Regulators probe major US banks’ handling of Zelle customer disputes

The Consumer Financial Protection Bureau (CFPB) is probing big US banks, including JPMorgan Chase, Bank of America and Wells Fargo, over their handling of consumer disputes related to the Zelle payments app, reports the Wall Street Journal.

The CFPB is examining whether these banks are doing enough to protect customers from scams and fraudulent transactions on Zelle.

Launched in 2017 by seven of the US’s largest banks, Zelle was designed to compete with payment apps like Venmo and Cash App. Despite its rapid growth, Zelle has been criticized for not adequately assisting customers who have been tricked into sending money.

While banks must refund unauthorized transactions, there’s no legal protection for customers who voluntarily send money, making it difficult to reverse such payments.

Banks argue that majority of Zelle transactions are legitimate and claim they warn customers about sending money to strangers.

Additionally, some lawmakers are questioning whether banks are properly reimbursing customers for unauthorized fraudulent payments.

A Senate subcommittee report found that JPMorgan reimbursed just three of the 41,390 scam disputes reported in 2020. Meanwhile, Wells Fargo did not reimburse any of the 25,061 scam complaints.

Between 2021 and 2023, Bank of America, JPMorgan and Wells Fargo collectively rejected $560 million worth of scam disputes.