Senators to CFPB: Use Authority to Protect Consumers From P2P Payment Scams

The Consumer Financial Protection Bureau (CFPB) should use its authority under Regulation E and the Electronic Fund Transfer Act (EFTA) to protect consumers from payment scams on peer-to-peer (P2P) services like Zelle, according to a letter sent to the agency by six U.S. Senators, all Democrats.

Under the EFTA and the CFPB’s Regulation E, a consumer is protected if a fraudster scams them into handing over account information and then initiates a transfer. If a consumer opens an account specifically to transfer monies to a scammer, then the consumer isn’t protected, according to the letter. 

“Determining liability based on whether a consumer or a fraudster physically initiates a transaction is antiquated,” according to the letter, which was signed by senators Elizabeth Warren (D-Massachusettes), Robert Menendez (D-New Jersey), Sherrod Brown (D-Ohio), Catherine Cortez Masto (D-Nevada), Jack Reed (D-Rhode Island), and Raphael G. Warnock (D-Georgia). 

See also: CFPB Wants Banks to Pay Back Victims Scammed Using Zelle, Other P2P Services

The CFPB could give banks more requirements surrounding fraud when it comes to P2P transactions and force them to refund victims, PYMNTS reported earlier this week. New regulatory guidance could maintain that fraudulently-induced transactions, even those approved by the consumer, are considered unauthorized.

“Given the growing marketing and use of these services, we believe it is essential that the CFPB intervene to protect consumers by more vigorously applying its existing authority under the EFTA and Regulation E,” per the letter.

Read more: Law Firm Probes Zelle’s Unauthorized Fraud Reimbursement Position

Silicon Valley law firm Schubert Jonckheer & Kolbe LLP is investigating the fraud reimbursement practices of banks that use Zelle, PYMNTS reported earlier this month. The firm says there have been multiple class-action lawsuits against Zelle, including federal suits in California, Florida, and Washington.

The letter from senators points out that operators of P2P services talk about convenience without having a plan that protects customers and “instead sought to avoid providing reimbursement when their customers are defrauded or scammed.”

Related: P2P Payments Fraud Suggests Liability Gray Area

Zelle and Venmo volumes have seen triple-digit gains, but the speed and convenience of real-time P2P money transfers have come at the cost of an increase in fraudsters slipping in to impersonate both individuals and businesses, PYMNTS reported July 12.