@ Will Jager
2025-02-14 03:44:21
While Zelle promotes itself as a quick and easy way to send money, its instant, irreversible transactions have made it a prime target for fraudsters. Despite mounting reports of consumer losses, banks continue to deny reimbursement for many fraud victims, citing narrow legal loopholes. Meanwhile, Early Warning Services, the company behind Zelle, profits from the vast consumer data it collects, fueling concerns about privacy and corporate exploitation. With government investigations ramping up and public pressure mounting, Zelle and their bank owners have teamed up with the Aspen Institute, forming a new task force with corporate and government players.
In 2017, [Early Warning Services](https://www.earlywarning.com/about), owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Trust, U.S. Bank, and Wells Fargo, released the [Zelle](https://www.zellepay.com/faq/what-zelle) payment system. It was a fast way to send and receive funds peer to peer between different bank accounts by only needing either the other person's email address or their U.S. mobile phone number.
By 2018, there were growing [concerns](https://www.nytimes.com/2018/04/22/business/zelle-banks-fraud.html) about fraud on Zelle. Despite its convenience, Zelle's design allows funds to transfer instantly and irreversibly, making it a target for scammers. Victims reported being defrauded through tactics like fake online sales or impersonation schemes, and many struggled to recover lost funds due to inconsistent fraud policies among banks. Consumer advocates criticized the platform for inadequate protections, urging banks to implement stronger safeguards to prevent fraud and better support affected customers.
In 2022, a Senate report [criticized](https://www.bankingdive.com/news/warren-zelle-fraud-scams-report-truist-pnc-us-bank-america-jpmorgan-wells-fargo-aba-bpi-cba/633305/) major U.S. banks, including JPMorgan Chase, Bank of America, and Wells Fargo, for failing to adequately protect consumers from fraud on the Zelle payment platform. The investigation revealed that these banks often deny reimbursement for scams where victims are tricked into transferring funds, citing a narrow interpretation of liability under the Electronic Fund Transfer Act. (*"While banks bear responsibility for unauthorized transactions to scammers, consumer-authorized transactions made to fraudsters are another matter”*.) Jamie Dimon, CEO of JPMorgan Chase, [explained](https://www.bankingdive.com/news/bank-ceos-defend-zelle-in-senate-hearing/632554/), *“Anything unauthorized, we do cover”*
On June 16, 2023, the United States Senate Committee on Homeland Security and Governmental Affairs subcommittee, the Permanent Subcommittee on Investigations, launched an inquiry into Early Warning Services and the three largest banks that co-own EWS: JPMorgan Chase, Bank of America, and Wells Fargo.
After a 15-month investigation, the Senate Permanent Subcommittee on Investigations released a [report](https://www.hsgac.senate.gov/wp-content/uploads/2024.7.23-PSI-Majority-Staff-Report-on-Zelle.pdf) on July 23, 2024, highlighting consumer fraud issues tied to the Zelle payment network. The report noted significant drops in the percentage of fraud disputes reimbursed—from 62% in 2019 to just 38% in 2023. Between 2021 and 2023 Zelle [refused](https://dailyhodl.com/2024/07/25/jpmorgan-chase-wells-fargo-and-bank-of-america-refuse-to-reimburse-863000000-to-customers-in-repeated-relentless-failure-to-protect-victims-of-fraud-us-senate-investigation/) to reimburse $880 million to customers who fell victim to fraud on their payment network. Bank employees were found to have broad discretion in deciding whether to reimburse fraud claims, often denying compensation without clear justification. This has raised questions about whether banks are meeting legal obligations under the Electronic Fund Transfer Act ([Regulation E](https://www.consumerfinance.gov/rules-policy/regulations/1005/))
Early Warning Services (EWS) runs the payment network Zelle at a financial loss but generates revenue by selling data-based services to financial institutions. EWS collects extensive consumer and bank data through its operation of Zelle and daily data-sharing agreements with its member banks. This data is used to develop fraud and risk management products, which EWS sells to financial institutions as its primary profit source. While EWS asserts it has not commercialized this data beyond these financial products, the sale of such services remains its main revenue driver.
