Big Banks Under Investigation for Handling of Zelle Scams
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Disney is getting consumers out of the house, just not to its theme parks, where the entertainment giant needs them the most. And regulators are investigating how banks respond when customers say they paid a scammer over Zelle.

Plus, is it possible to drink too much water? We look at why water intoxication could actually be dangerous.

It's Wednesday, August 7th. I'm Francesca Fontana for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. Disney's streaming and movie businesses are booming. Its theme parks, not so much. In its latest quarterly report, Disney posted profit and revenue that both beat Wall Street expectations.

Its streaming business, which includes Hulu, its flagship platform Disney+, and the sports-focused ESPN+, posted its first profit. And its unit that includes its theatrical film releases reported its first profit since early 2022, in large part thanks to Inside Out 2, the coming-of-age animated feature produced by the Disney-owned Pixar. Those areas are picking up the slack in Disney's theme park business, which the company expects to face more challenges on the horizon.

Here to discuss Disney's results is our heard-on-the-street tech columnist, Dan Gallagher. Dan, Disney's success this quarter seems pretty uneven. As you say in your story, Disney's getting more people out of the house, just not necessarily to the right places. Yeah.

Yeah, more than half of Disney's operating profits come from theme parks these days. And that's way up from about a quarter in the pre-pandemic years. And that's because, you know, the company's media business is going through this major transition. Cable TV is shrinking. Streaming is growing, but it just doesn't have the profits. It hasn't grown to that.

So it's really been relying on theme parks. And so this quarter was actually kind of a reversal we've been seeing with the company lately. So all of a sudden they have these movies out that are doing really well, looking good, right as the weakening consumer is starting to not go to the theme parks quite as much. And you touched on this, but why is the theme park business so important to Disney?

- Disney is this flywheel. They put out movies that make popular characters, people buy the videos, people buy the toys, and those become theme park attractions. They help get people into parks. And so when they open a new attraction, they sell a lot of tickets. So what we saw for a while was that media side was kind of weak because obviously the pandemic closed theaters and then people were slow to come back because of streaming. So that was looking problematic, but theme parks were really holding up well.

Right now, you've got the reverse. And I don't think what we're seeing now is going to be permanent forever. But I do think the U.S. is coming into a period where consumer spending is going to be weaker. So we're seeing that impact at the same time that their movie business is finally doing well again. But right now, it's just a complicated story where not every part of the business is humming like it typically does.

Is it possible for all of its key businesses to be humming at the same time? You know, can Disney grow all of its areas, parks, film, streaming? They've actually had a good history of that over the longer term. Obviously, the pandemic hurt them a lot because it closed movie theaters, it closed sporting events, and it closed theme parks. And that was not unique to them. So like their competitors, they've been kind of coming out of this, and it's been a slow process. Their business is still really strong.

But it's, again, because now it's so reliant on theme parks to make those operating profits. If there's any kind of like speed bumps or whatever, or a little bit of weakness in those, it tends to hurt. That was tech columnist Dan Gallagher. In the markets, strong daily gains for U.S. stocks evaporated before the closing bell today as the market's rebound faltered. The S&P 500 ended the day down 0.8% after climbing as much as 1.7% in morning trading.

The tech-heavy Nasdaq Composite and Dow Jones Industrial Average also rallied in early trading before finishing the session down 1% and 0.6% respectively. Investors say they expect the sharp moves to continue. Coming up, why regulators are investigating how banks respond to scams on Zelle. That's after the break. This message comes from Wall Street Journal sponsor C3.ai.

C3 Generative AI enables rapid access to secure, traceable, hallucination-free insights from enterprise systems, all while using any LLM, helping enterprises turn the invisible into the obvious. Learn more at c3.ai. This is Enterprise AI.

We report exclusively that regulators are investigating some of the biggest U.S. banks for their handling of customer funds on the peer-to-peer payments platform Zelle. According to people familiar with the matter, the Consumer Financial Protection Bureau is looking at how the banks respond when customers dispute transactions made through Zelle, which has been facing scrutiny over scams and fraudulent transactions.

Zelle was created in 2017 to compete with popular money transfer services like Venmo and Cash App and is owned by a network of big banks. But with its rapid growth came an increase in complaints that the banks weren't doing enough to help retrieve money that their customers were duped into sending. WSJ Banking reporter Andrew Ackerman joins us with more. Andrew, first off, what are regulators trying to determine in this investigation?

