Elizabeth Warren hones attack on Zelle’s payment system
(Bloomberg) – U.S. Senator Elizabeth Warren is stepping up her campaign against popular peer-to-peer payment system Zelle.
Bloomberg’s Most Read
Warren sent a letter to Consumer Financial Protection Bureau Director Rohit Chopra on Wednesday, calling for expanded regulation after collecting private data on rising Zelle fraud rates from some of the nation’s largest banks. . Warren, a Massachusetts Democrat, offered to share the data with Chopra, according to the letter obtained by Bloomberg.
“As the CFPB considers whether to act on this matter, my investigation findings reveal that the agency needs to strengthen consumer protections on peer-to-peer platforms like Zelle,” Warren said.
Earlier this month, Warren released a report based on data from Bank of America Corp., Truist Financial Corp., PNC Financial Services Group Inc. and US Bancorp that showed the value of scam and fraud claims had more than doubled to $236 million in 2021. These banks and three other lenders – JPMorgan Chase & Co., Wells Fargo & Co. and Capital One Financial Corp. – jointly own Early Warning Services LLC, which operates Zelle.
Under Regulation E, which governs how banks handle electronic funds transfers, if a hacker logs into a customer’s bank account and sends money, lenders are obligated to repay. But fraudsters have increasingly sought to use the Zelle network to persuade consumers to send them money. In these cases, with the real customer sending the money, the banks are not required to return the consumers whole.
Warren and other lawmakers have previously encouraged Chopra to expand the definition of an “in error” payment to include when a consumer is tricked into paying. They also suggested that the CFPB could issue guidelines that such a transaction count as an “unauthorized electronic funds transfer,” meaning banks should reimburse consumers.
The banks said they were working to provide better security barriers on the network by closing the accounts of customers who receive the fraudulent funds. The network also cut off several lenders who failed to properly monitor customers accused of defrauding customers of other banks in the network.
Bloomberg Businessweek’s Most Read
©2022 Bloomberg LP