Senators call on banking regulators to scrutinize Zelle fraud

As more consumers fall victim to fraud scams on peer-to-peer (P2P) payment apps, a group of Democrat senators sent a letter to federal banking regulators – including the NCUA – calling on the agencies to review customer reimbursement and anti-money laundering (AML) practices of financial institutions that participate in the Zelle network.

In the letter, Sens. Jack Reed, D-R.I., Bob Menendez, D-N.J., Elizabeth Warren, D-Mass., Mark Warner, D-Va., and Senate Banking Committee Chairman Sherrod Brown, D-Ohio, claimed, “When banks or credit unions participating in Zelle evade responsibility for reimbursing their customers if they are fraudulently induced to send money to scammers through the app, those customers may lose confidence in their depository institution for offering a product that places their money at risk.”

The senators argued there are compliance concerns – related to potential UDAAP, consumer protection, and AML violations – regulators should review at financial institutions and asked the Federal Reserve and OCC to regularly examine Early Warning Services, which operates Zelle and is owned by the nation’s largest banks. They also recommended the banking agencies coordinate oversight with the CFPB.

In response to reports that the CFPB was reviewing Regulation E liability requirements last summer, including potential guidance that would seek to ensure financial depository institutions cover losses from consumer authorized transactions that are the result of scams, NAFCU’s advocacy team shared concerns with lawmakers and regulators.


continue reading »