Scammed by the service. This is about two hours. [inaudible] thank you to make cochairman of the subcommittee the permanent subcommittee on investigations we Work Together on a bipartisan basis. Very pleased to welcome you to this hearing. On investigation entitled stirring on fraud alert shedding light. Ill give an Opening Statement to be followed by Ranking Member. The banks of america have a dirty little secret. It is called zelle its not just to sell its other paid platforms, apps that people used to transfer money among their Bank Accounts. The cell is nearly instantaneous. Almost always irreversible and it is owned by banks. In fact, zelle is the largest. Too. Payment app it is operated Early Warning services which in turn is owned and operated by the seven largest banks for it zelle is often integrated into consumers existing online Bank Accounts and mobile apps. Zelle markets itself as a fast and easy way to send and receive money. Unquote. As this committee has been found, a fast and easy way to lose money is often what happens on zelle. That is probably a more accurate catchphrase for zelle and other p2p platforms as well what distinguishes is speed permanence and bank ownership. That is really the reason we are focusing on zelle. The other platforms deserve attention as well. In fact it is less well known other payment apps like cash cap and then mow but zelle is by far the largest several times its nearest competitor. It is approximately three times larger than its nearest rival. Zelle transfers our nearly instant and irreversible. By the time a consumer knows they have been scammed usually its too late to do anything about it. At least according to zelle and according to the bank that own, control and in effect operate zelle. Just three banks to j. P. Morgan, chase, bank of america, and wells fargo handled 73 of all zelle transactions in 2023. Too. Payment apps no question about that fact. I want to be clear fraud happens on all of them but zelle deserves particular tension because of his direct connection to trusted Financial Institutions. Zelle and the banks that own it offered to customers the appearance of the trust they feel they deserve. But the risk of their our real and present. And they simply are failing to protect consumers and the way that they deserve it. 13 of p2p platform users report sending money to someone and later realized it was a scam. The kinds of scams are various, employment, romance, ai. There are various categories but the bottom line banks are failing to do it they should to protect their consumers. The subcommittee has heard many counts on fraud california teenager received as quitting Death Threats and lost 10,000 dollars on zelle simply because he wanted to protect his family. In florida colonel ptak and tillmans bank account user confidential information to manipulate her into transferring almost 5000 to zelle scammers. In arizona menus zelle to purchase parts he never received i like to enter into the record a collection of news articles about dealt scams and statements we have received from consumers about the personal experiences with zelle. With this they are two individuals have personally experienced those stories. We thank them for their bravery. For their initiative and coming forward. Arianna devol will tell us her story and receiving exciting Summer Research opportunity from a professor at her university only to learn she was out 2400 that she never had. And humphreys is here today to tell us her story of how her 94 gold mother was scammed out of 3500. After being told her brother was arrested and needed bail money. How its insufficient Safety Measures allowed the scan to play out again. We thank you both. Many times that of scams exist. But what they have in common is that these stories entail loss money due to time and time again zelle the big banks have said they could not help. What they mean is they wouldnt help. Their attitude has been not our problem. Well the banks of america basically the seven that own and operate zelle it is your problem. You own it. Just as you own zelle. You have the expertise, the resources, and the obligation to make sure that you do better. We are also going hear from experts as part of the bipartisan inquiry into zelin Early Warning services. A company that operates zelle and we hope to hear from the banks. We actually invited them to come here in june and explain how they can do better and why they have failed to do so. We have found that customers of j. P. Morgan chase, bank of america and wells fargo admitted claims reflecting a combined total 4,056,000,000 loss to scams and fraud in one year 2022 alone. And only a fraction were repaid three and 41 million more than two thirds of these losses were never repaid. The growth of mobile payments shows no signs of stopping. Unfortunately neither do these do thescammers who are preying n American Consumers on those apps. Criminals are increasingly using scams tailored to individuals with ai voice cloning personal details pulled from the abbott data sold on the dark web and increasing the risk. Those risks are growing so much to safeguard. Zelle and its owner banks are that frightening trends no question they put have been put on notice. They track detailed information about the latest scams. They are failing to stop them. And feeling also to make their customers whole. There are concrete steps these institutions can take to better protect customers. For example banks can extend the protections to credit card users to zelle transactions where they can allow customers to cancel or reverse payment within a certain period of time. They could in effect provide better means of authentication, more friction, and more time. Before a transaction is completed. Those ideas are only few the possibilities