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NAFCU, CUNA, and the Virginia Credit Union League (VACUL) filed a joint amicus brief Tuesday in the 4th Circuit Court Appeals case, Studco Buildings Systems v. 1^st Advantage Federal Credit Union. At the center of the case is a rapidly growing and increasingly costly type of fraud – a business email compromise used to fraudulently misdirect payments via ACH. 

In the brief, the associations highlight the regulatory burdens credit unions face and the clear indication that reducing those burdens would benefit the 138 million Americans who use credit unions for their financial services needs. A 2017 survey of credit union CEOs asking where they would reallocate funds earmarked for regulation, many of the respondents focused on items that would increase member benefits.

“Credit unions support their members but there must be a limit to liability for fraud that is out of the credit union’s control,” said NAFCU President and CEO Dan Berger, CUNA President and CEO Jim Nussle, and VACUL President and CEO Carrie Hunt in a joint statement. “We maintain that the judge got it wrong in this case. Financial institutions rely on automation to sort through billions of ACH transactions each year. For perspective, some 30 billion payments moved through the ACH network operators in 2022. While the ACH system is designed to flag transactions that warrant closer scrutiny, it is unrealistic to think any financial institution handling a significant volume of ACH transactions can manually monitor fraud. While fraud is on the rise and unfortunate, credit unions cannot be held accountable for events out of their control. Our financial system would collapse if that were the case.”

The groups pointed out there are critical policy questions at the heart of the case that warrant the attention of every credit union, including protecting the ability to rely on automation to make possible the processing of payments across a wide number of platforms. This case is further evidence of the growing legal threats to financial institutions, including frivolous lawsuits, issues arising from the expansion of the depth and breadth of regulation, and the challenges presented by technology and fraud.

Stay tuned to NAFCU Today for updates on this case as they become available.