JPMorgan Chase, Bank of America, and Wells Fargo are falling short in safeguarding customers against scams and fraud amounting to hundreds of millions of dollars each year, as per a US Senate panel.
During a hearing conducted by the Permanent Subcommittee on Investigations, Democratic Senator and Chairman Richard Blumenthal highlighted that customers of these banking giants filed claims seeking to recover $456 million in 2022, all stemming from fraud and scams on the Zelle payments network.
Blumenthal revealed, “The banks of America have a hidden truth known as Zelle… Zelle promotes itself as ‘A fast and easy way to send and receive money.’ However, as uncovered by this Committee, what often occurs on Zelle is a fast and easy way to lose money.”
The Senator expressed concerns that Zelle, a network jointly owned by seven US banks including Chase, BofA, and Wells Fargo, gives a false sense of security to customers while leaving them exposed to fraud.
Blumenthal stated, “Zelle transfers are almost instantaneous and irreversible, and by the time a consumer realizes they have been scammed, it is usually too late to take any action – as per Zelle and the banks that own, control, and essentially run Zelle… Zelle and its owning banks portray an illusion of trust to customers, but the actual risks are significant and current, with a failure to adequately protect consumers as they deserve.”
The Permanent Subcommittee on Investigations discovered that out of the $456 million lost to Zelle scams in 2022 as reported by customers, $341 million was reimbursed. The panel also noted that 13% of users on Zelle and other peer-to-peer payment platforms admit to sending money to someone only to realize later that it was a scam.
In response to the inquiry from the Senate panel, Zelle issued a statement through its parent company, Early Warning Services, LLC.
The statement read, “Ensuring a secure and dependable service for consumers is the top priority of Early Warning Services, LLC, the operator of the Zelle network, and our 2,100 participating banks and credit unions. Due to our continuous efforts to enhance Zelle’s robust security foundation, less than one-tenth of one percent (.1%) of transactions are reported as fraud or scams, making Zelle one of the safest options for consumers to make payments to trusted individuals. Additionally, Zelle is currently mostly free for consumers.”
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