South Dakota banks could soon have the power to prevent the financial exploitation of vulnerable individuals. That’s if a bill endorsed by the House of Representatives becomes law.
Rep. Mellissa Heermann is prime sponsor of a bill proponents say protects elderly and vulnerable populations from scams. On the House floor, Heermann laid out a real-world scenario, sharing a story about her grandfather from a few years ago. He received a call from a scammer.
“The voice on the other end told him that his grandson needed help. They even went as far as playing a recording that sounded like a young man crying out for help. It was convincing, it was urgent and it was designed to make him act quickly," Heermann said. "These scammers used three very deliberate tactics: fear and intimidation, isolation and a time-sensitive emergency so there wasn’t time to call loved ones or to ask questions.”
She said her grandfather prepared to move money into the bank to help. However, he’s “fortunately” from Nebraska.
“Where a regulation was passed in 2021 to provide protections from financial exploitation," Heermann said. "The bank recognized the red flags, slowed the transaction down, called a trusted family member, which happened to be my mom, and confirmed that it was indeed a scam.”
Now, Rep. Heermann is looking to bring similar legislation to South Dakota.
House Bill 1238 gives financial institutions, like banks, among other things, the option to delay or refuse suspicious transactions, withdrawals and changes in account ownership. Banks can also contact third parties, like family members, if they suspect exploitation.
Another lawmaker mentioned a similar situation. Rep. William Shorma endorsed the bill and discussed an issue with an employee of his 20 years ago between a husband and wife.
"A wife thought she was protecting her husband and was scammed out of enough money that her husband came to me after it was all figured out and said, 'Can you give me an advance? We're broke. We've been scammed out of all our money,'" Shorma recalled. "That was a 30-something person, not a senior, unprotected [person]."
Heermann outlined where the bank fits in.
“And when you look at the scamming process, there’s really one step between receiving a scamming call and the money leaving your account," Heermann said. "And the place to act is at the bank. Right now, our front-line bank and credit union staff, they can see those red flags, but they do not have clear authority to act to protect the customer.”
The bill doesn’t mandate banks to perform these actions but creates legal opportunity, and, along with it, immunity for delaying transactions if they suspect exploitation.
HB 1238 passed 56-6 Thursday. It next heads to a Senate committee.
