The Wall Street Journal has reported that the seven large banks that own Zelle are discussing possible approaches to fraudulent transactions on the Zelle network. According to the WSJ, the Zelle network rules under consideration would establish network-wide guarantees to reimburse scam victims and create liability sharing agreements, which could go live as soon as January 1, 2023. If it is determined that a customer has been scammed, the rules would provide for the receiving bank to return the money to the customer’s originating bank, which would subsequently issue a refund to the customer. The WSJ reports that banks are testing the process to ensure “the changes wouldn’t result in a fresh surge of scams.” Zelle has not confirmed these discussions or plans.
If Zelle moves forward with the new rules, the 1,800+ financial institutions that allow their customers to use Zelle would have to agree to the new fraud rules to continue to participate in Zelle. We are not aware of other P2P payments providers (such as CashApp, PayPal, Google Wallet, and Venmo) taking similar action to protect consumers from scams. However, if Zelle adopts its new rules, the other P2P payment providers will receive enormous pressure to follow suit. Also, should Zelle take this action, it seems likely that CFPB Director Chopra and Senator Elizabeth Warren (D-Mass.) will take credit for the changes just as the CFPB has taken credit for the actions of several banks to eliminate overdraft fees earlier this year. See our previous blog posts about overdraft changes here and here.