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, per the AP. 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. Banks are required under the Electronic Fund Transfer Act to repay customers when funds are illegally taken out of their account without authorization. However, banks are 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 cases of growing fraud and scams at Zelle—the banking industry's answer to the growing popularity of peer-to-peer payment services like PayPal, Venmo, and the Cash App—have been highlighted in previous news reports, including two by the New York Times. But those stories cited mostly anecdotal evidence. A group of Democratic senators asked for usage data on Zelle following the reports. Early Warning Services, the company that operates Zelle, has previously said that 99.9% of all transactions happen without complaints of fraud or scams. It said increased cases of fraud reflect Zelle's boost in popularity, though "the proportion of fraud and scams has steadily decreased" since its 2017 launch. (More banks stories.)
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