Senators Elizabeth Warren of Massachusetts and Bob Menendez of New Jersey took aim at Zelle, the popular money transfer app, on Monday, warning that it is putting millions of Americans at risk of being defrauded.
The lawmakers, both Democrats on the Senate Banking Committee, asked Zelle’s operator, Early Warning Services, what steps it had taken to protect consumers from the proliferation of sophisticated scams. Early Warning, a consortium based in Scottsdale, Ariz., is owned by seven banks: Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo.
The senators said reports of rising fraud were “disturbing” and blasted Early Warning and its owners for creating a “confusing and unfair” situation for consumers who are scammed.
“Alarmingly, both your company and the big banks who both own and partner with the platform have abdicated responsibility for fraudulent transactions, leaving consumers with no way to get back their funds,” the senators wrote in a letter to Albert Ko, Early Warning’s chief executive.
Early Warning said it was reviewing the letter and would respond in due course.
The letter quoted a recent New York Times article that described customers’ struggles to be compensated by their banks after thieves used Zelle to siphon money from their accounts. In one common scam, attackers posing as bank fraud investigators fool victims into transferring money into thieves’ accounts. Banks often refuse to compensate the tricked customers because they view them as having approved the transfers.
“Banks have chosen to let consumers suffer, blaming them for authorizing fraudulent transactions,” the senators wrote. “Your company and the banks have a clear responsibility to more aggressively protect consumers.”
The letter asks Early Warning Services for details on the number of fraud complaints it has received and on how the banks that use Zelle choose which customers will receive refunds.
In a meeting of the Senate Banking Committee on Tuesday, Senator Menendez asked an influential banking regulator, Rohit Chopra, the director of the Consumer Financial Protection Bureau, about the rise in scams on Zelle and peer-to-peer money transfer apps.
“I’m certainly aware of the complaints,” Mr. Chopra said. “The fraud has gotten more egregious that we’re seeing through P.-to-P. payment transfers. It’s something we’re highly attuned to.”