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Are Banks Doing Enough to Protect Customers from Zelle Scams? US Launches Federal Probe (yahoo.com) 82
"Zelle payments can't be reversed once they're sent," notes the Los Angeles Times — which could be why they're popular with scammers. "You can't simply stop the payment (like a check) or dispute it (like a credit card).
Now, the federal regulator overseeing financial products is probing whether banks that offer Zelle to their account holders are doing enough to protect them against scams. Two major banks — JPMorgan Chase and Wells Fargo — disclosed in their security filings in the last week that they'd been contacted by the Consumer Financial Protection Bureau. According to the Wall Street Journal, which reported the filings Wednesday, the CFPB is exploring whether banks are moving quickly enough to shut down scammers' accounts and whether they're doing enough to identify and prevent scammers from signing up for accounts in the first place...
A J.D. Power survey this year found that 3% of the people who'd used Zelle said they had lost money to scammers, which was less than the average for peer-to-peer money transfer services such as Venmo, CashApp and PayPal. The chief executive of Early Warning Services, which runs Zelle, told a Senate subcommittee in July that only 0.1% of the transactions on Zelle involved a scam or fraud; in 2023, the company said, that percentage was 0.05%. But Zelle operates at such a large scale — 120 million users, 2.9 billion transactions and $806 billion transferred in 2023, according to Early Warning Services — that even a tiny percentage of scam and fraud problems translates into a large number of users and dollars... From 2022 to 2023, Zelle cut the rate of scams by nearly 50% even as the volume of transactions grew 28%, resulting in less money scammed in 2023 than in 2022, said Ben Chance, the chief fraud risk management officer for Zelle. The company didn't disclose the amounts involved, but if 0.05% of the $806 billion transferred in 2023 involved scam or fraud, that would translate to $403 million.
Do Zelle users get reimbursed for scams? Only in certain cases, and this is where the banks that offer Zelle have drawn the most heat. If you use Zelle to pay a scammer, banks say, that's a payment you authorized, so they're not obliged under law to refund your money... Some banks, such as Bank of America, say they will put a freeze on transfers by a suspected scammer as soon as a report comes in, then investigate and, if the report is substantiated, seize and return the money. But that works only if the scam is reported right away, before the scammer has the chance to withdraw the funds — which many will do immediately, said Iskander Sanchez-Rola, director of innovation at the cybersecurity company Gen.
A J.D. Power survey this year found that 3% of the people who'd used Zelle said they had lost money to scammers, which was less than the average for peer-to-peer money transfer services such as Venmo, CashApp and PayPal. The chief executive of Early Warning Services, which runs Zelle, told a Senate subcommittee in July that only 0.1% of the transactions on Zelle involved a scam or fraud; in 2023, the company said, that percentage was 0.05%. But Zelle operates at such a large scale — 120 million users, 2.9 billion transactions and $806 billion transferred in 2023, according to Early Warning Services — that even a tiny percentage of scam and fraud problems translates into a large number of users and dollars... From 2022 to 2023, Zelle cut the rate of scams by nearly 50% even as the volume of transactions grew 28%, resulting in less money scammed in 2023 than in 2022, said Ben Chance, the chief fraud risk management officer for Zelle. The company didn't disclose the amounts involved, but if 0.05% of the $806 billion transferred in 2023 involved scam or fraud, that would translate to $403 million.
Do Zelle users get reimbursed for scams? Only in certain cases, and this is where the banks that offer Zelle have drawn the most heat. If you use Zelle to pay a scammer, banks say, that's a payment you authorized, so they're not obliged under law to refund your money... Some banks, such as Bank of America, say they will put a freeze on transfers by a suspected scammer as soon as a report comes in, then investigate and, if the report is substantiated, seize and return the money. But that works only if the scam is reported right away, before the scammer has the chance to withdraw the funds — which many will do immediately, said Iskander Sanchez-Rola, director of innovation at the cybersecurity company Gen.
Zelle? (Score:5, Informative)
It's a payment system owned by the American banks, Bank of America being one of the owners.
Re:Zelle? (Score:5, Informative)
It's a payment system owned by the American banks, Bank of America being one of the owners.