On August 4, 2024, Senator Richard Blumenthal sent a [letter](https://www.hsgac.senate.gov/wp-content/uploads/2024.08.04-Blumenthal-Letter-to-Chopra.pdf) to CFPB Director Rohit Chopra urging immediate action to address fraud concerns tied to the Zelle payment platform. The letter calls for the Consumer Financial Protection Bureau (CFPB) to investigate their dispute resolution practices and ensure that they fully and promptly address consumer fraud reports. On August 7, 2024, it was [reported](https://www.reuters.com/business/finance/us-consumer-watchdog-probes-major-us-banks-over-zelle-scam-wsj-reports-2024-08-07/) that the Consumer Financial Protection Bureau was investigating several banks due to their handling of Zelle.
On December 20, 2024, The Consumer Financial Protection Bureau (CFPB) responded by [filing](https://files.consumerfinance.gov/f/documents/cfpb_Zelle-Complaint_2024-12.pdf) a lawsuit against Early Warning Services, LLC and the major banks including Bank of America, JPMorgan Chase, and Wells Fargo. The CFPB alleges that these institutions prioritized the rapid deployment of Zelle over implementing effective anti-fraud measures, resulting in significant consumer losses. The lawsuit contends that the defendants failed to adequately address these issues, often denying relief to defrauded consumers. The CFPB seeks injunctive relief, monetary compensation for affected consumers, and civil penalties.
Just 5 days before the Senate Permanent Subcommittee on Investigations released its report, the [Aspen Institute](https://www.aspeninstitute.org/) Financial Security Program (Aspen FSP) [announced](https://www.aspeninstitute.org/news/task-force-on-fraud-and-scams/) the formation of a National Task Force for Fraud & Scam Prevention with their founding sponsor JPMorganChase and executive sponsor Zelle. The stated purpose of the Task Force is to develop a unified national strategy to help the U.S. government and private sector companies work together to stop fraud and scams. [Members](https://fraudtaskforce.aspeninstitute.org/membership) of this private/public task force include: JPMorgan Chase, Bank of America, Wells Fargo, Google, Meta, Amazon, Visa, Mastercard, Verizon, the Federal Trade Commission, the FBI Criminal Investigation Unit, US Department of the Treasury, Homeland Security, and many others.
The Aspen Institute is a 501(c)(3) nonprofit located in Washington DC. In [2023](https://projects.propublica.org/nonprofits/organizations/840399006) they had revenue of $232M and total assets of $519M with the primary source of income coming from donations and federal grants. Per their [mission](https://www.aspeninstitute.org/what-we-do/) statement, their goal is "realizing a free, just, and equitable society." The Institute works to achieve this through creating and driving policy as well as training future policy leaders.
Recently on November 25, 2024, FinCen [announced](https://www.fincen.gov/news/news-releases/fincen-joins-public-private-partnership-combat-fraud-and-scams-impacting) they are also joining the National Task Force that *"brings together key stakeholders including the financial services sector, technology companies, consumer advocacy groups, information sharing and analysis centers, and federal government agencies to develop a comprehensive national strategy for combating fraud and scams."* In The Case for a Coordinated National Strategy to Prevent Fraud and Scams, the Task Force lists [key components](https://fraudtaskforce.aspeninstitute.org/time-is-now) of a national strategy to include improved education of consumers to identify fraud, enhanced information sharing across industry, law enforcement, and regulatory agencies by use of data exchanges and legal mechanisms for sharing information. As well as empowering law enforcement with additional authority and resources. The document cites the recent [UK action](https://www.gov.uk/government/news/new-powers-to-seize-cryptoassets-used-by-criminals-go-live) as an example of recent amendments to law enforcement powers which in England means police will no longer be required to arrest seizing crypto from a suspect, can seize written passwords or memory sticks, as well as transfer "crypto assets" to a law enforcement wallet.
In an August 2024 [interview](https://www.businessinsider.com/zelle-scams-how-to-get-money-back-2024-8?) with Fortune, Ben Chance, the Chief Fraud Risk Management Officer for Early Warning Services reportedly "told the outlet that the best way to prevent scams on money-sharing apps is better user education, sound policy and more funding for law enforcement." This sounds very similar to the National Strategy to Prevent Fraud and Scams being crafted by the National Task Force for Fraud & Scam Prevention, with more user education and law enforcement. No mention of standardized reimbursement policies or enhancing transparency around fraud investigations which are the primary accusations aimed at Zelle and its owners by the US Senate and the subject of the current investigation by the Consumer Financial Protection Bureau.