Wells Fargo customers who use Zelle to send and request payments suffer more than twice the rate of fraud and other online scams as people using other big banks, according to US Senator Elizabeth Warren (D-MA).
Warren chastised both financial firms in letters to their CEOs this week: she said Wells Fargo had sent her an “evasive and misleading reply,” and Zelle parent company Early Warning Services had made “inaccurate” claims, in response to an investigation she led into banking fraud that stems from Zelle’s payment system. She called on both companies to release all data on Zelle-related fraud and scams.
It’s worth noting that seven of the largest US banks including Wells Fargo own Early Warning Services (EWS), and thus Zelle. The other six are Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank and US Bank.
Wells Fargo fraud ‘twice as high’ as other big banks
In a November 7 letter to Wells Fargo CEO Charles Scharf, Warren cited her October “analysis of the limited data you provided in response to my information request” about fraud affecting the bank’s customers who use Zelle.
“First, the frequency of Zelle fraud and scams reported by Wells Fargo customers was more than twice as high as it was for comparable banks for which we had data,” Warren wrote [PDF] this week.
“And second, the frequency of fraud and scams reported by Wells Fargo customers had increased significantly in recent years, and was more than 2.5 times higher this year than it was in 2019,” she continued.
Despite asking the bank multiple times, Wells Fargo still hasn’t provided Warren’s office with data on how frequently it reimburses customers who fall victim to Zelle scams, the senator claimed in her letter.
“Overall, your response reveals that Wells Fargo appears to be unable to protect its customers from fraud and scams, unwilling to come clean about the scope of its problems, and incapable of providing a satisfactory explanation for these failures,” Warren wrote.
Note to Zelle: more data, please
Meanwhile, Warren’s letter to EWS CEO Al Ko [PDF] asks for more information about unauthorized electronic fund transfers by November 21.
This includes how many reports of fraud from Zelle customers has EWS and participating banks — the fin-tech firm claims 1,700 financial institutions are on the Zelle Network — received for the past five years as well as the total dollar value of said fraud. Warren also wants to know: in how many of these did Zelle provide refunds to customers.
“If Wells Fargo and EWS really want to set the record straight about fraud and scams on Zelle, then they should change course and provide the American people with complete data,” Warren said in a statement. “Customers who were defrauded and scammed on Zelle deserve full transparency.”
The senator has been fighting for more congressional oversight of Zelle and the banks that own it for the better part of the year. Crucially, it would be good to find out why exactly this fraud is so rampant.
In April, she along with Senators Robert Menendez (D-NJ), and Jack Reed (D-RI) sent an initial letter [PDF] to EWS asking it to disclose reports of fraud since 2018. “Early Warning Services provided little data on the volume of fraudulent transactions occurring on Zelle,” according to Warren’s office.
Three months later, in July, the trio sent letters [PDF] to each of the seven banks that own EWS, requesting this same information. Only Truist provided a sufficient response, with the other six coughing up “little to none of the information” that the senators requested.
Warren and Menendez, both of whom sit on the Senate Banking, Housing, and Urban Affairs Committee, pushed for more information from the bank CEOs during a committee hearing in September, after which the banks finally provided some data on the prevalence of online banking scams.
According to Warren’s data, claims on the platform were in excess of $90 million in 2020, and are on track to exceed $255 million by the end of 2022. To make matters worse, Warren said that banks reported only repaying 9.6 percent of scam claims, amounting to just $2.9 million.
Zelle, on the other hand, said that 99.9 percent of the transactions on its network are sent without fraud or scam reports and that “any external analysis done is incomplete and does not reflect the efforts and data reported by more than 1,700 financial institutions on the Zelle Network.”
Then last month, Warren sent another letter [PDF] to the Consumer Financial Protection Bureau saying that banks fail to prevent “rampant” fraud on Zelle, and urging the consumer watchdog agency to tighten regulations governing banks’ obligations to repay customers who are defrauded on Zelle and similar payment platforms. ®
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