The fur is flying on Capitol Hill as senators face off once again against Zelle and its bank owners on scam reimbursements. One side says “Much more must be done to protect consumers from the harms that Zelle and the Big Banks are failing to stop.” The other says that forcing banks to reimburse authorized payments would only encourage more bad behavior.
At issue is the expansion of a provision on the Electronic Funds Transfer Act, an effort led by Sen. Richard Blumenthal (D-CT), chair of the Permanent Subcommittee on Investigations (PSI).
Regulation E is a consumer protection clause that mandates banks refund customers anytime they’re hit by an unauthorized or fraudulent transaction, like when someone buys a fake concert ticket on the web, pays for it with Zelle, only to see their money go up in smoke.
What Blumenthal wants is the provision to include authorized transactions made after a consumer is duped into sending money to a scammer – basically putting the onus on the bank to be more vigilant how money is transferred from a person’s account to another using cash apps like Zelle.
“Sending a payment on Zelle is fast, easy, and irreversible. Eighty percent of Americans who have bank accounts already have it sitting there ready to use. Zelle’s unique characteristics make it convenient trusted by consumers, but it also makes them a target for scammers,” said Blumenthal.
Want to know how to lose $20,000 in a day?
ConsumerAffairs reviews are loaded with complaints about Zelle-related incidents. Just last month, Suzanne of Haverhill, Mass., wrote in her review of Bank of America about how her family’s bank account was drained by $20,000 in a single day because of Zelle.
“If there was a negative star review, I would choose it. We have been Bank of America (BOA) customers for over 30 years. We have personal checking, savings, credit card and a business account. Time to find a new institution that we can trust with our money,” she wrote.
"On May 13, 2024, our accounts were all hacked. In one day, almost $20,000 was stolen from our life savings by unauthorized fraudulent Zelle withdrawals and a credit card cash advance. Thirty-one withdrawals in one day from one account.”
Suzanne said her family has never used Zelle and noted that her understanding was that there was supposed to be a $3,500 or 10 withdrawal limit with Zelle. That ceiling could be tough for some to overcome, but it wouldn’t be the end of the world. However, she said she got little help from the bank.
“How was Bank of America during this issue? Useless, callous, unethical and unprofessional," Suzanne wrote. "The phone staff in the fraud department treated us like criminals. We have 3 claims that the bank has all denied in less than 10 days. We were told it could take up to 45 days to resolve. It is now day 29.”
Did Zelle’s owners fail consumers?
Zelle is no small business. Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo are all part of its ownership group. That’s a pretty heavy tag team match that Blumenthal is taking on, but he says that PSI’s investigative findings show just how bad those banks have failed to protect consumers.
“Our investigation found that customers of Zelle’s three largest owner banks, JPMorgan Chase, Bank of America, and Wells Fargo, disputed over $372 million to scams and fraud in 2023 alone. Nearly three-quarters of these claimed losses, totaling $270 million, were never reimbursed by the banks.”
“Zelle’s efforts at self-regulation have not fixed the problem. In June 2023, Early Warning Services enacted a new policy requiring banks in the Zelle network to reimburse customers for certain types of imposter scams," Blumenthal continued.
"But our investigation found this policy change affected less than 20 percent of the scam victims, resulting in only $18.3 million in reimbursed scam claims in the first six months after it was implemented.”
Banks push back
In response, leaders from Bank of America, Bank of America, JP Morgan Chase, and Early Warnings Services (Zelle’s parent company) pushed back as hard as they could. Adam Vancini, who heads up Wells Fargo’s payments for consumers division, said expanding Regulation E to include authorized transfers would encourage customers to game the system by falsely claiming they were scammed.
“I think we need to be thoughtful and think about unintended consequences,” he said at the hearing.
Melissa Feldsher, head of payments and lending innovation and loyalty at JPMorgan Chase, said that one “thoughtful” move would be working hand-in-hand with law enforcement to keep scams from happening before they ever leverage a consumer sending money would be a more ideal solution.
“The best way to protect customers from fraud and scams is to prevent criminals from carrying out their schemes in the first place,” she said.
While that may seem like the banks and Zelle want to play nice, Blumenthal doesn’t want to budge on an expansion of regulation E.
“Long and short, more must be done to protect consumers from the harms that Zelle and the big banks are failing to stop. We have to level the playing field, providing Zelle users with the same protections that exist for debit and credit cards.
