scorecardresearch Skip to main content

Zelle emerges as lawmakers’ surprise villain at bank hearings

Senator Elizabeth Warren, a Massachusetts Democrat, on screen, questioned witnesses about Zelle, during a Senate Banking Committee annual Wall Street oversight hearing, Thursday in Washington. On the panel from left, Wells Fargo & Company chief executive Charles Scharf, Bank of America chief executive Brian Moynihan, JPMorgan Chase & Company chief executive Jamie Dimon, Citigroup chief executive Jane Fraser, Truist Financial Corporation chief executive William Rogers Jr., US Bancorp chief executive Andy Cecere, and The PNC Financial Services Group chief executive William Demchak.Jacquelyn Martin/Associated Press

Some of Wall Street’s most vocal critics chose a surprising target in a pair of hearings with the chief executives of the nation’s largest banks: Zelle.

US lawmakers pressed the executives on reports of fraud and scams on the popular payments network, which has processed more than 5 billion transactions and handled nearly $1.5 trillion in payments since its inception in 2017. The executives said they are working together to implement new policies to protect consumers using the network.

“Zelle is not safe,” Elizabeth Warren, a Massachusetts Democrat, said in a heated exchange with the CEOs during a Senate Banking Committee hearing Thursday. “You built the system, you profit from every transaction on the system, and you tell people that it is safe. But when someone is defrauded, you claim that’s the customer’s problem.”


Six of the seven banks represented at this week’s congressional hearings — Bank of America Corp., Truist Financial Corp., JPMorgan Chase & Co., PNC Financial Services Group Inc., U.S. Bancorp, and Wells Fargo & Co. — along with Capital One Financial Corp. jointly own Early Warning Services LLC, which operates Zelle. The company said earlier this month that 99.9 percent of payments on its network are sent without any report of fraud or scams.

In some ways, banks are in a bind: Under Regulation E, which governs how banks handle electronic fund transfers, if a hacker logs into a customer’s bank account and sends money, lenders are required to provide a refund. But fraudsters have increasingly sought to use the Zelle network to persuade consumers to send them money. In those cases, with the real customer sending the money, banks aren’t required under Regulation E to make consumers whole.

A spokeswoman for Early Warning Services didn’t immediately respond to a request for comment.

“Anything that’s unauthorized, we do cover,” JPMorgan chief executive Jamie Dimon told senators Thursday. “So you’re really talking about authorized transactions that we have an enormous amount of systems to stop. And the amount of fraud relatively is very small for this free-of-charge service.”


Bank of America’s Brian Moynihan said the owners of Zelle are working together to provide better guardrails on the network by closing accounts of customers who receive the fraudulent funds. The network also has cut off multiple lenders who didn’t properly police clients accused of defrauding customers of other banks on the network, he said.

Warren’s questions on Thursday come two months after she and five other senators wrote to Consumer Financial Protection Bureau Director Rohit Chopra, encouraging him to use the agency’s authority to expand the definition of an “error” payment to include when a consumer is defrauded into initiating a payment to a scam artist. They also suggested that the CFPB could issue guidance that such a transaction counts as an “unauthorized electronic fund transfer,” meaning banks would then bear responsibility for making consumers whole.

Dimon said that while he wants to see more fraudsters in jail for their crimes, he cautioned the senators against an expansion of Regulation E.

“If you simply said that, if you authorize a transaction, no matter what you will be repaid if you claim it’s a scam, think of the problems of that,” Dimon said. “That’s why you can’t go all the way the other way either.”

The executives of the biggest US retail banks faced a barrage of questions from senators on both sides of the aisle during Thursday’s hearing in Washington. Their appearance came one day after a six-hour-plus hearing before the House Financial Services Committee.


Some Republican senators sought to use Thursday’s hearing to get the CEOs to weigh in on the current economic environment, with several saying that President Biden’s moves on student-loan forgiveness and providing additional stimulus have contributed to inflation that’s at 40-year highs.

“It’s very important we get our hands around inflation as quickly as possible,” Dimon said. For some categories, such as wages and housing, inflation is likely to prove sticky, he said, adding that “rising rates are going to have to go much higher than what people expect.”

As was the case during past hearings, lawmakers slammed banks for their stance on financing certain forms of energy. Many of the country’s largest lenders have vowed to achieve net-zero carbon emissions in coming decades, including in their lending portfolios. Still, when asked, none of the executives present said they plan to stop financing fossil fuels.

“There is a very important balance to be attained over the next few decades: the balance between energy security and energy supply, as well as the transition to cleaner energy sources,” Citigroup Inc. chief executive Jane Fraser said. “That’s going to be an important balance. We will play an important role in both.”