Elizabeth Warren’s office.Įarly Warning Services touted its safety record in a statement this week, saying, “Tens of millions of consumers use Zelle without incident, with more than 99.9% of payments completed without any report of fraud or scam. bank or credit union account into the system.īusiness Fraud, scam cases increasing on Zelle, Senate report findsįraud and scams are on the rise on popular peer-to-peer payment service Zelle, according to a report issued by Sen. People can’t collect money through Zelle without enrolling their U.S. Still, Zelle wouldn’t have trouble figuring out where any disputed payments went. Credit card companies, by contrast, charge fees on every transaction. The process is different from using checks, credit cards and digital payment systems such as PayPal in at least two important ways.įirst, because the transfer goes swiftly from bank account to bank account, there is no entity holding onto the money while the transaction is verified or before it’s collected.Īnd second, because no fees are charged, Zelle isn’t building up a reserve to cover the fraud losses incurred by consumers on the platform. (Zelle leaves the fees up to its banking partners, and most of them don’t charge any, said Meghan Fintland, the company’s senior director of external communications.) The transfer takes a few minutes or less to complete, and in most cases, there are no fees paid by either the sender or the recipient. Last month it marked its fifth anniversary by announcing that it had handled more than 5 billion transactions involving $1.5 trillion.Ĭonsumers enroll in Zelle through one of more than 1,700 participating banks or through the Zelle app, then use it to send money directly from their bank account to another Zelle user’s bank account. Zelle is a peer-to-peer payment system operated by Early Warning Services, an Arizona tech company owned by Bank of America, Wells Fargo, JPMorgan Chase, PNC Bank, U.S. “The CFPB is working to prevent further harm, including by ensuring that financial institutions are living up to their investigation and error-resolution obligations.” “Reports and consumer complaints of payments scams have risen sharply, and financial fraud can be devastating for victims,” a CFPB spokesman said in response to an inquiry from The Times. The Consumer Financial Protection Bureau could try to settle this dispute, but it hasn’t done so - yet. But under a class-action lawsuit filed in Orange County, the plaintiff - a college student who says she was conned out of $2,150 - argues that when someone induces you to send them money as part of a scam, that person is initiating a transfer without your authorization. Under the law, an unauthorized transfer is when someone else initiates a transfer from your account without your approval.Īccording to Zelle and its partners, if you knowingly send cash to someone who’s taking your money under false pretenses, that’s an authorized transfer under the law. Some critics argue that Zelle and its banking partners are misinterpreting the federal Electronic Fund Transfer Act of 1978 and the regulation implementing it, which shield consumers from much of the liability for “unauthorized” transfers.
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