BALTIMORE — The U.S. Senate Permanent Subcommittee on Investigations (PSI) issued a 62-page report on Zelle’s “insufficient consumer protection” when users lost money to scammers.
Despite a legal mandate to reimburse fraud, the committee found consumers who reported scams were infrequently reimbursed by their financial institutions.
“Without legal requirements to repay customers for these lost funds, our analysis found that, in 2023, Zelle’s three largest banks reimbursed victims of these scams only 12 percent of the time. In fact, over the last three years, these banks denied more than half a billion dollars’ worth of scam disputes," said Chairman Richard Blumenthal (D-CT).
According to the report released early Tuesday morning, JPMorgan, Bank of America, and Wells Fargo collectively reimbursed consumers for approximately 38 percent, or $64 million, of the $166 million worth of fraud disputes at these banks in 2023, leaving over $100 million worth of fraud disputes unreimbursed that year. JP Morgan, Wells Fargo, and Bank of America rejected scam disputes worth a combined total of approximately $560 million from 2021-2023.
In its 13-month investigation, the committee also found that JPMorgan, Bank of America, and Wells Fargo policies and procedures in place for investigating claims allowed broad discretion for employees to deny claims based solely on internal documentation in certain instances with little transparency to consumers.
WMAR-2 News Mallory Sofastaii has reported extensively on this issue.
Most recently, she spoke with a woman who lost over $3,400 when someone posing as a Bank of America representative convinced her there had been an unauthorized transaction on her account. In order to reverse it, she was told to send the stolen amount to a claims number via Zelle. The number belonged to a scammer and the transfer was irreversible. She called her bank within minutes of the incident, but was told there was nothing they could do.
READ MORE: A year after Zelle rule change, fraud victims and lawmakers seek clarity on reimbursement policy
In March 2023, Sofastaii also reported on Zelle’s plans to implement a rule change to begin reimbursing victims of certain imposter scams, however, Early Warning Services, LLC, the network operator of Zelle declined to provide details on who qualifies for these protections.
“Zelle’s efforts at self-regulation have not fixed the problem. In June 2023, Early Warning Services enacted a new policy requiring banks in the Zelle Network to reimburse consumers for certain types of imposter scams. But our investigation found that this policy change affected less than 20% of scam victims, resulting in only $18.3 million in reimbursed scam claims in the first six months after it was implemented," said Senator Blumenthal.
READ MORE: Zelle's operator confirms fraud rule change, but current users lack recourse
The PSI is holding a hearing Tuesday afternoon at 3:30 p.m. to discuss their findings and to hear from Zelle’s CEO plus executives of Bank of America, JPMorgan Chase, and Wells Fargo.
In an email, a spokesperson for Early Warning, wrote:
“Early Warning, the network operator of the Zelle Network®, has provided financial empowerment for millions of Americans and has led the industry in scam reimbursement efforts. We are committed to protecting consumers through highly effective fraud and scam countermeasures. In 2023, more than 99.95% of payments were completed without a report of fraud or scam. That’s nearly a 50% decrease in reports of fraud and scam payments processed on the Zelle Network from the prior year (down from 99.9% overall) while the network transaction volume increased by 28%.
Additionally, Zelle requires the nearly 2,200 financial institutions on our network to provide industry-leading fraud and scam reimbursement benefits that go beyond legal requirements. Criminals who perpetrate fraud and scams are the ultimate source of the problem and stopping the root cause of financial fraud and scams requires solutions like increased law enforcement resources and criminal penalties, consumer education, and preventing criminals from spoofing identities.
Last year alone, we reached nearly 40 million consumers of all ages through our website, and our partnerships with the Better Business Bureau, National Council on Aging (NCOA) [website], Utilities United Against Scams and Vox Media (The Science Behind Scams and S.A.F.E. Squad) to help consumers identify and avoid potential scams.
We are actively working to bring together multiple industries, government agencies and law enforcement partners to develop broader solutions to combat fraud and scams.”