Sen. Elizabeth Warren requests CFPB investigation into Zelle

Sen. Elizabeth Warren is urging the Consumer Financial Protection Bureau to strengthen rules governing Zelle, as she raises concerns about what she called growing fraud on the payment platform.

In a letter to Consumer Financial Protection Bureau Director Rohit Chopra dated Wednesday, the Massachusetts Democrat also said big banks may have violated federal law by failing to fully refund the “vast majority” of defrauded customers. Warren, a member of the Senate Banking, Housing and Urban Affairs Committee, released the findings as part of a report earlier this month.

“My investigation, which is based on previously non-public information obtained from the banks that own and run the platform, shows that Zelle is increasingly becoming a tool of bad actors who use the platform to defraud consumers, while the big banks that own Zelle do little to stop them or provide recourse to their consumers,” Warren wrote in the letter.

Warren urged the CFPB to use its rulemaking authority under the Dodd-Frank Act to amend the so-called Regulation E of the Electronic Fund Transfers Act “to increase consumer protection and interpret the guidelines surrounding peer-to-peer platforms.”

“The rising volume of fraud and scams – combined with banks’ failure to make consumers whole in more than 90% of authorized scam cases and nearly 50% of unauthorized fraud cases – is a violation of banks’ responsibilities to their consumers and is not consistent with the goals of Regulation E,” she wrote.

A spokesperson for Zelle did not immediately respond to CNBC’s request for comment.

Zelle and its parent company, Early Warning Services LLC, are owned by Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo. Consumers use the platform to directly transfer money between banking accounts, similar to how other peer-to-peer platforms like Cash App and Venmo function.

CNBC contacted the seven companies that own Early Warning Services for comment. Bank of America directed CNBC to Early Warning Services, while JPMorgan and PNC Bank declined to comment.

Warren’s letter follows an April letter to Early Warning Services — also signed by Sens. Robert Menendez, D-N.J., and Jack Reed, D-R.I. — inquiring about its procedures to address fraud.

Warren said her investigation found big banks have promoted Zelle as a safe payment option, yet the number of consumer fraud and scam claims has climbed since 2020.

PNC Bank reported 8,848 customer claims in 2020, and reports may top 12,000 in 2022, according to Warren’s report. U.S. Bank said it received 14,886 claims on Zelle in 2020, but now it is on pace to reach nearly 45,000 this year.

Truist reported 9,455 fraud and scam claims on Zelle in 2020 and 22,045 in 2021, according to the senator. But claims are expected to dip slightly to roughly 20,000 in 2022.

Bank of America reported its number of claims rose from 49,652 in 2020 to 131,509 in 2021, Warren’s report said. Its customers are on track to make 160,977 scam and…