Banks using the Zelle payment app started to refund scam victims after concerns raised by US legal and consumer regulators. There are reportedly 2,100 financial firms on Zelle, which, as of 30 June, started reversing transfers made via this app.
Banks using the Zelle payment app started scam-based refunds
Owned by seven banks, including JPMorgan Chase (JMP.N), the Bank of America (BAC.N), and Wells Fargo (WFC), Zelle is a peer-to-peer payment system. Scammers, claiming to be official representatives, such as banks, agencies, or service providers, tricked Zelle users into transferring money to these quasi-bodies.
According to federal law, banks must reimburse their clients for unauthorised payments. However, existing regulations do not provide for such reimbursement if clients themselves transfer money.
Zelle indicated at the end of August that it will be implementing a new reimbursement benefit for specific types of scams. The company did not however provide details as it feared new imposter scams posing as fake scam claims.
This new policy denotes some major changes and implies it is unreasonable to expect banks to refund monies where customers were duped into fake transfers. However, after a report in the New York Times grabbed her attention, Senator Elizabeth Warren and other lawmakers started investigating the scam claims against Zelle.
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According to these probes, Zelle users lost roughly $440m in 2021 alone. Reuters reported that during a senate hearing last year, Senator Warren told Jamie Dimon, chief executive officer of JPMorgan Chase, that they produced the “perfect weapon” for scammers.
In 2022, impersonator fraud was the most prevalent type of fraud in the US, with an estimated $2.6bn in losses.
