Incidents of fraud and scams are occurring more often on a popular payment service. A Senate report on Monday gives the public its first glimpse into the growing problems of ordinary people’s money disappearing into cyberspace.
Launched in 2017, Zelle is a popular way for bank customers to send money to friends and family. It is the banking industry’s answer to the growing popularity of peer-to-peer (P2P) payment services like PayPal, Venmo, and the Cash App.
Zelle allows bank customers to instantly send money to a person via email or phone numbers—and have the funds go directly from one bank account to another.
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 back.
Marcas Miles told TV show Good Morning America that he received a text asking, “Did you attempt a $500 Zelle transfer?” After a phone call with someone he thought was from his bank, Miles’ account was empty. The whole transaction took just 16 minutes. “I might as well have just walked out my front door and given all of my money to the first person that I saw,” Miles says.
Senator Elizabeth Warren is a long-time critic of big banks. In April, she requested data on fraud and scams on Zelle from seven banks. Four banks complied.
The new Senate report finds that large banks that partly own Zelle have been slow 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 reimbursed.
In the report, four banks revealed 192,878 fraud cases in 2021 and the first half of 2022. The cases involved customers who, like Miles, claimed they had been tricked into making a payment. In only about 3,500 cases did those banks reimburse the customer, the report found.
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. US Bank had 14,886 cases in 2020 and 27,702 in 2021. Truist had 9,455 cases of fraud and scams on Zelle in 2020 that ballooned to 22,045 last year.
Banks are required to repay customers when funds come out of their account illegally. Banks say that in cases of fraud—when a customer’s account becomes compromised and he or she sends an unauthorized payment—they do reimburse customers.
However, they’re more reluctant to reimburse customers claiming to be scammed. They argue that customers claim being scammed more often, and it would be hard to tell whether the customer is telling the truth.
Warren made fireworks at a congressional hearing last month. The inquiry involved the CEOs of the big Wall Street banks that use and partly own Zelle. Warren pushed each of the CEOs to release fraud and scam data from their banks. The seven banks are JPMorgan Chase, Wells Fargo, PNC Financial, Truist, Bank of America, and U.S. Bank.
Warren’s office says data from both JPMorgan and Wells Fargo are not included in the report.
“Congress is considering a draft proposal to ensure that consumers who get induced into scams have protection and get their money replenished by the banking industry or whatever platform they’ve used,” says Sally Greenberg, executive director of the National Consumers League.
Zelle reminds users that banks will never call for personal information. After all, the banks already have it.
You shall not steal; you shall not deal falsely; you shall not lie to one another. — Leviticus 19:11
(Senator Elizabeth Warren on a screen in the background questions witnesses about Zelle during a Senate Banking Committee annual Wall Street oversight hearing on September 22, 2022, on Capitol Hill in Washington, D.C. AP/Jacquelyn Martin)
