UES Woman Loses $12K In Zelle Scam And Her Bank Says She’s On Her Own

UPPER EAST SIDE, NY – On Nov. 1, 2022, Dr. Karen Binder-Brynes, a psychologist and longtime East Sider, was at home recovering from a medical procedure – under the waning influence of anesthesia – when she received a troubling phone call.

Someone in Texas was using her debit card, she was informed, by a caller who represented himself as a Citibank fraud specialist.

“This guy was so smooth," Binder-Brynes told Patch, in an interview. “He knew the last four digits of my social security number and the number of my checking account, he was sending me those alerts via text message” – also known as multi-factor authentication – “and I told him, ‘Look, I just had a medical procedure, this better not be fraud.’”

“I was crying, and I put him on speaker – my husband Paul was listening – and the guy reassured me, gave me numbers I could call him back on, and even put me on hold to talk to a supervisor,” she recalled. “It was so professional.”

At the time a Citibank Priority member, Binder-Brynes says she was convinced that the caller was a bank representative. The fraudulent Texas charges would be addressed, she was told, and a new debit card would soon be on its way.

That's when the man on the phone said he noticed unusual activity on her Zelle account.

"'There's also something going on with your Zelle,' he said," Binder-Brynes continued. "He convinced me to temporarily change my password, so he could get into the account, which I did thinking he was with Citi," she said.

"As we were talking, I separately went into my account and could see that money was leaving it, and that's when I freaked out and realized that this was fraud. But by then, the money was gone," she sighed.

The scammer ultimately succeeded in sending Zelle payments to individuals Binder-Brynes says she did not and does not know totaling just short of $12,500.

‘Unable To Honor Your Claim’

The next day, Binder-Brynes went to her local Citi branch on Madison Avenue and opened a fraud investigation.

"I had every reason to believe that Citibank would reimburse me," she said.

On Nov. 14, 2022, Binder-Brynes received responses to her claims from Citibank, which stated the bank's conclusion: each fraudulent Zelle transaction was essentially her responsibility.

“Based on our research and the information you provided, we are unable to honor your claim,” the letters read. “The [person-to-person] transfer was sent to the recipient in accordance with your instructions. You may wish to reach out to the recipient directly to resolve this matter."

"I was devastated," Binder-Brynes said. "I felt violated, I felt angry at Citibank, and that's when I began the whole appeal process."

Although representatives at the Madison Avenue branch were very helpful, Binder-Brynes says, her appeal was denied and she's yet to see a dime of reimbursement.

"Nobody told me to contact the FBI or file a police report," she said. "It makes you understand why our ancestors kept their money under the mattress."

Unfortunately, she's not alone. Far from it.

Even .05% Can Be Significant

Zelle, a person-to-person payments platform on which users can quickly send and receive funds via their mobile phones, handles billions of transactions annually and counted 120 million users as of earlier this year.

But social media sites like Reddit – and in particular the r/scams subreddit – are full of stories like Binder-Brynes’, which typically involve individuals who claim they were preyed on, via Zelle, by sophisticated fraudsters during a vulnerable moment.

“I am 7 months pregnant and was Zelle scammed the other day when I was very fatigued,” reads one such account, in which a bank similarly declined to reimburse a customer who said she was the victim of a scam.

In fact, according to Connecticut Senator Richard Blumenthal’s office, victims of Zelle scams were reimbursed by JPMorgan Chase, Bank of America, and Wells Fargo only 38 percent of the time in 2023 – down from 62 percent in 2019, potentially in violation of the Electronic Fund Transfer Act (EFTA). Furthermore, a Senate investigation found that more than $100 million worth of disputed transactions went unreimbursed in 2021, 2022, and 2023.

Even so, only a small fraction of the $806 billion worth of transactions that were processed on Zelle last year – .05 percent, according to the platform – were reported as fraudulent. But .05 percent of $806 billion is still a significant amount of money: about $403 million.

Verify Before Sending

Reached for comment, a spokesperson for Citi declined to speak to the specifics of Binder-Brynes’ case and provided the following statement:

We have a great deal of sympathy for those who fall victim to scams, and we’re committed to doing our part to protect our customers. Financial institutions have seen a rising trend of impersonation scams, in which criminals impersonating bank employees contact unsuspecting customers for personal information. They may then direct customers to transfer money via wire transfer or peer-to-peer payment apps to “protect” their funds. Scammers target these payment methods because they’re fast and final – meaning it’s important to always verify the recipient before sending money. Trust your instincts, and if in doubt, hang up and call Citi directly using the number on your card. Visit citi.com/fraudprevention for more information.

