Several major banks, including JPMorgan Chase, Bank of America, and Wells Fargo, are under federal scrutiny for handling fraud related to the payment platform Zelle. The Consumer Financial Protection Bureau (CFPB) is examining how these banks manage disputed transactions and address attempts at fraud.
The CFPB’s investigation follows complaints that the banks have been inadequate in preventing and dealing with fraud in which consumers have been tricked into authorizing unauthorized payments. The study also assesses whether these banks, which are primary owners of Zelle, are properly verifying customers and closing accounts associated with illicit activities.
Recent findings from the Senate Permanent Subcommittee on Investigations reveal a significant decline in the recovery rate for victims of Zelle fraud—from 62% in 2019 to 38% in 2023. Additionally, between 2021 and 2023, banks denied recovery of $880 million for disputed transactions.
In response, Zelle has implemented new rules requiring banks to reimburse certain losses related to fraud, particularly in cases involving impersonation of financial institutions or government agencies. Zelle’s parent company, Early Warning Services, emphasized that while most Zelle transactions are not fraudulent, the focus should be on tackling the criminals behind such activities rather than solely increasing recovery rates.
JPMorgan Chase publicly criticized the CFPB’s investigation, suggesting that the agency’s demands exceed legal requirements and hinting at potential legal challenges.