More specifically, it's owned by a private financial services company, Early Warning Systems*, which is owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo. Many other, like 1,600, banks / financial institutions are members.
[ * A not at all a dubious name for a financial services company own by several banks. /s ]
Adding that EWS has a new service called Paze [paze.com] for online checkout system where you can register your credit card with them (through your bank) and a Paze aware website can offer you the option of using that to provide tokenized CC information for the transaction -- like a dumbed-down virtual CC. Personally, I'm skeptical.
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This is the first I'm hearing of Paze. That actually sounds pretty nice.
Despite my best efforts, I've had my CC number snagged a couple of times over the years. Both would have been avoidab
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This is the first I'm hearing of Paze. That actually sounds pretty nice.
Despite my best efforts, I've had my CC number snagged a couple of times over the years. Both would have been avoidable if the merchant hadn't had a reusable credit card number.
Unfortunately, it's only available on Paze aware websites. At checkout, they check the email address you provide against the Paze database (containing the email you use at your bank) and if you have a Paze wallet, the site shows the option to use a Paze generate tokenized CC information to complete the transaction -- which is approved using a regular, unsecure SMS/text message to your phone. That last bit doesn't sit well with me.
Here's something else that irks me. Many of the partner banks may have al
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paze is there replacement for applepay tokens for transactions.
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>Personally, I'm skeptical.
I'm not particularly skeptical.
Zelle wasn't started up as a profit center, but to cut down on the screwiness of other systems by the for-profit middlemen.
You can think of Zelle as either an instantly clearing check, or as a small limit bank wire.
And I'll note that banks don't reimburse you if you pay a scammer with either check or wire, nor if you take out cash and pay a scammer.
I really don't think this is something calling for intervention. If banks are going to have to gua
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Personally, I'm skeptical.
I'm not particularly skeptical. ...
Zelle wasn't started up as a profit center,
I'm skeptical of Paze, not Zelle.
RDC (Score:2)
Does this include the money taken via the "refund scam" (or similar) where the victim gives a scammer access to their bank account via remote desktop, and they transfer the money directly out of their account?
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If you hand cash to a scammer... (Score:3)
... as long as he can get away from you, you're screwed - the bank's not gonna refund that either.
It seems like the same principle.
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To be clear - I don't think the victims should be SOL; it's just that I think this is a law enforcement problem, not a bank problem.
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' I think this is a law enforcement problem, not a bank problem.'
Exactly! Just like Nigerian Prince scams are not the email provider's problem.
You have to make it a bank problem (Score:2)
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This isn't a technical issue it's a social issue.
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Why should the onus be on anyone else but the person that fell for the scam to eat the loss? The bank didn't just send the money without asking, they were told to do so via a completely voluntary transaction that was initiated by their account holder.
It has nothing to do with "supporting big banks/corporations". It's called taking responsibility for your actions and accepting the consequences of your own stupid choices. There is literally a ton of information out there that people can use to educate themsel
Re: If you hand cash to a scammer... (Score:2)
Ignoring your attempts to bring partisan bullshit into a non-political discussion in a lame bid to appeal to emotion, the fact remains that people should accept responsibility for their choices and the consequences that arise as a result of those choices. Expecting adults to act like responsible adults is not some earth shattering, offensive perspective.
You are literally advocating for socializing the losses that stupidity incurs by insisting that someone other than the responsible party that fell for the s
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Yes, but government's job is to privatize the gains and socialize the losses, so they will insist on a tx fee that you pay so dummies who fall for scams can get paid.
They will sell taking your money as compassionate.
And just to steelman, if you haven't been demaning that your schoolboard teach criticial thinking as a core subject maybe they should take your money.
But that's a poor argument because the fascist Rockefeller design of the government schools is to explicitly not teach critical thinking so you wo
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This is quite a muddled rant, sounds like a radio talk show.
Personally, I don't trust public schools to teach critical thinking *well* because they look at every subject, including critical thinking, through the lens of group-think ideology. If a viewpoint is not politically correct, it's not going to make it into the classroom.
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"the bank's not gonna refund that either."
