The Senate Permanent Subcommittee on Investigations Releases New Staff Report on Zelle, Bank Failures to Protect Consumers

[WASHINGTON, DC] – Ahead of a hearing with Early Warning Services (EWS) CEO Cameron Fowler and major bank executives, U.S. Senator Richard Blumenthal (D-CT), Chair of the U.S. Senate Permanent Subcommittee on Investigations (PSI), released a majority staff report today detailing the Subcommittee’s findings thus far in its bipartisan inquiry into EWS and the three largest Zelle owner banks, JPMorgan Chase, Bank of America, and Wells Fargo (the “Three Banks”).

“Zelle and the big banks who own it know that Zelle’s speed and convenience makes it a target,” said Blumenthal. “They are well aware that, every single day, some of their customers will be hurt.  They know this and are willing to accept the risk as the cost of doing business—the cost for their customers, that is, not for themselves.”

Spanning nearly 15 months and thousands of pages of documents and data, the Subcommittee’s investigation has found that Zelle and the Three Banks are not doing enough to protect consumers from the growing risk of scams and fraud. A summary of key findings from PSI’s investigation is available below.

Consumers Are Not Always Reimbursed for Unauthorized Transactions as Required by Law

The Electronic Fund Transfer Act requires banks to reimburse customers when they lose funds through an unauthorized transaction, such as hacking or other unauthorized access to a customer’s account.

However, PSI’s investigation has found that Zelle’s three largest owner banks reimbursed victims who report this kind of fraud only 38 percent of the time in 2023—a decline from 62 percent in 2019. In terms of dollar value, this translates to over $100 million worth of transactions disputed as fraud not reimbursed each year from 2021 through 2023.

Consumers Are Rarely Reimbursed for Authorized Transactions

In the absence of legal requirements for banks to repay customers who are tricked into transferring funds to a bad actor, PSI’s investigation has found that consumers who fall victim to scams on Zelle are rarely reimbursed for their losses.

In 2020, JPMorgan reimbursed three transactions out of 41,390 scam disputes that year, Wells Fargo did not reimburse any of the 25,061 scam disputes, and Bank of America did not track scam data as a separate dispute category until the second half of 2020. In 2023, the Three Banks reimbursed victims of scams only 12 percent of the time.

Zelle Is Growing Rapidly Without Adequate Consumer Protections

Zelle is continuing to grow at a rapid pace, and banks are increasingly encouraging their customers to use Zelle for commercial purposes. Despite surging growth, Zelle has failed to offer sufficient protections for consumers that are comparable to other payment methods such as credit and debit cards. In June 2023, Zelle expanded its reimbursement policy, describing the expansion of reimbursement rules as “well above existing legal and regulatory requirements.” However, the policy covers only a small percentage of all scam disputes on the Zelle Network.

PSI found that the policy change resulted in $18.3 million in reimbursed scam claims in the six months following its implementation, amounting to approximately 15 to 20 percent of all scam disputes on the Zelle Network within that timeframe.

The full staff report detailing PSI’s findings is available here. A livestream link to today’s hearing will be available here.

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