‘Focus On The Criminals’

Zelle also declined to address the specifics of Binder-Brynes’ case, and provided the following statement:

We recognize the concerns some consumers have about scams and fraud. Consumers face an unrelenting stream of fraudulent texts, calls, social media posts, and more, all from criminals trying to swindle them out of money. Scams do not originate in payment networks; they start well before the point the consumer decides to initiate a payment. These unfortunate situations are precisely why Early Warning Services, the network operator of Zelle, believes the best approach to solving this problem is to focus on the criminals trying to coerce hardworking Americans into sending money, and that government, law enforcement and private industry need to come together to prevent these crimes from happening in the first place.

Early Warning is constantly evolving our countermeasures to protect consumers. As a result of our multi-layered network protections and consumer education efforts, 99.95 percent of transactions on the Zelle network were completed without a report of scam or fraud in 2023. However, it’s important to recognize Zelle is a messaging service facilitating transfers between two federally regulated institutions. To ensure Zelle user privacy, all funds are sent directly from one financial institution to another and never pass through Zelle, like other peer-to-peer payment platforms that operate outside the regulatory perimeter. The funds remain with an insured deposit account. If fraud or a scam is suspected, consumers should immediately contact their financial institution, as they are required by law to investigate all fraud claims.

Zelle is only offered by regulated financial institutions and these institutions must adhere to our network operating rules which go above and beyond existing legal and regulatory requirements. This includes zero consumer liability for unauthorized transactions and an industry-leading consumer reimbursement benefit for qualifying imposter scams.

Feds Investigating, State Suing

According to the Wall Street Journal, the Consumer Financial Protection Bureau (CFPB) has been probing how banks handle disputed Zelle transactions since the summer.

While the CFPB could not speak to the specifics of Binder-Brynes’ case, a spokesperson provided Patch with the following statement:

Financial fraud can be devastating for victims, and the CFPB is working to prevent further harm by ensuring that financial institutions are living up to their obligations to the law and to their customers. Payment networks and financial institutions should do everything they can to ensure their networks are not facilitating fraud – including but not limited to kicking fraudsters off their services, investing in the appropriate safeguards, and ensuring that problems are resolved quickly.

Zelle was created and is owned by seven large banks – including JPMorgan Chase, Bank of America, and Wells Fargo – whose customers collectively represent 73 percent of all transactions on the platform.

JPMorgan Chase is reportedly prepared to go to court over any CFPB action on Zelle, and recent reporting in Payments Dive suggests that any regulatory move on the platform would likely be
brought to the business-friendly Fifth Circuit, which covers Texas, Louisiana, and Mississippi.

Closer to home, New York Attorney General Letitia James is pursuing related legal action against Citi, and her office declined to comment on this story.

James’ office sued Citi in January 2024, accusing the bank of failing to protect and reimburse victims of online fraud, per a press release.

“Citi has overpromised and underdelivered on security, reacted ineffectively to fraud alerts, misled consumers, and summarily denied their claims,” the suit reads. “Citi’s illegal and deceptive practices have cost New Yorkers millions.”

The lawsuit accuses Citi of violating the EFTA and seeks to bar the bank from "engaging in the fraudulent and illegal practices" it has allegedly been involved in, according to James' office.

The suit also seeks restitution for consumers, disgorgement of profits, civil penalties for violations, the appointment of an independent third party to review and identify affected consumers for compensation, and requests a list of all customers whose claims for money lost due to unauthorized payments or debits were denied by Citi over the past six years.

Both Zelle and Venmo, another peer-to-peer payment platform, are mentioned in James’ suit.

What Should You Do If You've Been Scammed?

If you believe you have been the victim of a scam on Zelle, reporting the incident to your financial institution is an important first step. Consumers should also consider filing a report with the FBI's Internet Crime Complaint Center (IC3), as many of these frauds are engineered by criminal enterprises located outside of the United States.

Consumers may also file a complaint with the CFPB or the Office of the Comptroller of the Currency, which regulates and supervises American banks.

Finally, local authorities are not to be underestimated, including the New York State Attorney General’s office. And closer to home, the Manhattan District Attorney's Office has a dedicated cybercrime hotline, (212) 335-9600.

What about Binder-Brynes?

"I’d like to get my money back, and I don’t want this to happen to other people," she said.

In September, Binder-Brynes requested a copy of the information used by Citi in its investigation of her claim. She received a single-page response from the bank, summarizing the reasons for their denial in a few brief, abbreviated lines.

"Funds were sent from client's established device," reads Citi's commentary. "Client initiated transfer."

Binder-Brynes isn't having it.

"I don’t see how a bank wipes their hands of responsibility when it's the bank's systems that failed completely in protecting one of their customers," she said. "It’s not right."

Have you been the victim of a scam? Want Patch to look into it? Email michael.mcdowell@patch.com.