The Credit Union National Association (CUNA), the National Association of Federally-Insured Credit Unions (NAFCU), and the Virginia Credit Union League (VACUL) filed an amicus brief Tuesday in support of First Advantage Federal Credit Union in its 4th Circuit Court of Appeals case Studco Buildings Systems v. 1st Advantage Federal Credit Union. 

At the center of the case is a rapidly growing and increasingly costly type of fraud – a business email compromised to fraudulently misdirect payments via ACH.  

“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 CUNA President and CEO Jim Nussle, NAFCU President and CEO Dan Berger, 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.” 

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. In 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. 

There are critical policy questions at the heart of the case that warrant the attention of every credit union and the ability to rely on automation to make possible the processing of payments across a wide number of platforms must be protected. 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.