October 03, 2022

New Report by Senator Warren: Zelle Facilitating Fraud, Based on Internal Data from Big Banks

“Big banks own and profit from Zelle, but are failing to make their customers whole for both authorized and unauthorized fraudulent activity on the platform, despite their claims that it is safe and that they have a ‘zero liability’ policy for fraud.”

This new report comes after months of Senator Warren urging the big banks to provide this data.

Text of Report (PDF)

Washington, D.C. – Today, United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee (BHUA), released a new report revealing rampant fraud and theft on Zelle. This new report contains the findings of Senator Warren’s investigation of Zelle fraud data provided by banks. It finds that fraud is growing on the platform and that the banks are not refunding the vast majority of defrauded consumers, breaking their promises to their customers and potentially violating federal law. 

In a hearing before the BHUA Committee on September 22, 2022, Senators Warren and Bob Menendez (D-N.J.) called on big bank CEOs to provide information on the volume of and procedures for addressing fraud on their Zelle platform. Senators Warren and Menendez received a commitment from several CEOs that they would provide the requested information to Congress. While JPMorgan Chase, Wells Fargo, and several other banks still refused to make key information about fraud public, several other banks did provide the information.

“New internal data from the big banks shows that their platform Zelle is rampant with fraud and theft, and few customers are getting refunded -- potentially violating federal laws and consumer rules. Despite their CEOs' promises to the Senate Banking Committee, JPMorgan and Wells Fargo have still not turned over complete data, and I'll keep fighting for stronger consumer protections and to hold all these banks accountable for abuse.” said Senator Warren. 

The report findings show that:

  • Fraud and theft are rampant on Zelle – and are increasing. The big banks that own Zelle market the product by telling their customers that the platform is safe and secure. Bank of America tells its customers that Zelle is “a safe and easy way to send money fast.” Similarly, Wells Fargo tells customers, “Zelle is fast, safe, and convenient.” Early Warning Services, Zelle’s parent company, brands itself as “innovative,” “collaborative,” and “trustworthy.” But PNC Bank reported that the number of fraud and scam claims from customers increased from 8,848 in 2020, to a pace of over 12,300 in 2022. Similarly, U.S. Bank reported 14,886 fraud and scam claims on Zelle in 2020, and that its customers are on pace to report nearly 45,000 claims in 2022. The four banks that reported the relevant data received scam and fraud claims in excess of $90 million in 2020, and are on pace to receive scam and fraud claims in excess of $255 million in 2022.
  • Banks are not repaying the vast majority of cases where customers were fraudulently induced into making payments on Zelle. Overall, four banks that provided data reported over 190,000 cases of scams – cases where customers reported being fraudulently induced into making payments on Zelle – involving over $213 million of payments in 2021 and the first half of 2022. In the vast majority of these cases, the banks did not repay the customers that were defrauded. Overall the three banks that provided full data reported repaying customers in only 9.6% of scam claims, and repaid only $2.9 million, representing 11% of payments.
  • Banks are not repaying customers who contest “unauthorized” Zelle payments – potentially violating federal law and CFPB rules. Zelle claims to have a “zero liability policy” for cases in which a bad actor gains access to a consumer’s Zelle account and uses it to make unauthorized payments, and the Electronic Fund Transfer Act (EFTA) and the Consumer Financial Protection Bureau’s (CFPB) “Regulation E” require that the banks repay customers when funds are illegally taken out of their account without authorization. But the data provided by the banks revealed that they reimbursed consumers for only 47% of the dollar amount of cases in which customers reported these unauthorized payments on Zelle in 2021 and the first half of 2022.

The CFPB has regulatory authority over Zelle and other peer-to-peer platforms including Zelle, and is reportedly considering issuing guidance clarifying the scope of “Regulation E.” The agency must act to clarify and strengthen “Regulation E,” and to include fraud in the Regulation’s error resolution purview.

Over the past 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, until Sen. Warren and Menendez again pressed bank CEOs for this information at the September BHUA hearing.