Three major US banks, JPMorgan Chase, Bank of America, and Wells Fargo, have reportedly agreed to testify at a US Senate hearing regarding significant fraud on the payments network Zelle, totaling hundreds of millions of dollars.
According to sources speaking anonymously to Politico, executives from the banks’ payment operations are scheduled to appear on July 23rd at a hearing conducted by the Permanent Subcommittee on Investigations. The committee revealed that customers of these banking giants reported $456 million in fraudulent transactions on Zelle in 2022, with the banks refusing to reimburse $115 million in claims.
Chairman Richard Blumenthal, a Democratic Senator, criticized the banks for failing to adequately protect their consumers, stating that they view these losses as simply part of the cost of doing business. He emphasized that it is the customers who ultimately bear the financial burden and invited Zelle and the three largest banks to address these issues.
Senator Blumenthal warned that scammers are increasingly using sophisticated technology such as AI voice cloning and stolen personal data to target customers, posing a growing risk. Despite Zelle and its owner banks being aware of these trends, they have failed to effectively combat these scams and compensate affected customers.
Zelle, owned by seven US banks including Chase, BofA, and Wells Fargo, disclosed that it processed $806 billion in transactions last year, with only a fraction – less than one-tenth of one percent – reported as fraud or scams.
As the investigation unfolds, the banking industry faces scrutiny over its handling of fraudulent activities, highlighting the need for improved safeguards and consumer protection measures. The upcoming Senate hearing will shed light on the challenges faced by customers in the digital payment landscape, urging financial institutions to prioritize security and transparency to mitigate risks for their clients.