-1, offtopic
The bank wasn't part of that transaction, so it's reasonable that they would not be part of the recovery.
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The difference is, Zelle is in a position to know (or find out) whether the recipient is a scammer, while cash is not.
Hate to mention it (Score:3)
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Humans have been using money for thousands of years. Let's hear your solution.
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Escrow (Score:2)
I think a decent compromise would be to have escrow for internet payments and instant only for NFC.
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And they want zero transaction fees, as well as insurance against fraud. Part of the transaction fee when using a card is basically paying for the insurance against fraud.
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Part of the transaction fee when using a card is basically paying for the insurance against fraud.
What the fuck? No it's not. That's not how it works at all. Not even close. When your card is used fraudulently, the banks can reach right back into the account it was paid to (i.e. the merchant's bank account) and they take it it back.
There's no insurance involved. The banks don't file a claim. The merchant might have some kind of specialized insurance that would cover it.. But that's not a given. The credit card issuer does not lose any money. Anybody that has a company that processes credit card
Re: Escrow (Score:2)
That is not exactly how it works. When you pay by credit card, the money does go into escrow until the payment is settled. Typically this is a few days for trusted merchants but could be longer on some transactions. Even so, you canâ(TM)t just take the money out and close the account at the end of the day.
Zelle, PayPal etc are peer-to-peer payments. They donâ(TM)t require you to put up the money to open a credit card account. They should act a bit more like an escrow in my opinion, but both have w
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> That's not how it works at all. Not even close. When
> your card is used fraudulently, the banks can reach
> right back into the account it was paid to (i.e. the
> merchant's bank account) and they take it it back.
That may not match the technical definition of "insurance" the way we think of it as practiced by the insurance industry of policies, premiums, actuaries, and all that. But one of the dictionary definitions of "insurance" is: "a thing providing protection against a possible eventuality
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hose protections are insurance in every way that matters.
Except the only way that actually matters... REALITY. You have consumer protections. i.e. Statutes that protect you. We don't call it insurance because it's not.. Words matter.. Definitions matter. We're not changing reality for you.
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> We don't call it insurance because it's not.. Words
> matter.. Definitions matter. We're not changing reality
> for you.
Words and definitions do matter. Perhaps you should try reading some and you don't appear so stupid:
https://www.merriam-webster.com/dictionary/insurance> [merriam-webster.com]
2
: a means of guaranteeing protection or safety
The contract is your insurance against price changes.
Frequent hand washing is good insurance against the common cold.
https://dictionary.cambridge.org/us/dictionary/english/insurance [cambridge.org]
something that protects against the possible damaging effects of something:
insurance against Households are stockpiling groceries as insurance against price rises.
insurance policy Many people are applying for overseas passports as an insurance policy in case of future chaos.
Owning gold was seen as an insurance against an unknown future.
https://www.dictionary.com/browse/insurance [dictionary.com]
any means of guaranteeing against loss or harm:
Taking vitamin C is viewed as an insurance against catching colds.
Words matter. Definitions matter. Words also have more than one, in this case several closely related, definition
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Except that's not what you were doing, you assclown. You implied a portion of the processing fees acted as some sort of a fucking premium.
Part of the transaction fee when using a card is basically paying for the insurance against fraud.
Pure goddamn bullshit and when called on it you DOUBLE-DOWN. The transactions fees play zero role in offsetting fraud because neither you nor the issuing back is ever exposed to financial liability. You didn't use the term "insurance" in the general sense. You used it exactly as I accused you of using it... A system whereby you pay a premium to gain coverage.
You're
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> Part of the transaction fee when using a card is
> basically paying for the insurance against fraud.
LOLWUT? You're going to try to put SOMEONE ELSE'S words in my mouth and use them to go all meathead and attack me on a point I NEVER made and then do your own little double-down by claiming that I'M the dishonest one here? Yeah, you can fuck right off with that bullshit.
> You're a dishonest piece of shit.
Pot, meet kettle.
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It's very convenient for money transfers between people I know and trust. I wouldn't use it any more casually then that. Certainly not with a business. That's what credit cards are for. Duh.
Maybe use cash to buy your drugs in the future...
