Senate Bill Would Require Online Platforms to Prevent Fraudulent Ads

A bill introduced Wednesday (Feb. 4) in the U.S. Senate would require online platforms to take “reasonable steps” to prevent fraudulent and deceptive ads.

The bill would also strengthen the ability of the Federal Trade Commission (FTC) and the states to enforce violations of consumer protection laws, particularly when scams “slip through” an online platform’s preventative measures, according to a press release issued Wednesday by one of the bill’s sponsors.

The “Safeguarding Consumers from Advertising Misconduct Act” (SCAM Act) was introduced by Sens. Ruben Gallego of Arizona and Bernie Moreno of Ohio, according to the release.

“Scammers are using social media to swindle Americans out of their hard-earned savings, and right now, those platforms face almost no consequences for letting it happen,” Gallego said in the release. “If a company is making money from running ads on their site, it has a responsibility to make sure those ads aren’t fraudulent.”

Morena said in the release: “It is critical that we protect American consumers from deceptive ads and shameless fraudsters who make millions taking advantage of legal loopholes. We can’t sit by while social media companies have business models that knowingly enable scams that target the American people.”

The American Bankers Association (ABA) and the Bank Policy Institute (BPI) issued statements Wednesday supporting the bill.

The ABA said in its statement: “Banks of all sizes invest significant resources to detect and stop fraud, and Americans appreciate those efforts, but we need to prevent scams before they ever reach a bank.”

The BPI said in its statement: “Banks want to work together with social media to better protect consumers, and this legislation helps restore accountability so that everyone is doing their part.”

The senators’ press release referenced a November report by Reuters that said fraudulent online ads cost Americans billions of dollars each year. The report said internal documents reviewed by Reuters showed that Meta projected that roughly 10% of its 2024 revenue, or $16 billion, came from ads for scams, illegal goods and other prohibited content.

Meta spokesperson Andy Stone told Reuters at the time that the leaked documents “present a selective view that distorts Meta’s approach to fraud and scams.”

“The assessment was done to validate our planned integrity investments, including in combating frauds and scams, which we did,” Stone said, per the report.

The PYMNTS Intelligence report “Financial Scams and Consumer Trust” found that 16% of scam victims said social media was the channel fraudsters initially used to reach them. Another 8% said the fraudsters used a digital marketplace, while 7% of scam victims said they clicked on a link that turned out to be fraudulent.