In a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, Democratic lawmakers asked Chopra to clarify whether consumers who are defrauded into making a financial transfer on peer-to-peer (P2P) payment apps like Zelle are “errors” or “unauthorized electronic fund transfers.” This shift could make financial institutions liable for repaying consumers who have fallen victim to fraud on P2P platforms.

Why should we care?
Through its letter to the CFPB, politicians are hoping to force the Bureau into addressing an urgent issue that has received little regulatory attention. In 2020, more than 17 million US residents were the victim of fraud on digital wallets or P2P payment apps—and, according to the New York Times, a significant proportion of these fraudulent transactions were on Zelle. In March, the CFPB said it was “aware of the problem and considering how best to address it,” but there’s been little movement since then. The CFPB alone isn’t to blame for Zelle’s issues with fraud. Co-owned by major financial institutions, including Bank of America, Capital One, JPMorgan Chase, and Wells Fargo, Zelle and its owners have been slow to implement stringent anti-fraud measures on the platform. “The CFPB should send a strong signal that the agency expects banks under its supervision to bear more responsibility for letting scammers and fraudsters onto services that they developed and that they currently market as safe platforms to send and receive money,” the lawmakers said. Clarifying the banks’ liability in cases of P2P fraud could force these banks to get their act together—and, in the process, make leading fintech apps like Zelle legitimately secure, rather than risky platforms causing savings losses and consumer disillusionment.