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I think a decent compromise would be to have escrow for internet payments and instant only for NFC.
Yes we can't brook any delays with those bored apes!
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I think a decent compromise would be to have escrow for internet payments and instant only for NFC.
I don't use Zelle or anything similar, but I've read a few articles that mention the the possibility of Zelle implementing a short transaction delay, like the practical effect of using a check or CC (but shorter), to allow more time for people to report scam/fraud, but the concern from the banks is that may drive people to use a competing service like Venmo/Paypal offering immediate transactions. Those articles also mention that Zelle apparently does now implement a warning/confirmation screen for an init
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Sellers use paypal because buyers want it, escrow which is frozen only on a police report would for sellers still be a massive improvement over paypal. For buyers it would make no difference over no escrow.
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but I've read a few articles that mention the the possibility of Zelle implementing a short transaction delay, like the practical effect of using a check or CC (but shorter), to allow more time for people to report scam/fraud, but the concern from the banks is that may drive people to use a competing service like Venmo/Paypal offering immediate transactions.
Yeah. That's exactly what it would do. I use Zelle all the time. The whole point of it is the instant transfer of money. I don't use it for purchases. I use it to send money to people I already know. My girlfriend picks up dinner on the way home? I Zelle her the cost (I'm old school. I pay for the meals). Or maybe I ask one of my technicians to grab donuts on the way to work (it happens once in a while). I'll Zelle him/her the money. One tech forgot her gas card one day.. She had to fill-up out of pock
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All of those could have been done with NFC, which is less fraud sensitive than internet transfers.
It's a question of finding the right convenience/security balance. With Fednow most banks will offer instant bank transfers too, slightly more involved to initiate the transfer, but that's what makes it less convenient for fraud.
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If my friend needs gas and is across town...I really don't want to have to drive to my friend. May as well just bring them the fucking gas as well. Zell is only useful because it is free and instant. As soon as it's neither, I wouldn't use it.
It's great for transfer of money between trusted parties. No one should use it for a business. That's what a credit card is for.
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Take the instant out of it and I'm not going to use it. Venmo has instant transfers
Unless your bank account is nearly empty, verified instantly is good enough.
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This, 100%. Well said.
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>(I'm old school. I pay for the meals)
nah, just partway there.
Old school is you drive to pick her up, open the door for her, and place your coat on the ground if necessary to protect her shoes from getting dirty.
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nah, just partway there.
Old school is you drive to pick her up, open the door for her, and place your coat on the ground if necessary to protect her shoes from getting dirty.
I'm GenX... I do open the door for her.
Why should banks be held for authorized payment? (Score:4, Insightful)
If you use Zelle to pay a scammer, banks say, that's a payment you authorized, so they're not obliged under law to refund your money...
To be clear, this is about *properly authorized* payment, isn't it? Why the hell should banks be held responsible for you getting scammed?
This isn't the other "identity theft" scam that banks pull when *they* were scammed by someone pretending to be you, right? This is about you going through the proper channels to authorize the bank to pay the scammer, whatever channel being used isn't the problem.
Perhaps people should be more careful before authorizing payment to strangers, just like one would be careful before handing out wads of cash to a stranger?
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I think there should be a balance somewhere. Yes, people need to be personally responsible, but on the other hand, I've seen what lengths thieves will go to, to filch someone's Bitcoin wallet info, so even if someone does everything right, they may still be defrauded.
Maybe something like IBM's old ZTIC could be something useful, where it communicates to the bank on its own channel separate from a potentially compromised PC or phone, as a way to confirm a transaction, however the ZTIC device wouldn't be abl
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"*properly authorized* payment"
The bank itself gets to define "properly authorized" in this scenario, and thus the bank always finds that the bank has no liability.
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To be clear, this is about *properly authorized* payment, isn't it? Why the hell should banks be held responsible for you getting scammed?
Chargebacks are the law [chargebacks911.com]. They were not the banks' idea. They were the government's response to credit cards being used for fraud which the banks profit from by collecting transaction fees. Perhaps you can explain how Zelle is different?
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When I buy something from a stranger for delivery by mail, I use paypal. More fees but more protections.
