Blumenthal Delivers Opening Statement at Hearing on Zelle & Banks' Failures to Protect Consumers

[WASHINGTON, DC] – Today, U.S. Senator Richard Blumenthal, Chair of the Permanent Subcommittee on Investigations (PSI), delivered opening remarks at a hearing titled “Instant Payments, Instant Losses: Zelle and the Big Banks Fail to Protect Consumers from Fraud.” The hearing featured testimony from Zelle owner and operator Early Warning Services CEO Cameron Fowler and corporate executives from Zelle’s three largest owner banks—JPMorgan Chase, Bank of America, and Wells Fargo. Prior to the hearing, Blumenthal released a majority staff report detailing the Subcommittee’s findings thus far in its inquiry into the handling of scams and fraud on the popular peer-to-peer payment platform.

“Sending a payment on Zelle is fast, easy, and irreversible. Eighty percent of Americans who have bank accounts already have it sitting there ready to use. Zelle’s unique characteristics make it convenient trusted by consumers, but it also makes them a target for scammers,” said Blumenthal.

Blumenthal underscored PSI’s investigative findings, which brought to light the extent of fraud on Zelle and lacking consumer protections, “Our investigation found that customers of Zelle’s three largest owner banks, JPMorgan Chase, Bank of America, and Wells Fargo, disputed over $372 million to scams and fraud in 2023 alone. Nearly three-quarters of these claimed losses, totaling $270 million, were never reimbursed by the banks.”

Blumenthal continued, “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 customers for certain types of imposter scams. But our investigation found this policy change affected less than 20 percent of the scam victims, resulting in only $18.3 million in reimbursed scam claims in the first six months after it was implemented.”

“Long and short, more must be done to protect consumers from the harms that Zelle and the big banks are failing to stop. We have to level the playing field, providing Zelle users with the same protections that exist for debit and credit cards,” concluded Blumenthal.

Video of Blumenthal’s opening remarks can be found here. The full transcript of Blumenthal’s opening remarks can be found below.

Chair Blumenthal: We will come to order. Thank you all for being here, most particularly my colleagues and the witnesses who are appearing today.

Every single day in America, at least some of the Americans who use peer-to-peer applications to transfer money will lose hundreds, maybe thousands, of dollars after they are tricked into sending an irreversible payment to someone perpetrating a scam, or the accounts are simply skimmed of money. This problem affects all peer-to-peer apps. Nowhere is it more problematic than on Zelle, which is the largest of them. It is run by a company called Early Warning Services, which in turn is owned by seven of the nation’s largest banks.

Sending a payment on Zelle is fast, easy, and irreversible. Eighty percent of Americans who have bank accounts already have it sitting there ready to use. Zelle’s unique characteristics make it convenient trusted by consumers, but it also makes them a target for scammers. Zelle and the big banks who own it know that Zelle's speed and convenience makes it a target. And they’re well aware that every single day, some of their customers will be hurt. They know this, and they are willing to accept the risk as a cost of doing business. But it is a cost for their customers, not for them in the vast, vast majority of instances.

Last year, the Subcommittee initiated an inquiry into Zelle and its three largest owner banks because of these widely reported harms. And after 15 months of investigation and pouring over thousands of pages of data, the Subcommittee has found Zelle and these three banks, which together comprise 73 percent of payments on its platforms, they are simply not doing enough. They are failing to protect consumers from the growing risk of scams and fraud.

I am going to ask the majority report with our findings be entered into the record without objection.

Our investigation found that customers of Zelle’s three largest owner banks, JPMorgan Chase, Bank of America, and Wells Fargo, disputed over $372 million to scams and fraud in 2023 alone. Nearly three-quarters of these claimed losses, totaling $270 million, were never reimbursed by the banks.

But what is most striking to me is that the unauthorized claims, that is to say, losses without consent or approval by the customer, were reimbursed only 38 percent of the time, which is down from 62 percent in 2019. Those claims are required to be reimbursed under our present, existing law. In fact, banks are required to reimburse customers when they lose funds through those unauthorized transactions such as hacking or other unauthorized access to a customer’s account. For two out of every three customers who called their bank to report they had been defrauded in this way, without authorization, without approval, without consent, they were denied reimbursement.

We don’t know what’s happening inside the banks. And frankly, your testimony gives us no enlightenment so far about the reasons for those denials. In fact, so far as I can tell, your testimony presents no numbers. It is simply, you simply say that 99.9 percent of all the transactions are without problems. But here is what’s important: when a customer is tricked into transferring funds to a bad actor, the outcome is even worse.

Without legal requirements to repay customers for those lost funds, our analysis found that in 2023, Zelle’s three largest banks reimbursed victims of these scams only 12 percent of the time. That is a staggering number.

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 customers for certain types of imposter scams. But our investigation found this policy change affected less than 20 percent of the scam victims, resulting in only $18.3 million in reimbursed scam claims in the first six months after it was implemented.

Meanwhile, Zelle is growing. It is growing at a very rapid pace. Despite Zelle claiming that it should be used only with individuals that a consumer “knows and trusts,” banks are increasingly encouraging customers to use Zelle for commercial purposes like paying rent, or buying lunch at a food truck. Without offering protections available with other payment methods, such as the purchase protection available with credit cards, or the chargeback mechanisms available with debit cards. Yet, when things go wrong, Zelle and the banks are quick to blame the victim and allege that they failed to use Zelle as it is “intended.”

In May, this Subcommittee heard testimony from two individuals, whose lives were upended after being targets of sophisticated scams on Zelle. Ariana Duval, a college student from North Carolina, told us about how she lost $2,400 after being tricked into thinking she was being hired for an exciting summer job opportunity with a professor at her university. Anne Humphreys, a grandmother from Maryland, told us about how her 94-year-old mother was targeted by scam artists who had personal information about Mrs. Humphreys’s brother and convinced her family that he had been arrested and was in urgent need of bail money. Neither of these victims has gotten their money back, nor have many others. We’ve heard from them on this Subcommittee, and more are coming forward because of these hearings.

Now, the banks may tell us—and they may sincerely believe that these stories are the exception—they tell us these scams don’t matter because more than 99 percent of transactions on Zelle, as I mentioned, go through without incident. But when we are talking about billions and billions and billions of dollars’ worth of transactions, 0.1 percent makes a difference. But whatever the percent, the average losses are $500, and that is a big chunk of change to the average everyday American.

So, when this devastation falls on them, it can be shattering, even though it is just the cost of doing business. We would never tolerate a car that protects infants 99 percent of the time in using a car seat. We would never accept an airplane that succeeds in 99 percent of its landings. And we should not accept a financial tool that protects only 99 percent of the people who use it when there are ways, in fact, to protect them that are affordable, accessible, and reliable.

A thousand dollars here, a few hundred dollars there, might not seem a lot to banks given the numbers that you are used to working with. But to most Americans, these losses can be devastating. And a federal reserve analysis has found, in fact, that a third of American households are unable to cover a $400 emergency. So that average loss can be severely consequential.

Long and short, more must be done to protect consumers from the harms that Zelle and the big banks are failing to stop. We have to level the playing field, providing Zelle users with the same protections that exist for debit and credit cards.

Today, we are going to hear from the chief executive officer of Early Warning Services and representatives from three banks that own it about why this is happening. But I will say, we will be preparing as well for the next steps. We hope you'll cooperate. We sincerely hope that you will be good to the promises that you make in the testimony you have submitted today about wanting to work with us. Because I think you will benefit your customers and your well-respected institutions.

With that, I turn to the Ranking Member.

-30-