Sen. Elizabeth Warren (D-MA) has seemingly shown once again that she apparently has never seen a federal regulation that was too tough or a financial institution that was not already regulated enough, this time in regard to alleged fraud and scams on peer-to-peer payment platforms like Zelle.
The progressive senator is now demanding a regulatory crackdown by the Consumer Financial Protection Bureau, not on the scammers who use Zelle to engage in fraud, but on the banks that have allegedly failed to fully repay defrauded consumers, according to the PYMNTS site.
Warren issued a report earlier in October that alleged widespread and increasing fraud and scams on Zelle and has now urged the CFPB to “update and strengthen regulations” aimed at holding banks and financial institutions responsible for repaying consumers who had been defrauded or scammed on the payment platform.
CFPB “must update and strengthen regulations”
Sen. Warren on Wednesday sent a letter to CFPB Director Rohit Chopra in order to “bring to your attention new findings from my investigation that revealed rampant fraud that occurs on the peer-to-peer payment platform Zelle, and the failure of banks to repay customers that are swindled by fraudsters and scammers.”
“The findings of this report reveal that the Consumer Financial Protection Bureau (CFPB) must update and strengthen regulations governing the obligations of banks to repay customers who are defrauded on Zelle and other peer-to-peer payment platforms,” she continued. “My investigation, which is based on previously non-public information obtained from the banks that own and run the platform, shows that Zelle is increasingly becoming a tool of bad actors who use the platform to defraud consumers, while the big banks that own Zelle do little to stop them or provide recourse to their consumers.”
She then proceeded to call out Zelle and its parent company Early Warning Services, as well as some of the “consortium of big banks” that share ownership of the platform, for not doing enough to combat fraud and for not providing her with certain information that she had previously demanded and specifically admonished JPMorgan Chase and Wells Fargo in that regard.
Warren accuses banks of violating the law
Warren also shared in the letter some of the purported evidence she had uncovered based on information provided by some of the banks that collectively own Zelle and asserted that there has been a sharp increase of tens of thousands of instances of fraud over prior years, as well as that the banks were not making defrauded consumers financially whole in an overwhelming majority of those cases.
The Massachusetts senator noted that the CFPB had the authority to “amend Regulation E of the Electronic Fund Transfers Act to increase consumer protection and interpret the guidelines surrounding peer-to-peer platforms” and once again insisted that the “agency must strengthen consumer protections on peer-to-peer platforms like Zelle.”
“The rising volume of fraud and scams — combined with banks’ failure to make consumers whole in more than 90 percent of authorized scam cases and nearly 50 percent of unauthorized fraud cases — is a violation of banks’ responsibilities to their consumers and is not consistent with the goals of Regulation E,” Warren concluded.
Targets of Warren’s regulatory ire fire back
CNBC reported that Zelle, which is a peer-to-peer payment platform similar to CashApp and Venmo, is collectively owned by seven major banks and financial institutions, including Bank of America, Capitol One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo.
In response to Warren’s letter, Zelle parent company Early Warning Services said in a statement, “Tens of millions of consumers safely use Zelle, with more than 99.9 percent of payments sent without any report of fraud or scams. Any external analysis done is incomplete and does not reflect the efforts and data reported by more than 1,700 financial institutions on the Zelle Network.”
As for Warren’s specific rebuke of Wells Fargo for not fully cooperating with her investigation, a spokesperson for that banking institution said in a statement, “We don’t believe the numbers in a recent report are done on a comparable basis, and therefore the analysis is misleading and inaccurate,” and added, “We welcome the opportunity to have a constructive discussion about wholistic Zelle data and industry trends — not just that of three banks.”