September 22, 2022

At Hearing, Warren Blasts Bank CEOs on Failure to Protect Consumers From Zelle Fraud

Warren: “You created the perfect weapon for criminals to use, and they have used it, and you have not stood behind your customers.”

Video (Youtube)

Washington, D.C. – During today’s Senate Banking, Housing, and Urban Affairs Committee (BHUA) hearing, U.S. Senator Elizabeth Warren (D-Mass.) blasted CEOs of the nation’s largest banks for their failure to protect consumers from fraudulent Zelle transactions. Wells Fargo, Bank of America, JPMorgan, Truist, U.S. Bank, and PNC all created, co-own, and help manage Zelle’s parent company – Early Warning Services – and yet all but one of them failed to provide the information Senator Warren requested about the scope of fraud on the platform. Senator Warren noted that while each of the banks markets Zelle to its customers as “safe,” millions of dollars are fraudulently transacted on the platform annually Several CEOs, including JP Morgan’s Jamie Dimon, promised to provide Senator Warren with the data she requested by the end of the day. 

During her questioning, Senator Warren asked each CEO whether they would commit to refunding customers who report to their banks that they’ve been defrauded through Zelle. None of the CEOs was willing to make that commitment.

Over the past six months, Senators Warren, Menendez, and Reed have led oversight letters requesting information about fraudulent transactions on Zelle. In April, Senator Warren led a letter to Early Warning Services asking the company to disclose how many reports of fraud it had received from users since the beginning of 2018. Early Warning Services provided little data on the volume of fraudulent transactions occurring on Zelle. In July, Senators Warren, Menendez, and Reed led letters to each of the banks that own Zelle’s parent company requesting information about the Zelle scams and frauds its customers have reported to them. With the exception of Truist, the relevant banks testifying provided little to none of the information the lawmakers requested.  


Event: Banking, Housing and Urban Affairs Oversight Hearing
Date: September 22, 2022
Topic: Annual Oversight of the Nation's Largest Banks

Senator Elizabeth Warren: So six of the seven banks here today – Wells Fargo, Bank of America, JP Morgan Chase, Truist, U.S. Bank, and PNC – jointly created and own the nation’s most popular peer-to-peer payment platform: Zelle.

The banks market Zelle as quote “fast, safe and easy way to send money,” end quote. That is only partly true. It is definitely fast, Zelle is fast and easy – and they increase bank profit margins. But Zelle is not safe. Last year alone, Zelle users were defrauded out of nearly half a billion dollars that we know of.

Now you built the system. You profit from every transaction on the system, and you tell people it is safe. But when someone is defrauded, you claim that’s the customer’s problem. 

We do oversight on the Banking Committee so I want to know exactly how big this problem is. In July, other Senators and I wrote to ask how many fraudulent Zelle transactions your customers have reported since 2018. Only Mr. Rogers of Truist provided data – 52,000 claims of fraud, totaling $46 million. Thank you, Mr. Rogers, for being transparent.

But the rest of you stonewalled. So today I get to ask you in person. Do I have any volunteers who want to go first and share the numbers I asked for back in July, or will I just pick volunteers?

Okay, Mr. Dimon, you represent the largest bank here today so let me start with you. You didn’t provide any of the information that we requested in my letter.  None of it. So what I want to know is that because you don’t keep track when your customers report fraudulent Zelle transactions, or is it because you do keep track and you know exactly how many fraudulent transactions have been reported, and you want to keep that report a secret?

Jamie Dimon: I deeply apologize if we didn’t give the numbers you asked for. I’m sure we responded, and we pay, anything that’s unauthorized we do cover. If you’re really talking about authorized transactions, that we have enormous amounts of systems to stop, and the amount of fraud relatively is very small for this free-of-charge service. 

Senator Warren: I very much appreciate that you’re going to give the commercial for Zelle, but if I don’t have the numbers, I don’t have any way to verify that. 

Jamie Dimon: You’re going to get them immediately, okay.

Senator Warren: You want to give me a ballpark right now?

Jamie Dimon: I don’t have the number in front of me.

Senator Warren: Do you know generally? This is a serious problem that’s been going on in this bank.

Jamie Dimon: I will get you the number immediately. I don’t want to make it up.

Senator Warren: Well I don’t want you to make it up either, but I don’t want you to wait another two and a half months before I get to see.

Jamie Dimon: I promise you that by the end of the day, you’ll get it. 

Senator Warren: Terrific. Alright, we’ll get it by the end of the day once nobody’s here to talk about it. How about you, Mr. Scharf? Do you have numbers?

Charles W. Scharf: I don’t here. I apologize, but we’ll get it to you immediately. 

Senator Warren: Does anybody here have numbers? Yes, Mr. Cecere, good.

Mr. Andy Cecere: First off, I apologize if we didn’t give you the numbers. We transact about 1.1 billion dollars a month, 3 million transactions, .07& have fraud involved.

Senator Warren: Okay, I’m sorry, but that’s not the number I asked for. The number I asked for is how many costumer fraud claims have you received? Mr. Dimon wanted to say well we bank are going to determine what we think is a fraud claim that we think should be reimbursed.  What I need to see is, I need to see the number coming in on the front end. And that is how many customers held up their hand, called the bank, and said “I have a fraud complaint with Zelle.” It's not hard. I presume you guys collect this information- 

Mr. Andy Cecere: we do. 

Senator Warren: What's your number?

Mr. Cecere: .07 on fraud point. .05 on customers raising their hand. 

Senator Warren: No, I'm sorry, I just need a real number. How many customer complaints have you received of fraud on Zelle system since 2018?

Mr. Cecere: I don't have that number in front of me but I will get it to you by the end of the day.

Senator Warren: Anybody else? Mr. Demchak?

Mr. William Demchak: I know the percentages. Six basis points of scams and fraud. Fraud is much less.

Senator Warren: As you define it, right?

Mr. William Demchak: Total disputes are six basis points. 

Senator Warren: You know what troubles me here, is the one person who gave us numbers. The numbers are pretty alarming. And the overall numbers are enormous. We know of at least a half a billion dollars in transactions may not seem like a lot of money to you, but to the person who just lost $450, it's a lot of money to them. 

So let me ask this the other way around. 

This would not be the same kind of problem if the bank stood behind the product. After all, you're the ones who invented it. You're the ones who made it work, you're the ones who profit off it. And then, when customers say I've got a problem, you say, I'm only going to reimburse a narrow slice of those who hold up their hands and say that they have been defrauded on the system. But, we could fix that problem, right now in this committee. If you would all be willing to say, or any of you would be willing to say, if a customer is defrauded on Zelle, and they come and complain to the bank, then the bank will make it good. Let's do this one by a show of hands, who is willing to make that commitment to your customers?

Mr.  William Demchak: Senator, we are working, the owners of EWS are actually working. We are a closed network owned by banks. So you're exactly correct, that we have an ability to make a difference here, and we are working on an answer to your question. We're in the throes of figuring it out. Now. Let me, let me continue, please. Zelle is one of the P2P networks that you highlight. The others have 15 times the number of disputes coming into our company that we have no ability –

Senator Warren: Mr. Demchak-

Mr. William Demchak: I have insight

Chairman Brown: Senator Warren, time.

Senator Warren: Let me just finish here if I can, please. I just want to say on this, you tell me you are so much better than the others. And yet you've had two and a half months to bring the data forward. And you have not produced any numbers on this. I'm sorry, your credibility right now is riding at zero.

Chairman Brown: Senator Warren –

Senator Warren: You created the perfect weapon for criminals to use, and they have used it, and you have not stood behind your customers.