PS5 - When playing Co Op with 2 Players Issue

When playing with 2 players co op on PS5 and getting to the main town, there is no other players in the town. Cannot join a team or invite anyone to the team. Also everyone on the friends list disappears.

This is even after the second player got through the first boss and unlocked the town.

Is anyone else having this issue?

This is for PoE2