To the Editor:
Our salon, SalonPROV, operates like many hair salons across the country. Stylists pay for a seat and gain access to all the marketing and scheduling tools available in return. When a customer receives a service, they pay the stylist directly. This business model has allowed us to grow our business, while at the same time making it easier for our stylists to grow theirs.
When it comes to how customers pay their stylists, peer-to-peer payment apps have become the new cash. These apps allow customers to make payments with ease, and our stylists to receive their compensation quickly. In the case of some apps such as Zelle, payments come with no fees and are deposited into a bank account almost immediately.
Unfortunately for us as small-business owners and our stylists, there is a growing view in Washington, D.C., that peer-to-peer platforms need to undergo radical change.
Several committees in the U.S. Senate, some of which include Rhode Island Sen. Jack Reed, have been looking into fraud and scams that happen online. In a misguided effort to help consumers, some of Senator Reed’s colleagues have introduced legislation that would drastically shift liability for fraud and scams to peer-to-peer payment platforms. In the case of Zelle, this liability would extend to banks offering the service, the vast majority of which are small community banks and credit unions.
The Senate legislation – called the Protecting Consumers from Payment Scams Act – will create more problems than it solves. The bill not only fails to include any provisions to actually protect consumers from criminals, but it also actively hurts small businesses such as ours and the community banks and credit unions on which many small businesses rely.
Under this bill, criminals will have been given a lifeline. Instead of being brought to justice, the Senate is directing peer-to-peer platforms and banks to finance their crimes. It’s a win for criminals and a loss for consumers who will face higher fees and diminished services.
While the senators are right to focus on the problem of scams and fraud, their focus on Zelle and other services is much too narrow. The senators are ignoring the proactive steps Zelle and its banks have taken to protect consumers, as well as the other venues in which fraud is committed, including checks, crypto, gift cards and investments.
The senators are also discounting Zelle’s track record. Recent reports have shown that fraud and scams on Zelle are the lowest among any peer-to-peer platform at just 0.05%. A J.D. Power survey similarly found that 2% fewer consumers face fraud and scams on Zelle compared with other platforms.
Instead of punishing Zelle, its users and local banks, senators could be pushing other platforms to follow Zelle’s lead.
Every year, the people of Rhode Island lose millions to scammers and fraudsters. We are lucky to have a senator like Jack Reed who recognizes the problem. Now, we need him to steer the conversation in the Senate toward real, meaningful solutions that zero in on the problem at hand: the criminals who prey on consumers. For consumers to really get new protections, the Senate must prioritize stricter criminal penalties, more resources for law enforcement and greater consumer education.
By doing these things, the Senate can enact a comprehensive plan that stops fraud without the negative side effects that come from a policy focused solely on shifting liability.
Lisa Pascale and JoAnn Bisesi
SalonPROV LLC owners, Providence
