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Zelle Scam: App Now Starts Limited Refunds Under Pressure From Lawmakers

Growing concerns about Zelle scams have led parent company Early Warning Services (EWS) to begin refunding money to some people who were deceived and sent money to criminals. The reversal of the previous position that customers are responsible for their transactions is believed to have been made in an attempt to head off potential legislation …

Zelle scam and previous EWS response

First thing to do Please note: Fraud, where people are tricked into sending money, is different from hacking, where a third party gains unauthorized access to an account. Federal law already requires banks to reimburse customers for fraudulent transactions that they did not authorize.

Fraud is when someone pretends to be a legitimate beneficiary – a government agency, a company you are about to pay, a friend, or a family member – in order to trick you into making a payment to them.

Zelle initially stated that the client is responsible for ensuring that it pays the right person and that the banks behind the app were not responsible.

Under pressure from regulators and lawmakers to do something to address the growing problem, Zelle back in August it said it was introducing a new policy that would reimburse customers for “certain types of fraud.” The company did not explain this policy at the time.

Fraudulent Refund Policy Now Stated, Refunds Continue

Reuters reports that Zelle has now defined its new policy and has begun issuing refunds.

2,100 financial firms on Zelle, a peer-to-peer network owned by seven banks including JPMorgan Chase and Bank of America, began canceling transfers on June 30 for customers duped into sending money to scammers claiming to be from a government agency, the bank. or an existing service provider, Early Warning Service (EWS) reports, banks’ the company that owns Zelle.

This appears to mean that you will receive a refund if the scammer impersonates any government agency or any bank. However, this also assumes that if the scammer is impersonating a company, you will only get your money back if you are already a customer of that company. Finally, it looks like you'll be out of luck if the scammer impersonates an individual, such as a family member or friend.

The company says going this far is “well beyond current legal and regulatory requirements.” .

The new policy is likely intended to prevent new laws from being passed

The growth of Zelle itself and the number of scammers using the application has increased the likelihood of regulation.

A March 2022 New York Times report that fraud was rampant at Zelle caught the attention of lawmakers who often criticize big banks, including Sen. Elizabeth Warren.

She and other lawmakers launched an investigation, estimating that only In 2021, Zelle users lost $440 million due to all types of scams. During a Senate hearing last year, Warren told Dimon and other bank executives that they had created the “perfect weapon” for criminals but failed to support their clients […]

Under pressure from Warren and Other lawmakers, the Consumer Financial Protection Bureau (CFPB), have considered forcing lenders to repay fraud, but Zelle's changes have so far satisfied the agency, a person familiar with the matter said.

The CFPM had previously suggested that banks on the hook for fraud will prompt them to improve their protections.

The National Consumer Law Center says legislation would be better than adopting this voluntary agreement.

“The only thing I think is problematic is that the consumer doesn't really know that they have this option,” said senior attorney Carla Sanchez-Adams. “And if they do know, and if the bank can't reimburse them, there is no private remedy,” she continued, noting that Zelle's policy change was nonetheless “a good first step.”

Bank executives are set to testify before the Senate in December, and fraud is almost certainly on the agenda.

Image:  Rubaitul Azad/Unsplash

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