Report: CFPB Investigation of Zelle Expected to Include More Banks

The Consumer Financial Protection Bureau (CFPB) is reportedly looking into how some of the biggest U.S. banks handle complaints from customers who dispute transactions made through Zelle.

JPMorgan Chase disclosed the CFPB’s investigation of the peer-to-peer (P2P) payment app on Friday (Aug. 2) in a filing with the Securities and Exchange Commission (SEC), and other large banks are expected to make similar disclosures soon, the Wall Street Journal (WSJ) reported Wednesday (Aug. 7), citing unnamed sources

The CFPB’s probe is focusing on whether banks are doing enough to verify the identity and background of deposit-account customers and to shut down accounts controlled by scammers, according to the report.

In JPMorgan Chase’s filing, the bank said that it is responding to inquiries from the CFPB, regarding transfers of funds through Zelle.

“In connection with this, the CFPB Staff has informed the Firm that it is authorized to pursue a resolution of the inquiries or file an enforcement action,” the filing said. “The Firm is evaluating next steps, including litigation.”

Wells Fargo had previously disclosed that “government authorities” are asking about Zelle, according to the WSJ report.

Zelle is owned by a consortium of seven banks — including JPMorgan Chase, Wells Fargo and Bank of America — and is run by network operator Early Warning, per the report.

Early Warning told the WSJ that it has put countermeasures in place and that 99.5% of Zelle transactions are completed without reports of fraud.

On Monday (Aug. 5), Senator Richard Blumenthal, D-Conn., issued a press release and the text of a letter to CFPB Director Rohit Chopra in which Blumenthal called on the regulator to investigate the dispute resolution practices of Early Warning and the three banks that collectively represent 73% of all Zelle transactions: JPMorgan Chase, Bank of America and Wells Fargo.

“I further urge you to take appropriate action to ensure that these institutions fully and promptly address consumer reports of fraud, as required by law,” Blumenthal said in his letter to Chopra. “If your investigation finds that an institution has violated the Electronic Fund Transfer Act ‘knowingly and willfully,’ I encourage you to take the strongest appropriate action.”

Fifty-one percent of Americans use P2P apps like Zelle and Venmo for quick and easy money transfers, but concerns about fraud are casting a shadow over the growth of these services, according to the PYMNTS Intelligence and The Clearing House collaboration, “P2P Payment Potential: Promoting Convenience While Protecting Consumers.”