So, regulators are taking aim again at Bank of America (BAC), according to the Wall Street Journal, and for a reason that some might not have expected: the way Bank of America is handling scams related to mobile payments app Zelle. But investors find this less a problem than you might think, and the end result is Bank of America was up over 2% in Wednesday afternoon’s trading.
Essentially, the regulators—more specifically, the Consumer Financial Protection Bureau—is taking aim at several major banks including Bank of America. Their goal is to find out how well said banks are shutting down accounts connected to scam activity and fraudulent transactions, among other things. The probe is “broad” and appears to be mostly information gathering at this point. In addition, several of the banks are already disclosing responses to the inquiries in question.
While banks are currently required to refund customers for unauthorized transactions, there is no such requirement for those who make transfers themselves, even if a transaction turns out to be fraudulent later. Reversing such a transaction is generally impossible.
Heading Off the Regulators
Reports suggest that banks are already taking the initiative on this one, which may blunt a lot of regulatory intervention by simply rendering it moot. Bank of America, along with other major banks, is working on a plan to refund customers who were tricked into using the Zelle network to make transfers.
Naturally, that wasn’t enough for some regulators. Senator Elizabeth Warren (D-MA) declared Wells Fargo (WFC) “evasive and misleading” for its responses to Zelle fraud issues. The stakes are surprisingly high; the Zelle network, just in 2021, processed 1.8 billion transactions with a cumulative value of nearly half a trillion dollars. If any significant portion of that is fraud, it represents a multi-million dollar industry.
Is BAC a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BAC stock based on 10 Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 24.56% rally in its share price over the past year, the average BAC price target of $45.47 per share implies 20.71% upside potential.
