Senator Democrats sent Friday’s letters to major banks, asking them to answer for their role as allowing millions of Americans to be defrauded by scams involving Zelle. The money transfer network’s parent company is owned in part by seven U.S. banks.
Senators Elizabeth Warren (D.Massachusetts), Bernie Sanders (I–Vermont), and Sherrod Brown (D.Ohio), Chairs of the Senate Banking Housing, and Urban Affairs Committee. and four others said that the banks aren’t doing enough to prevent scams that use Zelle, which The New York Times deemed in an investigation earlier this year as a “favorite of fraudsters.”
“It is imperative that the banks that created, own, and offer the service do more to protect consumers from the fraud and scams that are being perpetrated through the platform,” the lawmakers said in letters to Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo.
The service is popular due to its ability to immediately transfer money between bank accounts — but is easy to exploit, the lawmakers say, due to the fact that users have no way to cancel a transaction after they’ve made it.
Even those who have been scammed by the service can still be met with kindness. stony responseTheir banks. Reports have found that Wells Fargo and other banks have said that transactions done under a false premise aren’t fraudulent because the victim of the scam authorized the payment, leaving consumers short potentially hundreds or thousands of dollars. Instead, Zelle qualifies “fraud” as anything not authorized by the user — a definition that excludes scams or frauds.
In at most one case The New York Times reported earlier this year, victims who didn’t even authorize the purchase themselves had lost money due to Zelle-related fraud. Bruce Barth, a victim of Zelle fraud, lost $2,500 when his phone was stolen by someone in 2020 while he was being treated for COVID-19.
Lawmakers claim that widespread fraud has resulted from a lack of oversight by the banks and the shedding of responsibility. “The distinction [Early Warning Services, Zelle’s parent company] draws between fraud (transactions not authorized by the account owner) and scams (transactions authorized by the account owner, but induced through deception) ignores how consumers actually suffer financial loss on Zelle,” the senators wrote.
According to lawmakers, 18 million Americans fell for scams using Zelle or other instant transfers services in 2020. The scammers who used Zelle to send $490 billion in 2021 funds, estimated that Americans lost $440 million as a result of fraud through transactions on Zelle.
“While several banks have made the argument that they should not be held responsible for such scams, we believe that you need to do more to protect your customers,” the Democrats concluded. “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.”
