By Jenny Surane
US senators led by Democrats Bob Menendez, Elizabeth Warren, and Jack Reed told seven of the country’s biggest banks they must do more for consumers defrauded by scammers on Zelle, the person-to-person payments network the firms jointly own.
“Frauds and scams have proliferated,” the senators said in letters Thursday to firms including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. “One of Zelle’s biggest selling points to consumers — the ability to immediately transfer money — makes the platform a ‘favorite of fraudsters’ because consumers have no option to cancel a transaction, even moments after authorizing it.”
Zelle, which the banks own through parent company Early Warning Services LLC, soared in popularity during the pandemic. Payments on the network jumped to $490 billion in 2021, a 59% increase from a year earlier. While Early Warning Services has developed policies for reimbursing consumers who lose money through unauthorized transactions, it hasn’t yet done the same for customers who are tricked into sending money to fraudsters.
That’s what the group of senators is hoping to change. The three lawmakers were joined by Ohio’s Sherrod Brown, Chris Van Hollen of Maryland, Sheldon Whitehouse of Rhode Island, Bernie Sanders of Vermont and Illinois’ Tammy Duckworth.
The effort comes on the heels of a similar letter sent by senators to Early Warning Services in April. In response to that inquiry, the company said banks have already moved to limit abuses, including real-time alerts that asks users to carefully consider if they know and trust the person they’re sending money to before initiating a transaction.
Person-to-person networks such as Zelle are governed by Regulation E, which dictates rules for electronic transactions. With its policies for reimbursing consumers who are victims of unauthorized transfers, Early Warning told senators it believes it “has gone beyond what is required under Regulation E.”
But the senators said the company is ignoring scams that have been extensively documented in the press and by the Consumer Financial Protection Bureau.
“Given the sheer numbers of consumers using online payments services such as Zelle and the amount of money at risk, the absence of protective measures is unacceptable,” the senators said in the letter.
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