The three banks, which are among the seven financial institutions that own the popular person-to-person payments network, reimbursed only a tiny fraction of the thousands of fraud and scam victims between 2019 and 2023, according to a Tuesday report from Sen. Richard Blumenthal (D-Conn.), the chairman of the Senate Permanent Subcommittee on Investigations.
“They are simply not doing enough,” Blumenthal said at a subcommittee hearing the same day. “They are failing to protect consumers from the growing risks of scams and fraud.”
Companies that use Zelle define fraud as when a customer sees funds taken out of their accounts without their authorization, such as in a computer hack. Scam victims authorize a transaction and are victims of various tricks, such as people posing as bank employees, AI-generated voice schemes, and even fake advertisem*nts for puppies.
The 1978 Electronic Fund Transfer Act requires banks and other payment providers to investigate and reimburse unauthorized funds transfers found to be fraudulent. The law doesn’t require investigation or reimbursem*nt for authorized transactions, including for scam victims.
Millions in Fraud
JPMorgan, Bank of America, and Wells Fargo reimbursed 38% of fraud disputes for $64 million in 2023, more than $100 million short of the $166 million in fraud disputes for the year.
Scam victims had a rougher go, with JPMorgan Chase reimbursed three of 41,390 scam disputes in 2020, according to the report. Wells Fargo didn’t reimburse any of the 25,061 scam disputes that year and Bank of America didn’t even track scams as a specific category until the second half of 2020, the report found.
In total, the three banks rejected a total of nearly $560 million in scam disputes from 2021 to 2023, the report found.
An Arizona company called Early Warning Services LLC operates Zelle. JPMorgan Chase, Bank of America, Wells Fargo,
JPMorgan Chase, Bank of America, and Wells Fargo account for around 73% of the payments made through Zelle, the report found. Zelle processed $806 billion in payments in 2023, according to the report.
“We are committed to protecting consumers through highly effective fraud and scam countermeasures,” an EWS spokesperson said.
EWS added that 99.95% of all Zelle transactions were completed without a fraud or scam dispute in 2023, up from 99.9% in 2022, even as transactions on the network grew 28% in that period.
Report Critiques
Wisconsin Sen. Ron Johnson, the Permanent Subcommittee’s top Republican, said the fraud and scams were the fault of criminals, not banks or payments companies.
“I’m actually pretty impressed with the safeguards that these direct payment companies put in place before the consumer actually hits ‘yes, send the money,’” he said at the hearing.
A JPMorgan Chase spokesperson blasted the report, saying that banks are “at the forefront of detecting and preventing frauds and scams.”
“It’s disappointing this Subcommittee spent a year investigating one of the safest payment platforms only to make partisan recommendations that ignore the underlying problem—the criminals,” the spokesperson said.
Melissa Feldsher, JPMorgan Chase’s head of commerce enablement, said in testimony prepared for the Tuesday hearing on Zelle fraud and scams, that only 0.05% of transactions made through the bank’s Zelle platform were disputed in 2023.
JPMorgan Chase has instituted a series of protections for customers aimed at preventing frauds and scams before they happen. Those efforts blocked nearly $1.1 billion in frauds and scams in the previous 12 months, Feldsher said in her prepared testimony.
Wells Fargo said its anti-fraud and anti-scam efforts have been increasingly effective, blocking more than one million potentially risky Zelle transactions before they left the bank in 2023.
“Over 99.9% of Zelle transfers by Wells Fargo customers are completed successfully without a fraud or scam claim,” Adam Vancini, the San Francisco-based bank’s head of payments for consumer, small, and business banking, said in prepared testimony.
Wells Fargo added that it wants to work with government and law enforcement to improve its anti-fraud and scam efforts.
“Along with the industry, we remain focused on protecting our customers from criminals, and combatting fraud and scams – efforts which require collaboration among industry, law enforcement and government partners to combat this criminal activity to the fullest extent,” a Wells Fargo spokesperson said.
Bank of America didn’t respond to a request for comment.
Mark Monaco, the Charlotte, N.C.-based bank’s head of global payments solutions, said Bank of America working to lower the instances of fraud on its Zelle platform, adding that “even one customer harmed by a fraud or scam is one too many” in prepared testimony released by the committee.
‘Imposter Scams’
Zelle expanded its scam reimbursem*nt policy in June 2023 to cover “imposter scams,” where customers are tricked into sending money to scam artists claiming to be from a government agency, bank, or other existing service provider.
The Senate report found that the policy change resulted in $18.3 million in reimbursed scam claims in the six months after it was put in place, representing 15% to 20% of the fraud of all scam disputes in that time.
The Senate report calls for an expansion of the EFTA so that scam victims can receive reimbursem*nt after an investigation into their claims and for the Consumer Financial Protection Bureau, which oversees EFTA compliance, to update its rules so banks provide more transparency about investigations.
The report also calls for EWS and its members to create a real-time fraud and scam reporting system so that banks and credit unions can keep up to date and better protect customers, among other recommendations.
