The news: Five Democratic senators asked US banking regulators to strengthen consumer protections around peer-to-peer (P2P) payment fraud on Zelle in a letter sent last week.
The senators said supervision should evaluate safety risks and compliance with consumer protection and AML laws. If and when they find EWS in violation of these protocols, the agencies should “act promptly.”
Digging deeper: Some lawmakers have accused banks of “abdicating responsibility” when it comes to refunding Zelle fraud victims despite growing fraud and scam issues on the platform.
But EWS has pushed back. It classifies illicit activity in two buckets: fraud and scams.
Zelle has a “zero liability policy” for fraud and will reimburse customers. But Zelle doesn’t have an APP fraud policy. And it uses regulatory gray areas to avoid refunding customers in such cases.
EWS also told Insider Intelligence that it’s already “supervised and regularly examined” by the OCC and the CFPB.
Why it’s worth watching: P2P payments are growing rapidly, and lawmakers fear that without proper guards, P2P fraud will also proliferate.
Even though Zelle has reportedly developed a plan that will require the recipient’s bank to reimburse the payer for fraudulent transactions, lawmakers are hoping that banking agencies will increase accountability for Zelle and its partner banks.
This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a daily recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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