for divorce for consumers the big banks have accepted some of the transactions on zelle they have made the decision this is just the cost of doing business. But it is the cost of their consumers not them because it is the customer who is out of pocket. That is why we have invited zelle and the three largest banks to appear in today in addition we will be hearing from experts have studied the issue can better suggest potential remedies and preventions up or i i look forward to hearing from all of you. I turned to the Ranking Member. Mr. Chairman i will ask that michael written Opening Statement be entered into the record of a couple comments. Interesting hearing. I was a Consumer Fraud consumer scams are a real problem in our economy. But things likecybersecurity ri. All these things are troubling. It is noteworthy to understand the differences of for example credit cards, debit cards and. Too. Debit and credit cars are interchange fees so the banks really rake in hundreds of billions of dollars with a profit. In their unauthorized transactions they quickly reimbursed not to one 100 i am looking bank of america here credit card twopoint to billion dollars worth of a fraud they got reimbursed 1. 6 per debit cards about a billion dollars of fraud they reimbursed about 66 of that 660 million. There is no doubt about that zealot reimbursement is at a much lower rate but its really just a service. Its a software they sell to the banks to allow. Too. Payment. The other way to transact business is cash people dont carry cash if they dont instantaneous transaction if they do not want to pay an interchange fee apparently they used. Too. Services. They want to do it for speed. They want to do it to avoid the interchange fee. And as a result of a company like zelle does not of the hundreds of billions of dollars in interchange fee profits to reimburse. It does appear that they reimbursed for unauthorized or some unauthorized purchases. There is a fair amount of friction for this many steps you have to go through to actually have that money transferred. It is the caveat emptor. I will say caveats user beware. When youre transferring money. Too. The moneys gone inside your Checking Account for us would be very difficult to recover but the only way for the chairman to say you ought to extend the same protections and Credit Card Companies do they dont have the prophets off of the system. Interchange fees they view it as. This is a different system but again it leaves you be concerned about scams and fraud. Theres a fair amount of responsibility and part of the users to try and prevent that with cap people who have been scams. You can understand why people all the sudden quick transfer money they have got a loved one in trouble. It is despicable these crimes are being committed against them. But to necessarily blame a come beneath providing a Service Without huge financial rewards, like the interchange fees interested in testimony and want to hear people have a say about that. When judas the witnesses. Stephanie of the Tatar Law Firm with disputes against credit reporting agencies, debt collectors and Financial Institutions for almost two decades. Arianna devol is a rising senior in North Carolina a and T State University earlier this month. Arianna was targeted by a zelle scam that claim to offer her employment as a University Research assistant. She ultimately lost 2400 that fraudulent scheme. Jon is the Vice President of Public Policy telecommunication fraud at the National Consumers league. He is a prominent advocate for stronger Consumer Protections. Particularly related to technology, data security, privacy and more. From laurel maryland 3500 dollars on zelle. She is here senior director of digital marketplace where she leads the development of testing framework standards proves he served as 10 years at the Protection Bureau and various roles. Few would rise and raise your right hand do you swear the test but youre about to give is the truth, the whole truth and nothing but the truth help you god . Thank you. Could apted and chairman blumenthal and regular johnson thank you for the opportunity im very glad to see up to consumers on the panel today i myself hope to bring clients they are reluctant to testify against things about cell fraud which are not available for public review and consumers cant appeal. Which prevents a disclosure of significant information or because consumers are forced to sign confidential settlement agreements. The banking relationship with Banking Institution there affiliate. Largest banks in america not only are the consumers forced to File Lawsuits to make the banks comply there punished for doing so. We dont hear directly from a lot of consumers please do not take that zelle fraud is not important to consumers. This is due to the shroud of secrecy to impose on consumers. Its pervasive and ever evolving its the gateway Consumer Financial crime often leads to other bank product like wire transfers which are largely unchecked by current laws. Bank phone numbers seven card hacking, exploiting data breaches to gain access zelle transfers. Their costs ahead of two steps the banks when perpetrating their fraud schemes left to carry the burden of undoing the damage done to them. I do not mean to say damage done to their Bank Accounts that cost of zelle fraud is not simply the dollar amount significant emotional and mental component most are living paycheck to paycheck. Can you imagine would you please imagine 75 of your Checking Account balance was gone because of zelle fraud . Think about the impact if you are a retiree to make up those losses. Every minute of every hour of every day countless sleepless nights for months on end. Worrying, wondering, stressing waiting for banks to do their job. You do an