US CFPB Needs to Look Beyond Zelle to Curb Scams

The U.S. Consumer Financial Protection Bureau’s lawsuit against Zelle is too late and too narrow to reduce scams, said Ken Palla, retired director with MUFG Bank. CFPB on Dec. 20 sued the operator of Zelle and three banks for failing to protect consumers from fraud.

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The consumer protection agency alleged Zelle, along with Bank of America, JPMorgan and Wells Fargo, failed to implement proper fraud prevention safeguards. “The Consumer Financial Protection Bureau should be focusing on this massive amount of consumer financial scams that exist in the United States today. That should be their focus when they look at that, you need to be asking what can be done to reduce the scam losses,” said Palla.

“Yes, Zelle is a part, but it is such a small part. It just does not matter in the scope of it. So there should be a broader focus on the scams, and that is why I think it is political to just put so much effort on the banks.”

The federal government must take a more proactive approach to reducing scams, urged Palla. “You could follow what happened in the U.K., where they’ve assigned a person to be responsible for this. They’ve done the same in Australia, and also recently in New Zealand.” The government could require through regulation basic scam controls and money mule management.

In a video interview with Information Security Media Group, Palla also discussed:

• Why the CFPB’s focus on Zelle overlooks larger scam issues;
• How collaboration among banks, telcos and tech platforms can curb scams;
• Need for stronger regulations to improve consumer scam protections.

Palla helped shape the initial responses to the U.S. 2005 and 2011 FFIEC Regulatory Guidance to improve online security for U.S. banks and served as an adviser to the RSA Conference eFraud Global Forum. He previously served as a member of the program committee for the annual RSA Conference in San Francisco.