Zelle, a payment platform for peer-to-peer transactions, enables individuals to transfer and collect funds, operating similarly to apps like Venmo. The app has gained significant traction, with many US banks now offering seamless integration. However, the app’s growing popularity has also led to an uptick in fraudulent activities and deceptions, a trend that seems to be escalating.
A fresh investigative study conducted by the office of US Senator Elizabeth Warren reveals that approximately $440 million was siphoned off by fraudulent schemes targeting Zelle users in the United States during 2021 alone. Upon realizing they have fallen victim to a scam, individuals typically lodge complaints with their banks seeking aid and reimbursement. Nevertheless, as per the report, numerous banks opt to dismiss these complaints outright.
Financial institutions are bound by various federal guidelines, including Regulation E, which stipulates that banks are only required to compensate for fraudulent activities arising from unauthorized transactions, such as credit card theft. In cases where individuals are duped into authorizing payments through Zelle, banks are not mandated to provide refunds. This explains why about 90% of individuals who fall prey to Zelle scams fail to receive any reimbursement from their banks, despite requesting it.
Instances of fraud and deception are becoming more frequent on the widely-used peer-to-peer payment service Zelle, as detailed in a report released by Senator Elizabeth Warren’s office on Monday, shedding light on the mounting concerns surrounding Zelle’s operations. https://t.co/ZPuXoTxdus
— CBS News (@CBSNews) October 4, 2022
“The major banks hold ownership stakes in Zelle and benefit financially, yet they fall short in compensating their customers for both authorized and unauthorized fraudulent activities on the platform, despite asserting its safety,” the report from Warren’s office stated.
Regarding the issue, Zelle focused on highlighting the substantial volume of legitimate transactions on its platform compared to the fraudulent ones. “Millions of consumers engage with Zelle securely, with over 99.9% of transactions completing without any reported instances of fraud or deception,” the company emphasized.
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