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Subcommittee rejects bill that would require payment platforms to notify merchants before freezing funds
Summary
House Bill 1011, proposed to require online payment processors to notify users before freezing funds and to limit prolonged holds, failed in committee after a 2-4 vote following extended debate about fraud controls and unintended consequences for commerce.
House Bill 1011, sponsored by Representative Fritz, failed in the Banking & Consumer Affairs Subcommittee after a 2-4 vote. The bill would have required online payment processors to provide written notice to affected users before freezing funds and set a 30-day notification window when a company claimed legal reason to hold funds.
Representative Fritz presented the bill as a measure to protect small businesses and sole proprietors who rely on online payment systems. “Online payment processing systems are holding or freezing funds of those businesses who do not fall in line with their political or social agendas,” Representative Fritz said. He cited one business that alleged PayPal froze about $110,000, and told committee members companies sometimes returned funds only after long delays or required nondisclosure agreements.
Committee members questioned how the bill would interact with federal law and fraud prevention. Representative Fritz said the bill includes references intended to comply with federal law, telling the panel the measure “must be limited under C or otherwise provided in a manner that complies with 31 code federal regulations 1022.32 and 31 US code 5,318.” He also said the bill excludes banking organizations and added language to avoid conflicts with federal anti-money-laundering rules.
Several members expressed concern about unintended consequences for commerce and whether the bill would curb legitimate fraud prevention. Representative Hale said freezes are sometimes justified and warned against assuming political targeting. Representative Hammer expressed concern about multinational platform responses and the potential of platforms pulling services if the law was too broad.
The clerk announced the vote tally: “Mister chairman, you have 2 ayes and 4 no's.” The sponsor acknowledged he would “keep fighting for your votes,” and the measure failed in committee.
The transcript records the sponsor’s examples and references to federal codes; it does not show further amendments or a plan for reintroduction in that session.
