WASHINGTON—As more consumers fall victim to fraud scams on peer-to-peer (P2P) payment apps, a group of Democrat senators has sent a letter to federal banking regulators – including the NCUA – calling on the agencies to review customer reimbursement and anti-money laundering (AML) practices of financial institutions that participate in the Zelle network.
“When banks or credit unions participating in Zelle evade responsibility for reimbursing their customers if they are fraudulently induced to send money to scammers through the app, those customers may lose confidence in their depository institution for offering a product that places their money at risk,” claimed Sens. Jack Reed (D-RI), Bob Menendez (D-NJ), Elizabeth Warren (D-MA), Mark Warner (D-VA) and Senate Banking Committee Chairman Sherrod Brown (D-OH) in the letter.
Compliance Concerns
The senators argued there are compliance concerns – related to potential UDAAP, consumer protection, and AML violations – regulators should review at financial institutions and asked the Federal Reserve and OCC to regularly examine Early Warning Services, which operates Zelle and is owned by the nation’s largest banks.
They also recommended the banking agencies coordinate oversight with the CFPB, NAFCU reported.
Virginia Leage Responds
"We share the senators' concerns regarding financial fraud in all its many forms, but it's important we remind lawmakers that credit unions comply with all applicable laws with regard to Regulation E and the Electronic Funds Transfer Act," said Virginia Credit Union League President/CEO Carrie Hunt. "Fraud losses at a credit union are a cost borne by every member at that credit union, so we have every incentive to protect our members and educate them about fraud prevention and using the utmost care when initiating and authorizing electronic payments.
"We also appreciate Sen. Warner's leadership on cyber issues of every sort, including fraud and consumer privacy," said Hunt, "and we'll continue to engage with him on this issue. And while we remain committed to protecting and assisting our members in cases of fraud, credit unions believe this discussion should focus not on punishing law-abiding financial institutions, but on what we can do to educate consumers about such scams, what solutions we can develop and deploy to identify and prevent such fraud, and what we can do to root out and punish those who perpetrate these scams."
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