Zelle Is a payment service similar to others like Venmo and PayPal, where it allows users to digitally transfer money. Recently the Office of Senator Elizabeth Warren released a report outlining more and more instances of fraud and scams that are occurring on the platform. The report also found that large banks that have part ownership in Zelle were reluctant to reimburse customers who have fell victim to these scams.
The Report
Senator Warren, who is a known critic of the big banks, requested this data on fraud and scams on Zelle from 7 of the big banks starting in April. The report included data on four banks that totaled 192,878 cases worth collectively $213.8 million in 2021 and the first half of 2022. The cases came from customer-reported claims of fraudulently being tricked into making a payment. Of these 190,000+ cases, only roughly 3,500 cases were resolved by the bank. On top of that, in the cases where money was clearly taken out of a customer’s account without authorization, only 47% of the total cash stolen was reimbursed.
Why Zelle?
Zelle has become an increasingly popular alternative in the banking industry over other methods like peer-to-peer payment services like Venmo, PayPal, and Cash App. The service allows a bank’s customers to instantaneously transfer money directly from one bank account to another, instead of having to go through a 3rd party and then transferring into your bank account. More than 1,700 banks and credit unions utilize the service.
With its ever-growing popularity, it also has become extremely popular with scammers and fraudsters because once the money is sent via Zelle it requires a bank’s intervention to get the money back, and as many people know, dealing with a bank can cause headaches. However, under the Electronic Fund Transfer Act, banks are legally required to repay customers when funds are legally taken out of their accounts without authorization. The Consumer Financial Protection Bureau has also been looking into Zelle and other payment platforms and is expected to issue regulations that could require banks to reimburse customers for a wider array of scams and fraud.
Wrap Up
In response to the report that was released, Zelle’s owner came out and noted that the increase in scam rates reflects the increased popularity of the service. As far as response from the big banks on the situation, there has been next to none since the report came out, however, we will be monitoring the situation.