From this week’s inbox: “My wife was a victim of a Bank of America and Zelle scam, we lost $6,800 and the bank told me that there’s nothing they can do. Is this true? It blows my mind that our money is gone just like that. Is there really nothing we can do.”
FINALLY, I thought, in April, when Sen. Elizabeth Warren (D-Mass.) demanded that banks tell the world how much fraud consumers are enduring because of their Zelle instant payment platform. Regular readers know I’ve been writing about Zelle crime for years, and my inbox is constantly full of notes from desperate consumers who can’t believe their banks don’t back them when something goes horribly wrong. Victims get hacked and their accounts get drained; others are deceived by near-perfect scams and initiate transfers under false pretenses. Bank customer service agents frequently tell victims they are simply out of luck, often in direct contraction to regulators’ guidance.
How often does this happen? All I know is how much email I get about it, and the constant cascade of local news stories about it. I’d know more but banks have never been forthcoming. That’s why I was so excited by Warren’s demand letter in late April.
Unfortunately, the banks chose to ignore this direct request from the U.S. Senate. So a series of bank executives were hauled before a Senate committee yesterday, where they had to confess they’d ignored Warren’s request in public.
“I deeply apologize if we didn’t give you the numbers you asked for,” JP Morgan’s CEO Jaime Dimon said to Warren when she asked why the firm didn’t share fraud data with her office. He promised it would come at the end of the day. Odd, since he had more than four months to comply. Other executives did the same thing. Then Warren asked them all a direct question:
“We could fix this problem … if a customer is defrauded on Zelle and they come and complain to the bank, then the bank will make it good. Let’s do this one by a show of hands. Who is willing to make that commitment to your customers?”
Consumers have been conditioned by credit card fraud protections, and I’ve said before, banks initially marketed Zelle as a safer alternative to other instant payment apps “because it’s backed by the banks.” Like the reader above, most are shocked to find out that Zelle has no such safety net, making it a perfect tool for criminals. And as the email above shows, banks also do not implement the same aggressive algorithmic tripwires they do with credit and debit cards. If they did, surprise $3,400 transactions would set off all kinds of alarm bells and trigger big roadblocks. Why don’t they? Because banks aren’t on the hook for the losses.
It’s high time banks implement much stronger fraud protections on Zelle. Consumers should have easy redress when a criminal steals their money using these systems banks control. Not all Zelle fraud is the same, and one can certainly imagine scenarios where consumers do not deserve a refund. But this is true about credit card protections as well. The industry has a name for it: Friendly Fraud. Sometimes, consumers who actually buy things call the bank and claim it’s fraud, so they can get the thing they bought for free. But the existence of friendly fraud has not interfered with the strong consumer protections that credit card consumers enjoy, and obviously that industry has thrived, in part because consumers have great confidence in it.
While bank executives offered blank stares during yesterday’s hearing, it does appear that the sudden spotlight has moved the needle a bit, at least among Zelle security teams. I heard from a consumer today that he was just presented with a mandatory questionnaire by his bank. It required him to detail expected Zelle usage in the future — frequency, number and size of expected transactions in and out of his account. That’s a great first step. It’s unimaginable that banks didn’t think to do this three years ago when the constant cascade of complaints began. It’s also interesting that their algorithms don’t do this automagically.
For now, if you’re reading this story because you’ve been a victim of Zelle fraud, you can find more basic information at my Zelle fraud emergency FAQ page. The tl;dr: File a dispute with you bank, and if it’s rejected, make sure you fill out complaint forms with the Consumer Financial Protection Bureau and your state attorney general’s office. Even if your bank is giving you a hard no on dispute resolution, I think some future litigation might impact your rights. So keep that paperwork handy.
If you’ve been frustrated by an interaction you’ve had with Zelle, you might feel better watching Warren’s entire interaction with bank executives on the issue.