans billions annually. The hearing arrived days after President Trump signed an executive order targeting cybercrime and fraud — but the sole consumer witness warned that the administration's simultaneous gutting of CFPB enforcement is leaving consumers exposed. Three draft bills were on the table, setting up a potential legislative push ahead of the 2026 midterms.

The big picture

Financial fraud losses have reached staggering levels. FinCEN estimated check fraud alone accounted for roughly $21 billion in losses in 2023, according to Forbes. An Alloy industry report found 60 percent of financial institutions reported increased fraud, with nearly a third losing more than $1 million in direct losses.

The hearing was structured around three discussion draft bills — a signal this was a legislative drafting exercise, not routine oversight:

  • The TRACE Act of 2026 — creates a framework for banks, fintechs, and payment networks to share fraud data under legal safe harbor
  • The Bank Fraud Technology Advancement Act of 2026 — directs regulators to study AI, machine learning, and biometric fraud detection tools, with a focus on institutions under $10 billion in assets
  • The STOP Fraud Act — gives banks more flexibility to delay fund availability when they suspect fraud

The Bank Policy Institute submitted a statement calling for a "National Anti-Scam Strategy," while the American Financial Services Association called it "the financial fraud Congress cannot afford to miss."

What they're saying

The witness panel tilted 4-to-1 toward industry, with only one consumer advocate — a composition likely to draw scrutiny from Democrats.

  • Gay Dempsey, CEO, Bank of Lincoln County, testifying on behalf of the Independent Community Bankers of America, described fighting fraud firsthand and warned that "large financial institutions often reject fraud claims even when [community banks] provide significant documentation."

  • Adam Rust, Director of Financial Services, Consumer Federation of America, fired back at the deregulatory approach, writing in his testimony: "Congress chose to remove a layer of oversight only two months after the Federal Trade Commission released new data showing that fraud-related losses on payment apps had tripled from 2021 to 2024."

  • Patrick McDade, EverBank, represented the Consumer Bankers Association perspective, addressing the technological arms race between fraud perpetrators and banks deploying AI-driven detection systems.

  • Kate McKune, Park Community Credit Union, brought the credit union sector's voice, highlighting resource constraints that mirror those of community banks.

  • Joseph Schuster, Ballard Spahr LLP, provided the legal and regulatory framework analysis, addressing privacy considerations and the safe harbors needed for the TRACE Act to function.

Subcommittee Chair Rep. Andy Barr (R-KY-6) framed the hearing around tools rather than liability, stating in his press release that "placing liability on financial institutions when a consumer mistakenly authorizes a payment or transfer does not address the underlying root causes of scams." Full Committee Chairman Rep. French Hill (R-AR-2) said the scale and complexity of fraud "raises serious questions about whether our current legal and regulatory frameworks are fully equipped."

Political stakes in the financial fraud hearing

The hearing puts the Trump administration's fraud posture under a microscope. The White House signed an executive order in March 2026 combating cybercrime and created a new DOJ national fraud division. Treasury Secretary Scott Bessent has said the president "wants to scale the model we have established in Minnesota to root out waste, fraud and abuse."

But the administration has also dramatically scaled back the CFPB. Better Markets argued that "Trump has taken the consumer protection cops off the financial beat" — leaving a gap between aggressive law-enforcement rhetoric and reduced regulatory oversight.

For Barr, shepherding three bills through the subcommittee would be a legislative achievement. Kentucky's community banking sector gives him a direct constituent interest. But his explicit rejection of expanded bank liability for authorized push payment fraud aligns him firmly with industry — a position that could become a vulnerability if losses keep climbing.

Ranking Member Rep. Bill Foster (D-IL-11) and senior Democrats like Rep. Maxine Waters (D-CA-43) face a strategic choice: cooperate on information-sharing legislation or use the hearing to build a midterm narrative about Republicans protecting banks over consumers.

The other side

Rust's testimony exposed the core tension in the fighting fraud financial institutions debate. While industry witnesses called for safe harbors and regulatory flexibility, Rust argued Congress should expand the Electronic Fund Transfer Act to cover wire transfer scams and restore payment app oversight that was recently rolled back.

ICBA's Dempsey also revealed intra-industry friction. Community banks are not just fighting external fraudsters — they're fighting larger banks that reject their legitimate fraud claims. Dempsey warned that the Federal Reserve's potential withdrawal from check services "would only expose community banks to more fraud losses that should rightfully reside with larger banks."

AARP has separately endorsed H.R. 6681, the National Scam Prevention Coordination Act, which would create a National Fraud and Scam Prevention Office within the White House — a more centralized approach than the bills under consideration here.

What's next

The three bills were circulated as discussion drafts without assigned bill numbers, indicating they will be refined based on witness testimony before formal introduction. The committee's March 2026 schedule included a markup of various measures, suggesting an active legislative posture.

A looming deadline adds urgency: the Cybersecurity Information Sharing Act of 2015 expires September 30, 2026. The TRACE Act builds on the same information-sharing framework, and its passage could serve as a partial replacement.

With midterm elections eight months away, swing-district members on both sides — including Rep. Young Kim (R-CA-40) and Rep. Monica De La Cruz (R-TX-15) — will need to demonstrate fraud-fighting credentials to voters.

The bottom line

Congress is moving toward giving banks more tools and fewer constraints to fight fraud — but the debate over who pays when consumers lose money is far from settled.

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