What you need to know about fraud before sending money with Zelle

Read my story about fraud controls at MagnifyMoney.com

There’s still a lot of interest in stories of fraud at Zelle, the banks’ Venmo-like instant money-moving app.  To review, sending money with Zelle isn’t much different from sending someone cash — there’s no buyer’s protection, and it’s essentially not possible to get your money back if something goes wrong.  In this regard, it’s little different from wiring money.  So criminals have flocked to the service.

Zelle says its working on changes and working to make consumers more aware about the nature of Zelle transactions.  Practically speaking, that means member banks must change their apps — preferably with a big, red warning whenever a new payee is added that says ‘Do you know this person? This transaction can’t be reversed. People can and do lose money.’  But that’s not happening overnight. When I use my Zelle app from USAA, there’s nothing to suggest how risky adding a new payee is.

So in the meantime, the burden is on consumers to know how Zelle works. It’s worth repeating: Zelle is convenient, but it’s a pretty unsafe way to move money, so act accordingly. Only use it to move small amounts to people you know very well.

The folks at MagnifyMoney.com asked me to write up a definitive “What you need to know about Zelle and fraud,” story, which you can read at this link.  Below is a short excerpt:


Is Zelle unsafe? Yes and no.

It’s no less safe than sticking cash in an envelope and giving it to someone. If that person is someone you know, and you physically hand them the cash, that’s pretty safe. If you stick that envelope in the mail and send it to someone you don’t know across the country, that’s pretty unsafe.

Zelle should basically be handled the same way. In other words, Zelle should only be used for low-dollar, very personal transactions.

Some of the consumer confusion around Zelle was created by the product’s aggressive marketing, which initially touted its security features. In one TV commercial, performer Daveed Diggs rapped, “You can send money safely cause that’s what it’s for / It’s backed by the banks so you know it’s secure.” Citing such ads, consumer Lauren Driver, who lost $2,000 with Zelle trying to buy Hamilton tickets, said she was surprised that she wasn’t covered for her incident.

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About Bob Sullivan 1255 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.

1 Comment

  1. Seems like the only thing Zelle should be liable for is to get the funds from one bank to the other.Why should they be responsible for what the receiver does with the funds or if you send to some dishonest receiver.Americans have become so “entitled”,believing govt or someone should protect them against any bad event.We end up with idiots and greedy people(AKA lawyers and their clients) suing for stock market loses and every medical procedure that doesn’t go 100% right.

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