JPMorgan Chase, Bank of America and Wells Fargo Under Federal Investigation Over Hundreds of Millions of Dollars in Scams and Fraud on Instant Payments Platform Zelle
JPMorgan Chase, Bank of America, Wells Fargo and other unnamed large banks are reportedly facing a federal investigation over scams and fraud on the billion-dollar instant payments platform Zelle.
The Consumer Financial Protection Bureau (CFPB) is probing how the banks handle disputed transactions on the network, reports the Wall Street Journal.
The agency is responding to complaints that the banks don’t do enough to stop illicit transfers and especially scams, which are technically defined as someone being duped into authorizing a fraudulent transaction.
Investigators are also exploring whether the three lenders, which are the largest owner banks of Zelle, are doing enough to vet their customers and terminate scam accounts.
The Senate’s Permanent Subcommittee on Investigations recently found the three banks reimbursed victims who reported Zelle scams 38% of the time in 2023, a decline from 62% in 2019.
The subcommittee also says the three banks have collectively refused to reimburse $880 million in disputed Zelle transactions between 2021 and 2023.
Over the summer, Zelle began requiring its banks to reimburse some scams in select circumstances, like when someone impersonates a lender or the government.
At a Senate hearing on the matter, Cameron Fowler, CEO of Zelle’s parent company Early Warning Services, said over 99.9% of Zelle transactions are executed without any report of fraud, and the rate at which fraudulent Zelle transactions are reimbursed is not as important as the crimes themselves.
“We need to get focused on the criminals who are perpetrating this. Whole of society, across industry, across government solutions are an important next step…
Increasing reimbursements won’t solve this problem. We already lead the industry in reimbursements.”
JPMorgan Chase is the first to publicly comment on the CFPB’s investigation.
The bank says the agency is going “above and beyond what the law requires,” warning it may have to challenge the regulator’s actions in court.
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