Freud, scam cases increasing on Zelle, Senate report finds

Banks seen as reluctant to reimburse customers

By: Ken Sweet
Associated Press

NEW YORK - Incidents of fraud and scams are occurring more often on the popular peer-to-peer payment service Zelle, according to a report issued Monday [10/03/2022] by the office of Senator Elizabeth Warren, giving the public its first glimpse into the growing problems at Zelle.
..... The report also found that the large banks that partly own Zelle have been reluctant to compensate customers who have been victims of fraud or scams. For instance. less than half of the money customers reported being sent via Zelle without authorization was being reimbursed.
..... Warren, D-Massachusetts, a longtime critic of the big banks, requested data on fraud and scams on Zelle from seven banks starting in April. [2022] The report cites data from banks that tallied 192,878 cases worth collectively $213.8 million in 2021 and the first half of 2022 where a customer claimed they had been fraudulently tricked into making a payment. In only roughly 3,500 customers, the report found.
..... Further, in the cases where it's clear funds had been taken out of customers' account without authorization, only 47% of those dollars were ever reimbursed.
..... Since being launched in June 2017, Zelle has become a popular way for bank customers to send money to friends and family. Almost $500 billion in funds were sent via Zelle in 2021, according to Early Warning Systems, the company that operates Zelle.
..... Zelle is the banking industry' answer to the growing popularity of peer-to-peer payment services like PayPal, Venmo and the Cash App. The service allows a bank customer to instantaneously send money to a person via their email or phone number, and it will go from one bank account to another. More than 1,700 bank and credit unions offer the service. but the service has also grown more popular with scammers and criminals. Once money is sent via Zelle, it requires a bank's intervention to attempt to get that money bank.
..... The case of growing fraud and scams a tZelle have been highlighted in previous news reports, including two by the New York Times. But those stories cited mostly anecdotal evidence. Early Warning Systems has previously said that 99.9% of all transactions happen without complaints of fraud or scams. A group of Democratic senators asked for usage data on Zelle after the Times' report.
..... Banks are required under the Electronic Fund transfer Act to repay customers when funds are illegally taken put of their account without authorization. Banks have argued that in cases of fraud - meaning a customer's account becomes compromised somehow and they send an unauthorized payment - they do reimburse customers. Banks are more reluctant to reimburse customers who claim to be scammed, arguing that customers would make such claims more often and it would be hard to tell whether the customer is telling the truth.
..... 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.
..... the banking industry, aware of Zelle, has been on a campaign to show Zelle is a safe way to send money. The industry typically likes to point out that fraud and scam claims occur more often on the non-bank payment platforms such as Venmo or the Cash App.
..... The data for individual banks shows the increase in fraud and scams. PNC Bank had 8,848 cases on Zelle in 2020, and is on pace to have roughly 12,300 cases this year. [2022] U.S. Bank had 14,886 cases in 2020 and had 27,702 cases in 2021. Truist had 9,455 cases of fraud an d scams on Zelle in 2020, which ballooned to 22,045 last year. [2021]

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