Blumenthal Urges Action From The Banks That Operate The Zelle Payment App To Protect Consumers
by Hudson Kamphausen CTNewsJunkie
HARTFORD, CT – As more people fall victim to financial scams through services like Zelle, US Sen. Richard Blumenthal said Monday that the banks who primarily own and operate the service must make changes.
Speaking Monday at the Legislative Office Building in Hartford, Blumenthal said that peer-to-peer payment apps like Zelle and others are “emboldening and enabling” fraud and scams with instantaneous and irreversible payments.
However, Blumenthal said that Zelle is separated from its counterparts in the industry by one key distinction: awareness.
“[Zelle] is aware of this problem, and is failing to do anything about it,” he said, adding later: “Let’s be clear on who’s responsible. The banks own, operate, and control Zelle – they are responsible, and they should be held accountable.”
Blumenthal said that three banks in particular – J.P Morgan Chase, Bank of America, and Wells Fargo – control about 73% of Zelle, and that he wants to see those banks commit to improving their service and the protections it provides to consumers.
Specifically, Blumenthal said Zelle should prioritize three aspects of their service:
1 Reversibility – Blumenthal said that when a transfer is made it is instantaneous, and there is no way for the sender to recant their payment if they figure out they’ve been scammed;
2 Reimbursement, and;
3 Authentication.Blumenthal said that transactions over payments apps should be treated the same as credit card transactions, meaning that they should be reversible within 24 hours.
“These kinds of measures are common sense,” he said. “They diminish the quickness and the permanence of the transfer, but they also provide protection.”
Early Warning – the network operator for Zelle – said in a written statement Monday that providing safe and reliable service to its consumers is its top priority.
“As a result of our continued efforts to build on Zelle’s strong foundation of security, less than one tenth of one percent (.1%) of transactions are reported as fraud or scams, making Zelle one of the safest ways for consumers to pay people they know and trust,” a spokesperson for the company said.
According to Zelle, about 120 million Americans had access to the service through their banking apps, resulting in a total of 2.9 billion transfers last year.
The statement continued, saying:
“In accordance with federal regulations, the Zelle network rules have always required that fraudulent payments – those where a bad actor initiates a Zelle transaction from a consumer’s account without authorization – be reimbursed. ”
Additionally, a spokesperson for Early Warning said that as of June 2023, the payment app had expanded its regulations to require the financial institutions that use its service to reimburse consumers that are victims of financial fraud.
Blumenthal said that while the scams themselves are somewhat unavoidable, and unfortunate, there is more that can be done by the banks that own Zelle to protect consumers and gain some recourse if they are victimized.
The congressional Permanent Subcommittee On Investigations has been holding hearings on the issue, according to Blumenthal, with several victims coming forward to tell their stories.
The senator said that the subcommittee will produce a report on its investigation within the next couple of months, one that he said will hopefully lead to legislation, but that there is nothing currently on the floor of the senate that could be passed in the near future.
In the meantime, he said, he wants to know what steps the banks that own and operate Zelle will be taking to protect their consumers.
Blumenthal said that the committee has called on the banks that primarily own and operate Zelle to appear at the committee’s next hearing to answer questions, as well as state what they will do in the future to protect consumers.
“We want to know what they will do, not vague promises about their concerns and so forth, but what they will actually do, he said. “They can do better, and we want to know how they’ll do better.”
Blumenthal was joined by Connecticut Department of Consumer Protection Commissioner Bryan Cafferelli, who said that his department is doing its best to educate people in Connecticut about identifying and navigating scams, and how to avoid being defrauded on apps like Zelle.
Cafferelli shared one instance of a Connecticut resident who, he said, paid around $100,000 to an individual claiming to be a veteran. Cafferelli said that, in that case, he and others were unable to recover any of the money that had been sent to the fraudulent individual.
Blumenthal said that education around the issue is important.
“If it looks too good to be true, it probably is,” he said.