WASHINGTON — Senate Democrats led by Sen. Jack Reed, D-R.I., have asked banking regulators to more closely scrutinize Early Warning Services, the company that's owned by seven of the country's largest banks and operates Zelle.
The lawmakers — including committee Chairman Sherrod Brown of Ohio as well as Sens. Bob Menendez of New Jersey, Elizabeth Warren of Massachusetts and Mark Warner of Virginia — in a letter Thursday urged the Federal Reserve Board, the Federal Deposit Insurance Corp., the National Credit Union Administration and the Office of the Comptroller of the Currency to review the customer reimbursement and anti-money-laundering practices of banks that participate in the Zelle network.
They also recommended the regulators coordinate their approach to doing so with the Consumer Financial Protection Bureau.
"When banks or credit unions participating in Zelle evade responsibility for reimbursing their customers if they are
"On a wide scale, such a loss of confidence could weaken a depository institution's financial condition," the letter continued. "Additionally, there is risk of unfair, deceptive, or abusive practices if bank or credit union communications lead customers to expectations of safety that are not met."
The lawmakers also asked the Fed and the OCC to regularly examine
"This examination should evaluate safety-and-soundness risks as well as the company's compliance with consumer protection and AML laws," the letter said. "If the agencies uncover any unsafe or unsound practices, or uncover any legal violations, those deficiencies must be addressed promptly."
The Democratic senators also asked that the agencies provide their views on how to close any
In a statement in response to the letter, Early Warning Services said that the vast majority of its transactions are sent without instances of fraud or scams.
"Early Warning Services is supervised and regularly examined by the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB)," the company said. "In addition, we continually engage with policymakers on issues around protecting consumers from fraud and scams."
The Consumer Bankers Association, in response to the Democratic lawmakers' letter, said that Congress and the government should also play a role in limiting consumer harm due to scams.
"Scams, where a consumer knowingly transfers money to someone who turns out to be a bad actor, are a much tougher issue to tackle – one which agencies like CFPB, Treasury and FBI can help confront," said CBA President and CEO Lindsey Johnson in a statement. "Banks alone cannot stop scammers. That's why CBA has called on Congress, the CFPB and other regulators — in a whole of government approach — to prevent bad actors from harming consumers in the first place."
