Sen. Elizabeth Warren is tightening the pressure on Wells Fargo CEO Charles Scharf, just one among major bank executives that the Massachusetts Democrat is targeting amid evidence of repeat fraud on Zelle, the instant-payments system owned by seven of the U.S.’s largest banks.
In a letter dated Oct. 6 but made public Thursday, Warren told Scharf the “alarming pattern” of Zelle misuse was made worse by his bank’s WFC, +4.62% refusal to make its Zelle scam and fraud data public. Scharf had shared some data with the lawmaker, but stressed proprietary protections, which Warren respected, but disliked.
Data, in some cases sourced by Warren’s repeat requests, suggests that hundreds of thousands of defrauded customers have had little recourse for recovering stolen cash. By constrast, credit card fraud is typically covered by the card issuers.
Across all banks and credit unions, Zelle users sent 1.8 billion payments last year, totaling $ 490 billion.
Warren and other, mostly Democratic senators, grilled bank leaders at a Senate Banking Committee hearing last month. She followed up that appearance with a scathing report about the data that a handful of banks sent her. JPMorgan Chase’s JPM, +5.56% chief executive, Jamie Dimon, apologized to Warren at the hearing for his bank’s lack of a response, promised to send the information, and then did not, which she detailed in the release.
During the September hearings, Warren said that only Truist had provided data she requested in a July letter to banks on the number of fraud complaints since 2018 on Zelle.
“Last year Zelle users were defrauded $ 500 million that we know of,” Warren said then. “You built it, you profit from every transaction, and you tell people it’s safe.”
Days after the hearing, Wells Fargo sent Warren information she had sought and the numbers raised alarms, Warren said in the early-October letter to Scharf.
The data indicates that Wells Fargo customers “are reporting fraud and scams on the bank’s Zelle platform at a rate that is nearly 2.5 times higher this year than it was in 2019, and that the rate of reported fraud and scams this year is more than twice as high for Wells customers than it is for customers of other banks,” Warren wrote.
A Wells Fargo spokesperson told the New York Times that some 99% of the bank’s Zelle transactions are fraud-free.
Wells Fargo is part of Early Warning, a consortium based in Scottsdale, Ariz. that also includes Bank of America BAC, +6.13%, Capital One COF, +4.63%, JPMorgan Chase, PNC PNC, +4.69%, Truist TFC, +4.78% and U.S. Bank. Nearly 1,700 banks and credit unions use the network, and customers have sent $ 1.5 trillion through Zelle since it began operating in 2017. Several class action suits have been filed.
Warren said she plans to send the data revelations to the Consumer Financial Protection Bureau, the body formed in the wake of the 2008-09 financial crisis. CFPB is considering issuing new guidance to banks on their liability for fraudulent transactions over digital payments networks like Zelle.
