When Customers Say Their Money Was Stolen on Zelle, Banks Often Refuse to Pay

Zelle, the most popular payments app, is owned and operated by Early Warning Services, a company based in Scottsdale, Ariz. Early Warning is owned by seven banks — Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo. But each of the 1,600 banks and credit unions that offer Zelle to their customers uses its own security settings and policies.

Neither the banks nor Early Warning publicly release any data on fraud, so it’s hard to tell how prevalent scams and theft are on Zelle. Incidents like the ones described by Mr. Oriach and Mr. Ruoff are “rare” and make up a small portion of the activity on the platform, said Meghan Fintland, a spokeswoman for Early Warning.

In a survey of nearly 1,400 people whose accounts were accessed without their consent last year, a quarter said Zelle or other person-to-person payment services were used to make unauthorized money transfers, according to a report by Shirley Inscoe, an adviser at Aite-Novarica Group, a financial services consultant. That was second only to fraudulent credit card transactions.

Bob Sullivan, a journalist and longtime consumer advocate, likened the current wave of scams and thefts — and the banks’ reluctance to absorb the losses on them — to the early days of online banking, when phishing and other tricks to get customers’ login credentials and passwords were epidemic and banks routinely denied customers’ claims. It took an order from the Federal Reserve in 2005 to make it clear to banks that they were expected to cover such cases.

Outright theft is just one aspect of the much bigger problem of fraud on Zelle and other payments apps. In March, The Times reported that con artists and other scammers often trick people into making payments themselves — such as by posing as bank employees or selling fraudulent goods. In those cases, banks usually refuse to make refunds, arguing that since customers themselves initiated the transfer, it’s not “unauthorized” under the definition of the law.

Article source: https://www.nytimes.com/2022/06/20/business/zelle-money-stolen-banks.html