December 22, 2022

Warren Questions Zelle on Fraud Policy Changes

Zelle is Considering Changes to Customer Refund Policies after Warren’s October 2022 Investigation Revealed Rampant Fraud and Theft on Platform

“Given the consistent unwillingness of EWS and the Big Banks that own and operate the platform to cooperate or provide lawmakers and the public with full, complete, and factual information about fraud on Zelle, your announcement gives me little confidence that your company will implement the full scope of changes needed to protect consumers from fraud on Zelle.”

Text of Letter (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Early Warning Services (EWS), the parent company of big bank-owned peer-to-peer payment platform Zelle, questioning EWS about upcoming changes to its fraud policy on Zelle, including changes to its liability policies and refunds for customers who were scammed, and requesting a full briefing about these changes. 

“Your proposed policy changes are long overdue: consumers deserve better than EWS’ current approach, which leaves them holding the bag while scammers and fraudsters benefit. But given the consistent unwillingness of EWS and the Big Banks that own and operate the platform to cooperate or provide lawmakers and the public with full, complete, and factual information about fraud on Zelle, your announcement gives me little confidence that your company will implement the full scope of changes needed to protect consumers from fraud on Zelle,” wrote Senator Warren.

In October 2022, Senator Warren released a report that found rampant and increasing fraud and scams on Zelle – with the value of fraud and scams jumping more than 250% from over $90 million in 2020 to a pace exceeding $255 million in 2022. The report also found that Zelle wasnot repaying consumers who were defrauded, leading to millions of lost funds for consumers each year. Less than half of the value (47%) of “unauthorized” transactions classified by EWS as fraud was returned to consumers in 2021 and the first half of 2022. 

Recent reports indicate that EWS is considering changes to its fraud policy, including changes in liability for banks on the platform and increasing refunds for customers. Senator Warren is requesting EWS provide a briefing on its proposed rule change for Zelle no later than January 9, 2023, and included a set of questions that EWS should be prepared to answer, including its plans to implement this new rule retroactively, how EWS will work with regulators, and if EWS will commit to publicly release complete data on the scope of fraud and scams on Zelle. 

Senator Warren has led congressional oversight of Zelle and the banks that own it to protect consumers who were victims of frauds and scams: 

  • In November 2022, Senator Warren sent letters to Wells Fargo and EWS, criticizing both companies’ responses to her report as misleading and false, and called on them to release all data on fraud and scams on Zelle to back up their rhetoric disputing her findings. 
  • In October 2022, Senator Warren sent a letter to the Consumer Financial Protection Bureau, summarizing the findings of her investigation revealing high rates of fraud and scams on Zelle and that the banks are not refunding the vast majority of defrauded consumers, breaking their promises to their customers and potentially violating federal law. 
  •  In July 2022, Senators Warren, Bob Menendez (D-N.J.), and Jack Reed (D-R.I.) sent letters to each of the banks that own EWS, requesting information about the Zelle scams and frauds its customers have reported to them. With the exception of Truist, the relevant banks testifying provided little to none of the information the lawmakers requested, until Senators Warren and Menendez again pressed bank CEOs for this information at the September BHUA Committee hearing. 
  • In April 2022, Senators Warren, Menendez, and Reed sent a letter to EWS, asking the company to disclose how many reports of fraud it had received from users since the beginning of 2018. Early Warning Services provided little data on the volume of fraudulent transactions occurring on Zelle.

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