The Government’s Coming for Fraud—But What’s the Catch for Payments?

Last week, Senators Mike Crapo and Mark Warner introduced the TRAPS Act—short for Taskforce for Recognizing and Averting Payment Scams. If passed, it would create a multi-agency payments fraud task force under the U.S. Treasury, pulling in players like the CFPB, DOJ, Fed, OCC, FinCEN, and even NCUA. The goal? To study payment fraud and issue an annual report with “recommendations.” On the surface, this sounds like responsible governance. But for those of us who’ve been in payments long enough, “recommendations” often foreshadow regulation.

From a pure public policy standpoint, it’s hard to argue against more coordination on fraud. Bad actors move fast, and consumers—especially older and vulnerable populations—are often on the losing end of real-time scams. But as usual, the devil is in the implementation. Once Washington turns its attention to an issue like payments fraud, it rarely stops at reports. Standards, thresholds, liability shifts—all of that is likely to follow. And that has real implications for issuers, acquirers, processors, and PayFacs who are already living under the rulebooks of the card brands.

Moreover, regulation stifles innovation. Government involvement, however well-intentioned, tends to impose rigid frameworks on problems that demand agile, market-driven solutions. In the context of payments fraud, overly prescriptive rules can stifle innovation by forcing all players—regardless of size, model, or risk appetite—into the same compliance mold. Instead of rewarding ingenuity and differentiated fraud controls, regulation like TRAPS could create a lowest-common-denominator environment where innovation is slowed by red tape and emerging technologies are sidelined until they’ve been vetted through a bureaucratic lens. By shifting liability or mandating specific fraud thresholds, regulators risk distorting the free market incentives that drive competition, investment, and continuous improvement in fraud prevention. When the market is free to solve its own problems, it moves faster, adapts better, and ultimately produces more effective solutions than any task force ever will.

One area worth watching closely is how this effort might intersect with existing scheme-based fraud enforcement like Visa’s VAMP (Visa Acquirer Monitoring Program). VAMP was designed to drive merchant-level accountability on fraud and chargebacks, primarily through statistical triggers and enforcement penalties. But if a federal task force starts setting “best practices” for what fraud controls should look like, card brands may be pressured to harmonize—or even hard-code—those into their compliance regimes. US-led legislation may become the tail wagging the dog for global fraud and compliance standards, yielding yet another instance of the government interceding without being asked (I'm looking at you, GDPR).

So who wins if TRAPS becomes law? In the short term, consumers stand to benefit, especially if the task force focuses on consistent reimbursement standards for push payment fraud. Smaller banks and credit unions would get a voice. Lawmakers score a political win for “doing something” about scams. But the costs will likely show up downstream: more compliance muscle required at the acquirer level, less risk-model differentiation among issuers, and added costs for merchants.

Ultimately, fraud is a shared problem—but so is overreach. What are your thoughts on legislative efforts to stem payments fraud?

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