A substantive restructuring and expansion. v2 removes specific provisions for striking certain check types from expedited availability, replacing them with a new framework allowing temporary holds during material fraud losses. It also significantly expands the details for fraud exceptions for checks and wire transfers, adding specific delayed availability periods and additional notice requirements. Furthermore, v2 introduces new sections mandating a study on funds availability and setting rulemaking deadlines.
STOP Payments Fraud Act of 2026
- Sponsor
- Rep. Kim, Young [R-CA-40]
- Committees
- Financial Services Committee (primary)
- Last action
- Sep 1, 2026
Bottom line
The bill aims to combat rising payments fraud by giving banks more power to hold suspicious funds, potentially reducing fraud losses but also risking delayed access to funds for legitimate transactions.
What it actually does
This bill amends the Expedited Funds Availability Act (EFAA) to grant depository institutions and regulators greater flexibility to delay access to deposited funds when there is reasonable suspicion of fraud. It allows the Federal Reserve Board and the Director of the Bureau of Consumer Financial Protection to temporarily adjust funds availability for certain classes of checks during periods of material fraud losses and establishes new exceptions for fraudulent checks and wire transfers, permitting holds of up to 45 days. The bill also mandates a study by the Comptroller General on funds availability and fraud.
Proponents argue
Proponents argue that the bill is a critical update to outdated regulations, providing financial institutions with necessary tools to combat the significant and growing problem of check and wire transfer fraud. They contend it will protect consumers, businesses, and the U.S. Treasury from substantial financial losses, and that the regulatory discretion ensures a flexible response to evolving fraud schemes.
Opponents contend
Opponents express concerns that the bill's expanded exceptions for delaying funds could lead to legitimate transactions being held for extended periods, causing financial hardship for consumers, particularly those who rely on immediate access to their funds. They may also argue that the 'reasonable suspicion' standard could be applied inconsistently or disproportionately affect vulnerable populations.
The bill is relatively short, but its implications for consumer banking and fraud prevention are significant, requiring careful consideration beyond a quick read to understand the full scope of changes and potential impacts.
Section 2, amending EFAA Section 603(d) and adding 603(g)
Temporary Adjustment of Funds Availability for Certain Check Classes During Material Fraud Losses
This provision allows the Federal Reserve Board, jointly with the Director of the Bureau of Consumer Financial Protection, to determine if specific classes of checks (e.g., Treasury checks, government checks) are experiencing material fraud losses. If such a determination is made, they can temporarily (for up to one year) make funds from these checks available to the same extent as funds from local checks, potentially extending hold times. This amends the prior mandate for funds to be available in 'as short a time as possible and equal' to local checks, making it discretionary.
Supporters argue
Supporters argue this provision provides regulators with a necessary, targeted tool to combat widespread fraud affecting specific types of checks, protecting both government funds and financial institutions from significant losses. It allows for a flexible and data-driven response to evolving fraud schemes.
Critics contend
Critics might argue that this provision could lead to arbitrary delays for legitimate transactions, disproportionately affecting vulnerable populations who rely on quick access to government payments. They may contend it shifts the burden of fraud prevention more heavily onto consumers.
Tradeoffs
This provision balances the need to combat fraud and protect financial systems from significant losses with the consumer's expectation of expedited access to deposited funds. It also involves balancing regulatory flexibility with potential for consumer inconvenience.
Section 3, amending EFAA Section 604(c)
Fraud Exception for Check Deposits
This section creates a new exception to the EFAA's expedited funds availability rules for checks. If a receiving depository institution has 'reasonable suspicion' to believe that a check is false, unauthorized, or otherwise involves fraud, it can delay the availability of funds. Regulations, to be prescribed by the Board and CFPB Director, will establish initial hold periods (not to exceed 10 days) and extended hold periods (not to exceed 45 days), with potential for different timelines based on the dollar amount. Institutions must provide notice to the depositor, including the reasons for the hold.
Section 4, adding EFAA Section 604(g) and 604(h)
Fraud Exception for Wire Transfers and High-Risk Accounts
This section introduces two new exceptions. First, for 'greater fraud risk' accounts (604(g)), it allows the Board and CFPB Director to identify circumstances associated with higher fraud risk for any account, enabling existing exceptions to funds availability (e.g., for large deposits) to apply for up to 60 days. Second, for wire transfers (604(h)), it creates a 'reasonable suspicion' exception similar to checks, allowing institutions to delay funds availability for up to 10 days (initial) or 45 days (extended) if fraud is suspected. Importantly, it prohibits overdraft fees if a wire transfer is delayed due to fraud suspicion, the depositor wasn't notified, and the overdraft was solely due to the delay.
Section 5
GAO Study on Funds Availability and Fraud
This section directs the Comptroller General of the United States (GAO) to conduct a comprehensive study on various aspects of funds availability and safeguards against fraud. The study will examine State laws, actual hold periods by depository institutions, investigation times for nonpayment of checks, the appropriateness of current EFAA time periods and amount limits, and administrative and legislative reform options to mitigate payment fraud risk. A report on the findings is required to be submitted to Congress within nine months of the effective date of the rules implementing this Act.
Section 6
Rulemaking Required and Delayed Effective Date
This section mandates that the Board of Governors of the Federal Reserve System, jointly with the Director of the Bureau of Consumer Financial Protection, adopt final rules implementing the amendments made by Sections 3(a)(3) and 4 of this Act. This rulemaking must be completed not later than one year after the date of enactment. The amendments themselves will take effect 60 days after these final rules are adopted, ensuring a period for institutions to prepare and for the public to understand the new regulations.
This amendment modifies EFAA Section 603(d) by changing 'shall' to 'may' and striking 'to as short a time as possible and equal'. This removes the explicit mandate for the Board to reduce hold periods for certain checks to 'as short a time as possible and equal' to local checks, making it a discretionary power rather than a strict requirement.
Section 2(a)(1)
Why it matters:This is standard legislative drafting for modifying existing law, but its impact on regulatory discretion is significant. It shifts the Board's obligation from actively minimizing hold times to merely having the option to do so, which is a subtle but important change in policy direction.
Case for: Supporters would argue this provides necessary flexibility to the Board and CFPB to manage funds availability in response to evolving fraud risks, rather than being strictly bound by a mandate that might hinder effective fraud prevention efforts.
Case against: Opponents might argue that this subtly weakens consumer protections by removing the statutory directive for regulators to ensure funds are available as quickly as possible, potentially leading to longer hold times even without explicit fraud concerns.
Estimated impact: This change grants significant regulatory discretion that could affect the availability of funds for millions of check deposits, particularly if the Board chooses not to prioritize minimizing hold times in certain scenarios.
This 'Rule of Construction' clarifies that nothing in the Act restricts or prohibits a depository institution from communicating to any other depository institution involved with a deposit (by check or wire transfer) that it has invoked an exception under this section to some or all of the requirements of EFAA Section 603 with respect to that deposit.
Section 4(i)
Why it matters:This is a technical clarifying provision designed to ensure that inter-bank communication regarding fraud holds is not inadvertently restricted by the new EFAA amendments. It's buried because it's a legal clarification rather than a primary policy change.
Case for: Proponents would argue this is essential for effective fraud prevention, allowing banks to share critical information about suspicious transactions and coordinate efforts to prevent losses across the financial system, thereby strengthening overall security.
Case against: No direct opposition, but some privacy advocates might scrutinize the scope of information sharing, though this provision is limited to the fact that an exception was invoked, not specific customer data.
Estimated impact: Facilitates inter-bank cooperation in fraud detection and prevention, potentially reducing overall fraud losses and improving the efficiency of fraud investigations across the financial system.