Whether you’re splitting a tab, or paying a babysitter, Zelle is the most popular way to transfer money electronically in the U.S., processing more money than Venmo and CashApp combined, lawmakers have found.
But Zelle is also popular among thieves.
Each year, millions of dollars are stolen from consumers through Zelle in fraudulent transfers, data shows, and victims say getting help or refunds from their banks has been difficult.
That could soon be changing, as the Wall Street Journal reports the big banks that own Zelle’s parent company, Early Warning Services, have been meeting and negotiating the standardization of refund procedures, as well as the sharing of liability within the Zelle network.
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A recent report by Senator Elizabeth Warren found fraudulent or unauthorized transfers over Zelle exceeded $255 million last year alone.
Count Jim Weber out of Homer Glen, Illinois, as one of those victims.
Weber built his business, Tricor Carpentry, from the ground up starting in 2006, and has worked on an array of retailers across the city.
When Weber received a text message, followed by a phone call last November that someone was trying to drain his company’s BMO Harris bank account, he paid attention.
“I got a call from a BMO Harris [phone] number,” Weber said, “And the person said, ‘Hey, this is the Fraud Department. We're just reaching out to let you know there's some fraud activity happening on your account right now.’"
The person on the other line had many accurate details: Jim’s full name, his address, and the last digits of his bank account. Most compelling, the phone number the call came from rang back to BMO Harris when Weber said he tried the number.
Within minutes of the bank’s closing time, and heading into a long Veteran’s Day holiday weekend, the caller created a sense of urgency, Weber explained, telling him his accounts were in danger.
“He goes, ‘We're gonna send you a code,’” Weber recalled. “And he goes, ‘Just reply yes to the code.’”
Weber acted, and within minutes, he discovered two transfers totaling $20,000 were made without his authorization.
By the time he got through to a BMO representative after the holiday weekend, Weber said the rep confirmed his suspicions: The person who called him was an imposter.
“He sounded so professional,” Weber said. “He sounded just like someone who works for BMO.”
BMO Harris would not comment about Weber’s situation, but after our inquiry, Weber told us he was informed by BMO that his $20,000 would be reimbursed.
Still, Weber worries for others out there falling victim to intricate ploys designed to trick people into authorizing fund transfers over Zelle.
Nonprofit Consumers’ Checkbook has seen first-hand how fraud over Zelle has skyrocketed over recent years.
“The criminals have become quite sophisticated,” said Kevin Brasler, executive editor for Consumers’ Checkbook.
Brasler added that victims have had little recourse, warning that “if you're defrauded or you send money to the wrong person on accident, you're not going to be made whole.”
While Zelle’s parent company, Early Warning Services LLC, is owned by seven of the major banks, it is a separate entity only responsible for communicating a money transfer, from one bank account to another, a spokesperson explained to NBC 5.
“Zelle does not hold the funds,” said Meghan Fintland with Early Warning Services. “We provide messaging between financial institutions. When a consumer reports fraud or [a] scam, their financial institution researches the case incident on how best to mitigate it, which may include reversing the funds and working with Zelle in removing the fraudster or scammer from the network.”
By federal laws and rules enforced by the Consumer Financial Protection Bureau, banks are required to refund customers for “unauthorized transfers.”
But if a customer is tricked into providing authorizations, many banks have argued in the past that they’re not required to refund what’s lost, creating a wrinkle for consumer advocates.
“There’s a clear federal law that says if fraud occurs during an electronic transfer, the consumer isn’t responsible,” Brasler explained. “The question is whether the federal law covers us if we’ve been scammed, if fraud occurred, and we were kind-of a willing participant because we didn’t know what was going on and we made a mistake.
Now, lawmakers say they have answered that question, finding that the law is actually on the consumers’ side.
In the report released last October by Sen. Elizabeth Warren, her office concluded, “Banks [that] are not repaying customers who contest ‘unauthorized’ Zelle payments [are] potentially violating federal laws.”
Regulators with the Consumer Financial Protection Bureau also confirmed this to NBC 5, telling us, “consumers are not liable for payments initiated by a third party who obtained the consumer’s payment information through fraud or robbery.”
A win, at least on paper, for consumer advocates - and there could be more changes on the way.
Early Warning Services is now reportedly meeting with the banks, and negotiating changes to their refund policies, according to the Wall Street Journal. Those changes could include standardizing refund procedures, as well as the sharing of liability within the Zelle network of banks that use the service.
Early Warning Services would not address any potential changes, but told NBC 5, “Protecting consumers is a top priority for Zelle…Part of our work includes collaborating with our financial institution participants to evolve and enhance our network-wide rules.”
“We believe consumer education is imperative to stopping scams before they can happen in the first place. Our website offers tips and resources to help consumers protect themselves,” a spokesperson for Early Warning Services said.
In addition, Zelle’s parent company shared the following advice for consumers, in order to protect themselves from fraudulent transfers:
- Your bank will never ask you to send money to yourself.
- If you detect suspicious activity, hang up and contact your bank directly at the number listed on the back of your bank-issued debit card, in your banking app, or the bank’s official website.
- Don’t let anyone rush you into making a payment. That is a red flag.
- For more tips and resources, visit https://www.zellepay.com/financial-education/pay-it-safe.
Back in Illinois, for Weber, the "trustworthy" way to send money still feels anything but, and he hopes the banks will do more to protect their customers.
“When they say it’s not their problem, it is their problem,” Weber said. “But it’s an easy way for the banks to deflect onto someone else.”