BALTIMORE — As of June 30, 2023, Zelle revised its rules to require financial institutions offering the peer-to-peer payment service to reimburse consumers for certain qualifying imposter scams. However, some fraud victims say they’re still being denied reimbursements, and federal lawmakers have sought answers on exactly who qualifies for these protections.
Zelle's operator, Early Warning Services, is co-owned by seven of the country's largest banks. Customers can easily send payments to friends and family using Zelle in their bank’s app. The transactions are nearly instantaneous as well as irreversible, making it a popular payment method for scammers.
Amalia Speedone recently fell victim to an imposter scam on the payment platform. In May, right around the time she received her tax return refund, she received a text purportedly from Bank of America.
“Hey, did you authorize $1,700 to David Band, or something like that. A text, it said from Bank of America,” said Speedone.
She replied “No” then pressed “1” to be connected to a representative. “And then they called me directly,” Speedone said.
At the time, Speedone didn't suspect this scam because there had been a fraudulent attempt on her card two days earlier. That charge had been flagged, and she figured Bank of America did it again.
“They said, it's two charges, a total of $3,400, so I panicked,” said Speedone. “They had my new address, they had my name, but they also were able to confirm the last four digits of my bank number.”
She then followed their instructions to initiate a Zelle transaction for the amount she believed had been taken, and to enter the claims number in the phone number line.
Right before transferring, she had a bad feeling. “I’m just a little nervous, I'm sorry,” she told the imposter.
“And they said, ‘Okay, well, we're just doing our job. And then, we're just going to close your account.’ I was like, oh, no, no, no, okay, fine, alright, I'll do that. And I accepted it. And as soon as I accepted it, they said, ‘Okay, look back at your balance and tell me what you see.’ And I look back on my balance, and the $3,452 was gone. And I said, what the, expletive, and the phone disconnected,” Speedone recalled.
She immediately called Bank of America.
“I literally had alerted them within about five to seven minutes. And they said, there's nothing that can be done,” said Speedone.
“Did you expect your bank to have stronger protections?” asked WMAR-2 News Mallory Sofastaii.
“Yes, absolutely. I was really shocked that it could happen so quickly,” Speedone replied.
Bank of America said they're unable to provide details due to client privacy, but they'll never ask a client to send money through Zelle to themselves or anyone, ever.
"When sending money using Zelle, clients also receive alerts they are required to review and approve before the transaction can be sent. Clients are encouraged to send money only to people they know, personally. If a client has questions after they receive calls or texts that appear to be from their bank, they should call the customer service number on their debit or credit card or review their transactions online to confirm any questionable or fraudulent inquiries."
“Time and again, Zelle and the big banks have said, 'They couldn’t help.' What they mean is, 'They wouldn’t help,'” said Chairman Richard Blumenthal, during a hearing on the prevalence of scams and fraud on Zelle in the U.S. Senate Permanent Subcommittee on Investigations on May 21.
Prior to that hearing, the Senate Committee on Banking, Housing and Urban Affairs held a hearing in February and in September 2022.
In response to pressure from federal lawmakers to better protect users, Early Warning Services announced a rule change.
In addition to reimbursing fraud victims whose accounts were used to send unauthorized transactions, they're reimbursing consumers tricked into sending money for certain qualifying impostor scams. A spokesperson adding that this consumer benefit is unique to Zelle and goes beyond legal and regulatory requirements.
However, a spokesperson would not provide WMAR-2 News with details on their reimbursement requirements or details about certain qualifying impostor scams, as they “don't want to give criminals a roadmap to commit more crime.”
On February 15, the Senate Banking Committee sent a list of questions to Zelle CEO Cameron Fowler on its reimbursement policy and requested a response by March 13.
WMAR-2 News requested a copy of these responses. The committee declined to share them with us.
Instead, a spokesperson emailed a statement that Committee Chairman Senator Sherrod Brown is continuing to work to ensure banks protect consumer's money from fraud and scams on their payment platforms, including by reimbursing customers who have been scammed.
“Banks could extend protections available to credit card users to Zelle transaction. They could allow customers to cancel or reverse a payment within a certain period of time. And they could, in effect, provide for better means of authentication—more friction and more time before a transaction is completed,” said Senator Blumenthal during the May hearing.
In an email to WMAR-2 News, a spokesperson from Early Warning, LLC, the network provider of Zelle®, said there were 2.9 billion Zelle transactions last year and “less than one tenth of one percent (.1%) of transactions are reported as fraud or scams, making Zelle one of the safest ways for consumers to pay people they know and trust.”
Speedone disagrees.
“It was very, very difficult and it was pretty traumatic. I do feel like I got virtually robbed not just by the actual person who did this, but then the fact that going to my bank, and being like, oh, well, is my money insured? And they're saying no. I'm still a consumer of yours, and why am I not protected?” Speedone asked.
WMAR-2 News has learned the U.S. Senate Permanent Subcommittee on Investigations plans to have another hearing about fraud concerns on Zelle's platform. Zelle’s CEO plus executives of Bank of America, JPMorgan Chase, and Wells Fargo are expected to testify. The hearing is scheduled for July 23 at 3:30 p.m.
“Year after year, Zelle and the banks that own it have failed to fully protect consumers from a growing threat of scams and fraud,” said Blumenthal. “The banks play ‘heads I win, tails you lose,’ as sophisticated scammers reap the benefits and consumers lose hard-earned money. At this hearing, Zelle and its three largest owner banks will finally answer for their unwillingness to make consumers whole when they fall victim to scams and fraud on Zelle. Instant payments must not mean instant losses for consumers.”
For more information on staying ahead of scammers and how to safely send and receive money on the payment platform, click here.