Washington, D.C. – The Consumer Financial Protection Bureau announced legal action against Early Warning Services and several of its owner banks under its unfair, deceptive or abusive acts or practices (UDAAP) authority. The Bureau is wrongly alleging Zelle failed to protect its users from fraud. The announcement is emblematic of the Bureau’s track record of stretching UDAAP beyond its statutory bounds to advance narratives that have no basis in law.
Greg Baer, BPI President and CEO, responded:
“The CFPB’s 11th-hour announcement to invoke its UDAAP authority against Zelle is the latest attempt to twist UDAAP to accommodate the Director’s political views, completely independent of any case law reading of the term.”
Just the Facts:
- Data show that Zelle is the safest peer-to-peer payment platform.
The Zelle platform processed over $806 billion in transactions across 2.9 billion individual transfers in 2023. More than 99.95% of these transactions were completed without any reports of fraud or scams, according to Zelle data.
BPI research shows that Zelle is safer than other leading peer-to-peer payment platforms, such as Cash App, Venmo, and PayPal. Disputed transactions on PayPal are three times higher than those on Zelle, while disputes on Cash App are six times higher.
- The CFPB’s overreach of UDAAP authority has already been found legally deficient.
Under the Consumer Financial Protection Act, Congress gave the CFPB authority to regulate unfair, deceptive, or abusive acts or practices. However, the Bureau’s attempts to broaden this definition through rulemaking have been struck down as clear overreach.
In March 2022, the CFPB issued changes to its UDAAP examination manual, which were challenged in court and deemed improper. While the CFPB has appealed on procedural grounds, it did not contest the substance of the district court’s ruling. In September 2023, the Bureau updated its UDAAP exam manual, removing the contested changes pending a Fifth Circuit decision.
- Zelle employs robust safeguards to protect its users before fraud occurs.
Banks implement extensive measures to prevent fraud and protect Zelle users, including:
- Rigorous customer onboarding consistent with relevant laws (e.g., customer due diligence and “Know Your Customer Requirements”);
- Account access safeguards and cybersecurity best practices (e.g., encryption, one-time verification codes, multi-factor authentication and zero-trust architecture);
- Consumer education campaigns and helpful and timely notices when authorizing Zelle transfers;
- Transaction verification and monitoring;
- Ongoing collaboration with law enforcement and national intelligence; and
- Regulatory requirements to limit customer liability for unauthorized transactions.
To learn more about the safeguards protecting Zelle users, visit here and here.
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About Bank Policy Institute.
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
Media Contacts
- Austin Anton, Bank Policy Institute, austin.anton@bpi.com