Re: Why should banks be held for authorized paymen (Score:2)
They are profiting by having you as a customer. It's not charging you that makes them liable, it's profiting. They don't do anything for no reason. They also get information about your purchases that they can sell after pinky swear anonymizing.
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>Perhaps you can explain how Zelle is different?
start with the lack of transaction fees . . .
Just do what they did in the UK... (Score:5, Interesting)
In the UK they passed laws that make banks liable for losses due to scams (I don't know exactly how it works) but if the same laws were passed in the US, the banks (and Zelle as an entity) would have a huge incentive to do everything possible to stop the scams.
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In the UK they passed laws that make banks liable for losses due to scams (I don't know exactly how it works) but if the same laws were passed in the US, the banks (and Zelle as an entity) would have a huge incentive to do everything possible to stop the scams.
They just make it harder to send a bank transfer (faster payments). When I was buying a car my bank stopped me from sending 1 x £4000 so I sent them 4 x £1000 payments which got around the issue. I of course could have phoned my bank but that would have meant talking to someone and I fixed the issue on my own.
Scammers are just developing new ways of getting hapless OAPs to send them money, it might have stopped a few old biddies sending their entire savings away but I doubt it's stopped much
Re: Just do what they did in the UK... (Score:2)
In the US my bank restricted automatic push payments to $1,000 last year. This year I can automatically push up to $2,500 a day. To send $10,000 using our system, Zelle, would take 4 days.
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In the US my bank restricted automatic push payments to $1,000 last year. This year I can automatically push up to $2,500 a day. To send $10,000 using our system, Zelle, would take 4 days.
UK faster payments is £25,000 a day (About US$30,000), this can be increased by speaking to your bank about the transaction. The strange thing is, UK money laundering regulations requires all payments over £10,000 to be tracked, so typically you need to state why you're making that transaction. At exactly what point they'll require some interaction on a transaction outside those limits depends on the policies of each bank.
Independent regulation (Score:2)
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Depends on the transaction. Cash is arguably the best way to settle a transaction, and the simplest, needing no computers or online presence, but then comes the aspect of getting mugged, cash storage, and proving to a cop that pulled one over that the cash is actually theirs and not something to be seized.
Maybe in a parallel universe, some "good" people made a stablecoin whose purpose is not to just make immediate profit for them or be used for rug-pull scams, but to allow for anonymous, private transactio
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I've seen a lot of crime go both ways, from seller fraud (buyer expects an iPhone, gets a box full of tiles), to buyer fraud (seller ships a working iPhone, buyer swaps the iPhone out for a fake or a stolen, iCloud locked iPhone, then disputes the transaction.)
Problem is that this is a moving target. If seller fraud is focused on, then the criminals will shift to buyer fraud, and vice versa.
Probably the only real way to deal with this is to have multiple payment systems, and parties agree on something, or
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Cash has no way to tell you that a seller is fraudulent. Zelle does, and least in many cases.
Imagine that .. (Score:3)
Imagine that, a company owned by banks that doesn't have the protections of normal banking or credit cards.
Almost as if it was setup to skirt those protections like the gig economy did with employment protections.
You can reverse a Zelle payment (Score:2)
Zelle payments can't be reversed once they're sent,
While in most cases that is probably true, it's not true all the time. I was at a restaurant with friends and we needed to split the cost of something and I lacked enough small bills to pay the other people, so we agreed I could pay them by Zelle. One guy was with a credit union instead of a bank and he could not in the end get Zelle working, so Zelle allowed me to reverse the transfer since he never picked it up after a few days. But the real issue here is probably not whether Zelle can or can't be re
Still fascinated... (Score:2)
I don't understand why the US doesn't have something between Credit Cards and Bank Transfers that has 0.5% fees and an escrow functionality. Escrow has some costs, but nothing like the 2% (net) that credit cards charge.
Service Works as Advertised (Score:1)
Route all receipts via banks (Score:2)
This would also mean that every single retailer would not need your email address or phone number for sending re
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Opposite Problem (Score:2)
The Zelle scams I've heard about is in the opposite direction. You sell something, like on say, Facebook Marketplace.