AP

Fraud, scam cases increasing on Zelle, Senate report finds

Oct 3, 2022, 7:19 AM | Updated: Oct 4, 2022, 12:19 pm

NEW YORK (AP) — Incidents of fraud and scams are occurring more often on the popular peer-to-peer payment service Zelle, according to a report issued Monday by the office of Sen. 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 long-time critic of the big banks, requested data on fraud and scams on Zelle from seven banks starting in April. The report cites data from four 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 cases did those banks reimburse the customer, the report found.

Further, in the cases where it’s clear funds had been taken out of customers’ accounts 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 Services, the company that operates Zelle.

Zelle is the banking industry’s 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 banks 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 back.

The cases of growing fraud and scams at Zelle have been highlighted in previous news reports, including two by The New York Times. But those stories cited mostly anecdotal evidence. Early Warning Services 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 reports in The New York Times.

Banks are required under the Electronic Fund Transfer Act to repay customers when funds are illegally taken out 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 have been 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 Washington’s increased scrutiny 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 like Venmo or the Cash App.

“That doesn’t mean that Zelle, just like every other instant (peer-to-peer) payment service, is entirely free from those who seek to defraud the American consumer,” four banking industry lobby groups said in a joint statement. “Banks know this and take steps to mitigate instances of fraud and criminal activity.”

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 had 27,702 cases in 2021. Truist had 9,455 cases of fraud and scams on Zelle in 2020, which ballooned to 22,045 last year.

In response to Warren’s report, Zelle’s owner said the increased cases reflected the fact the service has become more popular.

“Zelle usage has grown significantly since its launch, from 247 million transactions in 2017 to 1.8 billion in 2021, while the proportion of fraud and scams has steadily decreased,” Early Warning Services said in a statement.

Warren made fireworks at a congressional hearing last month involving most of the CEOs of the big Wall Street banks that use and partly own Zelle, where she pushed each of the CEOs to release fraud and scam incident data at their banks. The seven are: JPMorgan Chase, Wells Fargo, PNC Financial, Truist, Bank of America, Capital One and U.S. Bank.

The hearing featured an exchange where Jamie Dimon, the CEO of JPMorgan Chase, apologized to Warren for not getting her the data she requested and promised she would have it at the end of that day.

Warren’s office says ultimately JPMorgan’s data on Zelle did not provide the information they were looking for, so data from JPMorgan is not included in the report.JPMorgan did not return a request for comment.

Wells Fargo and Capitol one were also not included in the report. Wells said it sent its data to Warren’s office on Sept. 28, a week after the congressional hearing.

___

This story has been updated to correct the name of the company operating Zelle. It is Early Warning Services, not Early Warning Systems.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Crystal Baziel holds the Pan-African flag Monday, June 19, 2023, during Reedy Chapel A.M.E C...

Associated Press

The beginner’s guide to celebrating Juneteenth

For more than one-and-a-half centuries, the Juneteenth holiday has been sacred to many Black communities. It marks the day in 1865 enslaved people in Galveston, Texas found out they had been freed — after the end of the Civil War, and two years after President Abraham Lincoln’s Emancipation Proclamation. Since it was designated a federal […]

2 days ago

A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch ro...

Associated Press

Plane that did ‘Dutch roll’ on flight from Phoenix suffered structural damage, investigators say

A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch roll” during a flight from Phoenix last month.

6 days ago

This photo provided by Randy Shannon shows Mooney Falls on the Havasupai reservation outside the vi...

Associated Press

Dozens report illness after trips to waterfalls near Grand Canyon

Dozens of hikers say they fell ill during trips to a popular Arizona tourist destination that features towering blue-green waterfalls deep in a gorge neighboring Grand Canyon National Park.

7 days ago

Mugshot of Rudy Giuliani, who was processed Monday, June 10, 2024, in the Arizona fake electors cas...

Associated Press

Rudy Giuliani posts $10K cash bond after being processed in Arizona fake electors case

Rudy Giuliani, a former New York City mayor and Donald Trump attorney, was processed Monday in the Arizona fake electors case.

10 days ago

FILE - White House former chief of staff Mark Meadows speaks with reporters at the White House, Wed...

Associated Press

Former Trump chief of staff Mark Meadows pleads not guilty in Arizona fake elector case

Former Donald Trump presidential chief of staff Mark Meadows and Trump 2020 Election Day operations director Michael Roman pleaded not guilty Friday in Phoenix to nine felony charges for their roles in an effort to overturn Trump's Arizona election loss to Joe Biden.

13 days ago

deadly heat wave last summer...

Associated Press

After a deadly heat wave last summer, metro Phoenix is changing tactics

Fresh memories of the deadly heat wave last summer have led Arizona authorities to launch new tactics ahead of summer 2024.

23 days ago

Sponsored Articles

...

Collins Comfort Masters

Here’s how to be worry-free when your A/C goes out in the middle of summer

PHOENIX -- As Arizona approaches another hot summer, Phoenix residents are likely to spend more time indoors.

...

Day & Night Air Conditioning, Heating and Plumbing

Beat the heat, ensure your AC unit is summer-ready

With temperatures starting to rise across the Valley, now is a great time to be sure your AC unit is ready to withstand the sweltering summer heat.

...

DESERT INSTITUTE FOR SPINE CARE

Desert Institute for Spine Care is the place for weekend warriors to fix their back pain

Spring has sprung and nothing is better than March in Arizona. The temperatures are perfect and with the beautiful weather, Arizona has become a hotbed for hikers, runners, golfers, pickleball players and all types of weekend warriors.

Fraud, scam cases increasing on Zelle, Senate report finds