The latest: JPMorgan’s Jamie Dimon, Bank of America’sBrian Moynihan (and other CEOs at the banks that manage the peer to peer (P2P), payment system) ZelleLast week, congressional finance committees were under fire for failing to answer questions about fraud in P2P payments.
Sen. Elizabeth Warren (D.MA), grilled the executives, calling Zelle at one stage unsafe. Six out of seven banks represented at the Senate hearing were their own. Early Warning ServicesZelle is owned by. Warren claimed that the companies built and profit from the system and tell consumers it’s safe but fail to compensate users when they’ve been defrauded.
The following is the key context Warren and Sen. Bob Menendez Ask Early Warning Services earlier this summer to clarify how it handles fraud and whether existing regulations—namely Regulation E, the Federal Reserve’s implementation of the Electronic Fund Transfers Act that covers money transfers—apply to Zelle fraud.
Warren, Menendez and other senators sent separate letters LetterTo Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra asking for the bureau’s help in filling the regulatory gap that they claim has allowed banks to avoid liability in certain cases of P2P payments fraud.
- Regulation E requires banks and credit unions to reimburse victims of fraud when fraudsters hack into accounts to send money.
- But it doesn’t cover authorized push payments (APP) fraud—when the victim is tricked into transferring money to the fraudster—which has grown more prevalent in the last year.
The other side: As Zelle’s payments volume grows, the proportion of fraud and scams has decreased, Early Warning Services told Bloomberg. Zelle has also launchedThere are solutions that can be used to mitigate fraud
- Zelle’s US transaction volume is expected to hit $531.01 billion in 2022This is an increase of $366.28 billion from last year According to Insider Intelligence forecasts.
- Zelle payments are sent at 99.9% with no fraud reportsThe company This was earlier in the month.
US banking execs generally oppose extending Regulation E to include APP fraud; Dimon implied users would file fake fraud claims, which could hurt banks’ revenues.
Here’s the big takeaway P2P fraud is a problem that affects all sectors, according to both banking executives and lawmakers. But there’s little consensus on how to mitigate it or which party should be liable in APP fraud cases.
As P2P payments grow more popular, however, they’ll need to find common ground on tackling fraud and protecting consumers. Legislators from across the pond are working together. IntroductionA bill that would require banks reimburse victims of APP fraud could be a model to the US.