investigation and agree fraud was committed as they get their money back. These consumers lose money in the blink of an eye but it takes a weeks, months and even years to get their money back if they are lucky. Often refused to conduct investigations or they delay investigation into zelle fraud they request consumers to complete paperwork or file Police Reports contrary to their duty under the electric funds transfer accident. There investigations are superficial at best. Lacking thorough record reviews or inquiries. Thanks appear to prioritize approving transactions occurred rather then and verify authorized by consumers. Also against the electronic funds transfer active. Crucial evidence such as the new recipients with random names or sequences of numbers or letters the edition of unfamiliar devices or ip addresses and unusual transaction patterns are frequently disregarded. Thanks neglect to analyze past spending habits rendering their perfunctory examinations of limited information falling far short of what the fta required for its editors, if you are truly interested in effecting change, and Financial Institutions really want to do better in the first step is to stop thinking of consumers as account numbers or names written in black and white. Educating consumers is not a solution. Your on fairly free and the onus on every consumer that in the banks can keep up with the Solutions Must include safeguards for suspicious activity. Delaying payments, putting an end to rampant victim blaming Financial Institutions demanding banks investigate all unauthorized transactions, banks must have the risk of zelle fraud between spending bank and receiving back it we must also demand transparency. Banks get away to shoddy shoddyinvestigations because sow people know exactly what happens my closed doors but thanks must be held to efta compliance standard they are after all consumers of hard earned money but thank you for hearing me out today on this critical issue. Appreciate your attention and consideration of the necessary reforms that need to protect consumers and the devastating impacts of zelle fraud. Thank you so much. Ms. Devol . Hi. On the afternoon of may 1 i applied to a Research Position from an email i received on april 30 i believe the hiring manager to the music professor at my university. After applying it via email by providing my resume i received followup questions, for example how would you rate your communication skills . Are you a u. S. Citizen question give Prior Research experience . Is that a form i passed the criminal academic background screening. Further instructions on the email confirmed office suppliea big needed for the position and i will be sent a check, which i would then need to provide to the Sales Representative who is responsible for any supplies on my behalf. I received a check in the form of a pdf on may 22 email that presented itself as a Payroll Department at the university but it actually had that. Edu domain presented in the email address. Has given specific instructions to print the check to a mobile deposit only once i deposited the check into my account the 400 was available immediately on may 3 2000 would be available the following day. I inform the fictitious professor of this was told to zelle the money as it became available. Alice provided the name and email address of the Sales Representative and asked to send a screenshot of it with confirmation codes. I did as instructed sent the 400 followed by the 2000 on may 4. Both are listed as pending in my bank account which i inform the fictitious professor of it. That point i was told the representative would wait until confirmed before to supply. My mother observes an exchange of my counsel called me too figure out what was going on. After asking several questions my mother help me too understand and realize i was scammed for shall be to contact the bank and file a fraud claim. I called the bank immediately and explain the entire situation to the Bank Representative but with the representative assistant i failed to fraud claims one for the 2000 another for the 400. I was told investigation will be conducted i would receive a call back from the bank with the status update. On may 7, i woke up this pain wl in my final exams when i checked my bank account found i was in a deficit for 2400 askance into receiving and sending off. I was devastated. In addition to a five major final projects i had to do for four courses within the last two weeks of the school year, my money was already getting low i stressed out of my mind is staying up late to complete. I saw myself for the very first time in my life. All this as a result of wanting to work and have a job with flexible hours to accommodate my summer internship. The towing to report to the fbi but i was told by the police i was only student that was actually financially impacted by the phishing scam beutler the following week that i was not. I reported my situation to the fbi my mother and i called the bank to see if there is any feasibility i will be reimbursed for 2400 that have scammed out of. Although we never received a call back from the bank on the investigation they were doing, we were informed at that time both fraudulent claims were denied. I returned back to the campus to complete one of my projects. After turning back to my room about two fraud claims with self of the 2000. 400. In the process of filing those claims, asked for a zelle payment id but there is a note in the faqs if you submit the zelle payment fee at your bank app did not note the zelle payment idea was to contact their partner that this affiliated with. I called my bank asking for the zelle payment id but however is transferred several representatives of multiple department to clean the zelle department. None of th