Tuesday, August 13, 2024
Those three banks – Bank of America, JPMorgan Chase and Wells Fargo – combined are said to represent 73 percent of all Zelle transactions.
Senator Blumenthal, who chairs the Senate Permanent Subcommittee on Investigations, sent a letter to CFPB chief Rohit Chopra requesting the investigation in response to a subcommittee report that blasted the three banks for their handling of scams and other frauds perpetrated against consumers who use Zelle.
That report came on the heels of 2022 New York Times reporting on how scams were flourishing on Zelle. Senator Elizabeth Warren, D-Mass., who is not a member of the subcommittee, opened her own investigation of Zelle in response to the New York Times article. That investigation revealed fraud was "rampant" and growing on Zelle, and that banks were not compensating "the vast majority" of victims.
The subcommittee held two hearings in May and again in late July on the issues raised by Warren and the subcommittee's own investigations.
In testimony before the subcommittee representatives of Early Warning and the three banks noted that less than a tenth of a percent of transactions handled by Zelle are reported to be fraudulent or related to scams. That may not be good enough, however.
"Although the amount of fraudulent transactions on Zelle is extremely low, that fact brings little solace to those who have fallen victims to scams that trick them into sending money to another user," said the subcommittee's ranking Republican, Senator Ron Johnson of Wisconsin.
John Breyault, vice president at the National Consumers League, said during testimony before the subcommittee in May that P2P payment apps, like Zelle, have attracted a "tsunami of scammers" eager top prey upon consumers. He added that many consumers fail to report these crimes
"Relying on consumers to accurately spot and resist fraudulent schemes run by sophisticated, professional criminals is unlikely to yield a more secure P2P payments system" Breyault told the subcommittee
Blumenthal in an August 4, 2024, letter to Chopra complained Chase, BofA and Wells provide employees with "broad discretion" to decide whether a disputed transaction is unauthorized, and, in turn, whether it qualifies for reimbursement.
"The three banks circuitous answers to questions [during the subcommittee's latest hearing] regarding whether they have ever had a third-party review of their dispute resolution practices further increased our concerns that, not only has such a review never occurred, but that opaque processes applied by these banks are being used to deny rightful complaints," Blumenthal wrote.
He asked the consumer watchdog agency to "take appropriate action" to ensure the banks are fully and promptly dealing with consumer reports of fraud. "If your investigation finds that an institution has violated the Electronic Funds Transfer Act 'knowingly and willfully,' I encourage you to take the strongest appropriate action."
The EFT Act was enacted nearly 50 years ago and covers all consumer transactions involving the electronic movement of money. The CFPB was given authority to enforce the law by the 2010 Dodd-Frank Act. Previously, the Federal Reserve was chief enforcer of the legislation and wrote its implementing rule set, Regulation E. 
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