CFPB’s Attacks on Zelle® Will Hurt Community Banks and Harm More Than 143 Million Enrolled Consumers and Small Businesses Who Rely on Zelle for Fast and Secure Payments
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*Based on a Q4 2023 survey of financial institutions offering Zelle® to their customers, 99.44% of consumer saving and checking accounts linked to Zelle® do not charge a fee to send, receive, or request money.
Zelle® is relied on by millions of hardworking American consumers.
The CFPB seeks to dismantle a financial tool that consumers value as a reliable, convenient, and free* person-to-person money transfer service. Additionally, Zelle is an industry leader in helping to protect consumers from criminals with continuously evolving multilayered security. We also have in place consumer reimbursement policies that go above and beyond applicable legal and regulatory requirements.
On the Zelle Network®, financial institutions are required to provide full refunds to consumers in confirmed instances of fraud. In addition, the Zelle Network requires that financial institutions reimburse consumers for qualifying imposter scams.
*Based on a Q4 2023 survey of financial institutions offering Zelle® to their customers, 99.44% of consumer saving and checking accounts linked to Zelle® do not charge a fee to send, receive, or request money.
Small businesses already face enough challenges, but the CFPB would have them face even more.
In the first half of 2024 alone, small businesses conducted 243.9 million transactions, moving $129.5 billion dollars using Zelle.
Small business owners in communities across the U.S. rely on the unique features of Zelle to provide their customers with flexible ways to pay, to give their dedicated employees an on-the-spot bonus, and to quickly send money for a last-minute delivery.
If banks are forced to stop offering Zelle, it would take away a valuable and needed tool for America’s Main Street – the backbone of the U.S. economy.
The Bureau would also unfairly dump the cost of criminal activity onto thousands of community financial institutions – costs they can’t afford.
In turn, these financial institutions – many of which are community and minority-owned banks and credit unions – will be forced to consider whether they can continue to provide Zelle to their customers for free*, or whether they have to increase fees on consumers because the CFPB is telling them they have to accept scams as the cost of business.
*Based on a Q4 2023 survey of financial institutions offering Zelle® to their customers, 99.44% of consumer saving and checking accounts linked to Zelle® do not charge a fee to send, receive, or request money.
There are more than 2,200 financial institutions on the Zelle Network®, 95% of which are community banks and credit unions.
These organizations have spoken out on how shifting the financial burden of criminal activity to community financial institutions would impact their customers and members:
It would impact their members'
"ability to offer innovative payment solutions which enables local credit unions to compete with the largest financial institutions by offering the same innovative person-to-person (P2P) payment services.”
Similar proposals would put community financial institutions in the
"untenable position of having to restrict consumers’ access to deposit accounts, which would harm consumers and reduce community banks’ competitiveness...” and “financial institutions may have to be more selective about who qualifies for an account and charge more for basic banking services."
These types of demands would
"impose severe costs on credit unions and dramatically alter their ability to absorb future losses" and would "have the unintended effect of limiting consumer choice and access to services."
Zelle® is Helping Lead the Fight Against Fraud & Scams
The rate of fraud and scams on Zelle is already low. However, the CFPB’s proposed changes will have the opposite of its intended effect, emboldening the criminals responsible for predatory fraud and scams.
The CFPB is focused on the wrong source of this problem. Scams originate outside the payment method. Americans are being targeted by criminals through phone calls, text messages, emails, social media platforms, online marketplaces, and more — and criminals will use whatever tool is at their disposal to get paid. According to FTC fraud reports for 2023, about 5% of all fraud and scams occur through peer-to-peer networks. The other 95% occur through cash, checks, ACH, wire, credit and debit cards, crypto, and even gift cards.
As the FBI recently warned American consumers, this criminal activity isn’t going to let up:
...the two biggest schemes we are seeing right now are investment frauds, especially crypto related and second, the tech repair schemes.
- James Barnacle, FBI Deputy Assistant Director, on Good Morning America
Zelle® has a strong set of controls in place today, but the job is never done – we're constantly evolving to try to outsmart criminals.
Our participating financial institutions must meet the highest standards when protecting consumers. Zelle requires all participating financial institutions to use authentication and enrollment controls, which may include (but are not limited to) two-factor authentication, biometric data, encrypted identity verification data, and real-time monitoring of enrollment tokens. Additionally, the Zelle Network utilizes data-driven technology for real-time identification of potential bad actors, allowing financial institutions to intercept and stop potentially high-risk transactions.
The fact is fraud and scams are an issue that transcends industries, and the solution requires everyone – law enforcement, government, and private industry — to work together to stop criminals from taking advantage of hardworking Americans.
Looking ahead, Zelle is a founding member and executive sponsor of the National Task Force for Fraud & Scam Prevention, a cross-industry partnership that will develop recommendations for a national strategy to prevent fraud and scams. The task force is working to address different aspects of the fraud and scam lifecycle by sharing intelligence across industry, government, and law enforcement to increase prevention and detection, exposing and prosecuting criminals, and educating consumers on how to spot and report scams.
Where We Go from Here
Consumers value Zelle as a reliable, convenient, and free* person-to-person money transfer service and small businesses rely on Zelle to pay and get paid. Zelle is a differentiator for community banks and credit unions.
While this matter proceeds, we will continue to offer the convenient, dependable, and cost-effective service that Americans have come to rely on from Zelle.
We will continue to empower consumers through our partnerships with the Better Business Bureau Institute for Marketplace Trust and the National Council on Aging (NCOA) to ensure they have information about how they can stop scams and fraud and will continue to deploy safeguards, like the 700 million in-app direct alerts cautioning people before a payment was sent in 2023.
We will continue to work to keep criminals out of our network.
Protecting Americans from criminals perpetrating scams requires a wide range of solutions - technology, consumer education, and coordination across government and industries.