Yahoo Finance JPMorgan, BofA & Others Face CFPB's Probe Over Zelle Fraud
Amid growing concerns over the handling of customer funds on the popular peer-to-peer payments platform Zelle, the U.S. consumer watchdog is investigating the major banks. The probe, conducted by the Consumer Financial Protection Bureau (“CFPB”), is primarily focusing on JPMorgan JPM, Bank of America BAC and Wells Fargo WFC, among other large banks, to see how these firms manage fraudulent transactions and customer disputes linked to Zelle.
Launched in 2017, the Zelle network aimed to be the go-to alternative to money transfer giants like Venmo and Cash App. It is owned by seven major banks, including JPM, BofA and WFC.
Gradually, Zelle became the preferred platform for millions for sending money and handling more transaction volume than Venmo. However, along with growth in the service, there has been an increase in complaints about scams, leaving customers agitated and out of pocket.
Thus, the CFPB is particularly concerned about whether these banks act swiftly enough to investigate and resolve disputes when customers claim that they have been deceived.
The CFPB is investigating whether banks are doing their job of shutting down accounts controlled by scammers and whether their screening processes for customer identities are thorough enough.
Regulators and lawmakers are extremely worried regarding the potential for consumer exploitation on the Zelle platform. Various consumers are left helpless when scams occur, often with little recourse to recover their funds.
For almost a year, Zelle has mandated its member banks to reimburse customers for certain disputed transactions, even if the payment was initially authorized by the victim like those involving impersonators claiming to be government officials or bank employees.
On their part, these banks have argued that the majority of transfers conducted through Zelle are legitimate. Banks have also emphasized that it is not practically possible to prevent all types of fraud. If the entire cost of such scams is covered, it will encourage more fraud and will ultimately cost billions of dollars for banks.
While these technology-driven payments options provide ease to customers, allowing them to transfer money hassle-free, customers are increasingly questioning the safety and reliability of their funds transferred via such platforms, including Zelle.
Thus, banks have a huge responsibility to safeguard their customers.
Recently, JPMorgan indicated that it has been actively cooperating with the CFPB, and is contemplating the possibility of legal actions against these inquiries.
Likewise, Wells Fargo has publicly reported its meetings with regulatory investigations concerning customer dissatisfaction with Zelle.
Currently, Bank of America and WFC carry a Zacks Rank #3 (Hold). JPM has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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