The regulators are trying to determine a couple things. One is, are the banks living up to their obligations under the law? Which is, if a customer is the victim of a fraud where they didn't authorize a payment and there was a money transfer, are they actually repaying customers for that? The other issue is, what are the bank's obligations when their customers are the victims of scams? They might see tickets to like a Taylor Swift concert

online, they send some money to a stranger for them, and they turn out to be non-existent tickets. They've been duped out of several hundred dollars. In that case, do the banks have any obligation to repay their customers? And legally, the answer is no, because the customers authorized the transaction. But it's a gray area, and the CFPB today has been under a ton of political pressure to address that issue. And without changing the law, it's unclear what happens.

How widespread of a problem is this for people who use Zelle? According to the banks, it's a very small problem. 99.95% of all of the transactions over Zelle and in any given year, there are billions of transactions. They happen without any incident. The problem is when you're talking about billions of transactions,

And while they may not be legally compelled to do anything for customers who are scammed, what do you think the banks are doing to help them?

What are some of the things that banks are doing? The banks say they go above and beyond their legal requirements. And since last summer, Zelle basically changed its rules for the banks that are part of the Zelle network. And there's over 2000 banks that participate in Zelle.

where they say, hey, if you have been part of a scam, if you're duped into sending money because somebody impersonated your bank or they impersonated a government agency, we will reimburse you in those specific instances. We don't have a lot of clarity on whether those rules are really working. The banks essentially say,

What is working is all the warnings that if I send money to somebody for the first time, I get a warning. Are you sure you want to send money to this person? Are you really sure you want to send money to this person? You know, it causes people to reassess, like, are they being scammed in real time? Now that we know that this investigation is happening, what are some of the banks saying in response?

So right now, only one bank has disclosed the existence of the CFPB probe. That's JP Morgan. On Friday night, they had a quarterly disclosure that had a paragraph on this that for the first time said the CFPB was investigating. And they've signaled that they're ready to litigate, that the CFPB staff have said they are prepared to offer a settlement or to pursue legal action against banks.

And the banks have said they're kind of ready to defend themselves in court, or at least J.P. Morgan said that. That was my colleague, WSJ banking reporter Andrew Ackerman. Economic data says inflation's coming down, but it still might not always feel like it. What's your view? From food to housing, health care to utilities, what costs that are a big part of your budget are still going up? Which ones aren't? And overall, how confident are you that your situation is going to get better?

Send a voice memo to WNPOD at WSJ.com or leave a voicemail with your name and location at 212-416-4328. We might use it on the show. Elon Musk's ambitions for dozens of SpaceX launches at the Cape Canaveral region are facing a backlash. Florida's residents aren't happy with the billionaire space company's plans to launch Starship, the Earth's largest and most powerful rocket, up to 44 times a year from a launch pad on the Cape.

Wall Street Journal investigative reporter Susan Pulliam. People who live there are already unhappy about the large number of launches that have been happening. There are often several launches a week, sometimes even two times a day. And the launches rattle people's windows. They wake them up at night.

The second issue is that there are a lot of industries that compete for that space, including commercial fishermen. There's the cruise industry at Port Canaveral. During launches, ocean space and airspace are both closed for a period of time. So that impacts the businesses of the commercial fishermen and also the airlines. And of course, the other direct competitors, the rocket companies, are upset about the application as well. Blue Origin, for one, thinks that the number of SpaceX launches should be capped.

And finally, in the heat of summer, it makes sense to worry about dehydration. But it turns out drinking too much water comes with risks of its own. Some researchers warn that water intoxication could be a growing issue. Health and science reporter Jennifer Kalfas explains what excessive water consumption does to the human body and how to avoid it.

When we drink too much water over a short period of time, and I'm talking about a really excessive amount of water that goes beyond our thirst levels, what we might usually drink during a day, it can kind of flood our system. And when I say that, I mean it dilutes the sodium levels in our blood. That can make us feel nauseated, dizzy. It can cause headaches, make us feel fatigued.

fatigued. This also can get actually pretty dangerous. In fact, it can cause swelling in our brain cells. And when that occurs, that expansion puts pressure on certain parts of the brain and could lead to more serious issues like coma, seizures, or even death. The most simple thing people can

think about based off of what doctors and researchers have told me is that we should all just try to drink to satisfy our thirst. That might be the most simple way of thinking about this and ensuring you aren't drinking too much water when you're trying to stay safe in the heat of the summer.

And that's What's News for this Wednesday afternoon. Today's show was produced by Anthony Banzi and Pierre Bien-Aimé with supervising producer Michael Kosmides. I'm Francesca Fontana for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening. This message comes from Wall Street Journal sponsor C3.ai.

C3 Generative AI enables rapid access to secure, traceable, hallucination-free insights from enterprise systems, all while using any LLM, helping enterprises turn the invisible into the obvious. Learn more at c3.ai. This is Enterprise AI.