A group of Democratic senators recently urged federal agencies to coordinate a supervisory approach to peer-to-peer payment systems such as Zelle and similar apps with the Consumer Financial Protection Bureau (CFPB).
U.S. Sens. Jack Reed (D-RI), Bob Menendez (D-NJ), Elizabeth Warren (D-MA), Sherrod Brown (D-OH), and Mark Warner (D-VA) forwarded correspondence to Acting Comptroller of the Currency Michael J. Hsu, Federal Reserve System Supervision Vice Chair Michael S. Barr, Federal Deposit Insurance Corporation (FDIC) Chairman Martin J. Gruenberg, and National Credit Union Administration (NCUA) Chairman
Todd M. Harper regarding the matter.
“We write to urge your agencies to take several specific steps to protect consumers who use the nation’s largest instant payment app from falling victim to scams and fraud,” the legislators wrote. “In particular, we urge the Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (OCC) to closely review and examine the customer reimbursement and anti-money laundering (AML) practices of depository institutions that participate in the Zelle network. We also urge the OCC and Federal Reserve Board to examine Early Warning Services, LLC (EWS) on an ongoing basis.”
Per the lawmakers, EWS operates the Zelle network and is owned by seven of the nation’s largest banks – maintaining Zelle’s model has opened the door to fraud and scams.
“Supervision for compliance means ensuring that neither EWS nor other regulated institutions that make Zelle available to millions of Americans engage in practices that would increase the risks to the safety and soundness of those institutions,” the legislators concluded. “We raise these concerns about safe and sound operation of Zelle because depository institutions currently take the position that they are under no obligation under the EFTA to make their customers whole when fraudsters use the network to steal their hard-earned money.”