JPMorgan Chase, Bank of America, Wells Fargo and other unnamed major banks are reportedly facing a federal investigation over scams and fraud at the multibillion-dollar instant payments platform Zelle.
The Consumer Financial Protection Bureau (CFPB) is investigating how banks handle disputed transactions on the network, the Wall Street Journal reports.
The agency is responding to complaints that banks are not doing enough to stop illegal wire transfers and especially scams, which are technically defined as someone being tricked into approving a fraudulent transaction.
Investigators are also looking into whether the three lenders, which are Zelle’s largest banks, are doing enough to investigate their customers and close scam accounts.
The Senate Permanent Subcommittee on Investigations recently found that the three banks reimbursed Zelle scam victims 38% of the time in 2023, down from 62% in 2019.
The subcommittee also says the three banks have collectively refused to refund $880 million in disputed Zelle transactions between 2021 and 2023.
Over the summer, Zelle began requiring its banks to reimburse certain scams under certain circumstances, such as when someone impersonates a lender or the government.
During a Senate hearing on the issue, Cameron Fowler, CEO of Zelle’s parent company Early Warning Services, said that more than 99.9% of Zelle transactions are completed without any reports of fraud, and that the rate at which fraudulent Zelle transactions being repaid is not as important as the crimes themselves.
“We need to focus on the criminals who do this. The solutions for the entire society, the entire industry and the government are an important next step…
Increasing fees will not solve this problem. We already lead the industry in reimbursement.”
JPMorgan Chase is the first to comment publicly on the CFPB’s investigation.
The bank says the agency “goes beyond what the law requires,” and warns it may have to challenge the regulator’s actions in court.
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