JPMorgan Chase could be headed for a dust-up with the Consumer Financial Protection Bureau. In its “Consolidated Financial Statements” for the six months ending June 30, the bank indicated that the CFPB has inquired about transactions through the Zelle network and that it is currently evaluating the next steps, which could include litigation against the CFPB.
“JPMorgan Chase is responding to inquiries from the Consumer Financial Protection Bureau (CFPB) regarding the transfers of funds through the Zelle Network,” the statement read. “In connection with this, the CFPB Staff has informed JPMorgan Chase that it is authorized to pursue a resolution of the inquiries or file an enforcement action. JPMorgan Chase is evaluating next steps, including litigation.”
The filing was flagged in a report by Bloomberg News, which noted that U.S. authorities have been probing banks’ response to abuses of the Zelle network as regulators try to root out scammers abusing peer-to-peer payment networks. The CFPB had not issued any public statements about its concerns about fraudulent transactions via the Zelle network since June 2023, when it posted an “issue spotlight” that stated, “we find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the nonbank payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage.”
Wells Fargo revealed in May that the Securities and Exchange Commission (SEC) was investigating its handling of Zelle-related complaints.
“Government authorities have been conducting formal or informal inquiries or investigations regarding the handling of customer disputes related to fund transfers made through the Zelle Network,” the filing said.
Zelle told PYMNTS at the time that its network rules have always required reimbursements for fraudulent transaction claims. In adherence to federal regulations, these rules cover scams in which a fraudster initiates a Zelle transaction from a consumer’s account without permission.
“As of June 30, 2023, our bank and credit union participants must also reimburse consumers for certain qualifying imposter scams,” Zelle said. “The change ensures consistency across our network and goes beyond legal and regulatory requirements.”
Meanwhile, recent research by PYMNTS Intelligence finds that more than half of American consumers are using services like Zelle and Venmo to send money.
“With 51% of Americans using P2P regularly, consumers are increasingly expecting their primary financial institutions to offer P2P capabilities,” PYMNTS wrote Friday (Aug. 2).
“The appeal is clear: convenience, speed, and the added security of dealing with a trusted financial partner. As competition intensifies, banks that fail to provide P2P services risk losing customers to FinTech disruptors.”
However, in spite of their popularity, these platforms are still wrestling with the ongoing threat of fraud. Impostor scams, in which criminals impersonate friends or family to trick victims, have become more sophisticated, with Americans losing more than $2 billion to these scams last year, mostly via P2P payment channels.
“The irreversible nature of many P2P transactions exacerbates the problem, as victims often find it difficult to recover lost funds,” PYMNTS wrote. “This has led to a growing distrust of P2P services, hindering wider adoption, particularly among older demographics.”
The research shows that 28% of P2P payment users report being scammed, with Generation Z and millennial consumers being the most vulnerable.
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