Scammed On Zelle? Feds Are Looking Into It: Report

UPPER EAST SIDE, NY – Zelle, a popular peer-to-peer payments platform similar to Venmo, is a useful way to send money to friends and businesses. It’s ubiquitous in online spaces like Facebook Marketplace, where New Yorkers buy and sell furniture and other items.

Unfortunately, the app is also popular with scammers.

Earlier this year, the NYPD sounded the alarm after a group of teenagers reportedly targeted unsuspecting victims in Central Park’s Sheep Meadow.

Parkgoers thought the teens were soliciting donations for a sports team. Instead, the teenagers commandeered phones and swiftly transferred significant sums to themselves without consent, police said.

Even a former Miss New York was conned in a similar incident, according to the New York Post.

Users Responsible

Zelle was created by seven large banks, including JPMorgan Chase, Bank of America, and Wells Fargo – which collectively represent 73 percent of all transactions on the platform – and as such, you’d think there’d be a clear process to have funds reimbursed in cases of suspected fraud.

But according to a report in the Wall Street Journal, while “banks are required to refund customers for transactions they didn’t authorize, there isn’t legal protection for customers who send the money themselves.”

Meaning that if you “authorized” a payment that turned out to be a scam, you may not get your money back.

Reimbursements Drop

According to Connecticut Senator Richard Blumenthal’s office, victims of Zelle scams were reimbursed only 38 percent of the time in 2023 – down from 62 percent in 2019. An investigation found that more than $100 million worth of disputed transactions went unreimbursed in 2021, 2022, and 2023.

That’s a small fraction of the $806 billion worth of transactions that were handled on Zelle last year, according to the platform, which is used by more than 120 million consumers and businesses.

However, a small fraction of $806 billion is still a significant amount of money.

Zelle’s network operator told the Journal that “99.95%” of transactions are completed without incident. Unfortunately, .05% of $806 billion is $403 million.

CFPB Probing Banks

According to the Journal, the Consumer Financial Protection Bureau (CPFB) is now examining “whether banks are proactive enough in shutting down accounts controlled by scammers” and “the degree to which banks vet the identity and background of deposit-account customers who end up being bad actors.”

Banks maintain that most transactions conducted through Zelle are legitimate and assert that it is impractical to completely eliminate all instances of misuse on the platform. In recent years, banks have implemented measures to protect customers, such as issuing frequent advisories against sending money to unfamiliar recipients.

Since last year, Zelle has required banks to reimburse customers for some types of disputed transactions even if the victim authorized the payment, “such as when scammers impersonate a government official or a customer’s bank.”

It’s unclear whether or not that would cover incidents like those that occurred in Central Park earlier this summer.

JPMorgan Chase is reportedly prepared to go to court, to ensure that the CPFB’s actions “stay within the bounds of the law,” and the bank told the Journal that it “already [goes] above and beyond what the law requires.”

Have you been the victim of a scam on Zelle? Want to tell Patch about it? Email michael.mcdowell@patch.com.