Fraud Is Flourishing on Zelle. The Banks Say It's Not Their Problem. (nytimes.com) 63
Zelle, the payments platform used by millions of customers, is a popular target of scammers. But banks have been reluctant to make fraud victims whole -- despite owning the system. From a report: Consumers love payment apps like Zelle because they're free, fast and convenient. Created in 2017 by America's largest banks to enable instant digital money transfers, Zelle comes embedded in banking apps and is now by far the country's most widely used money transfer service. Last year, people sent $490 billion through Zelle, compared with $230 billion through Venmo, its closest rival. Zelle's immediacy has also made it a favorite of fraudsters. Other types of bank transfers or transactions involving payment cards typically take at least a day to clear. But once crooks scare or trick victims into handing over money via Zelle, they can siphon away thousands of dollars in seconds. There's no way for customers -- and in many cases, the banks themselves -- to retrieve the money.
Nearly 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020, according to Javelin Strategy & Research, an industry consultant. "Organized crime is rampant," said John Buzzard, Javelin's lead fraud analyst. "A couple years ago, we were just starting to talk about it" on apps like Zelle and Venmo, Mr. Buzzard said. "Now, it's common and everywhere." The banks are aware of the widespread fraud on Zelle. When Mr. Faunce called Wells Fargo to report the crime, the customer service representative told him, "A lot of people are getting scammed on Zelle this way." Getting ripped off for $500 was "actually really good," Mr. Faunce said the rep told him, because "many people were getting hit for thousands of dollars."
Nearly 18 million Americans were defrauded through scams involving digital wallets and person-to-person payment apps in 2020, according to Javelin Strategy & Research, an industry consultant. "Organized crime is rampant," said John Buzzard, Javelin's lead fraud analyst. "A couple years ago, we were just starting to talk about it" on apps like Zelle and Venmo, Mr. Buzzard said. "Now, it's common and everywhere." The banks are aware of the widespread fraud on Zelle. When Mr. Faunce called Wells Fargo to report the crime, the customer service representative told him, "A lot of people are getting scammed on Zelle this way." Getting ripped off for $500 was "actually really good," Mr. Faunce said the rep told him, because "many people were getting hit for thousands of dollars."
Fraud on a major bank payment systems (Score:2)
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Don't do anything money related on your phone. No apps, no CC or DC registered in the store. It's convenient... until it isn't.
Re:Fraud on a major bank payment systems (Score:4, Insightful)
In TFA, person 1 who got scammed initiated the transfer himself. Person 2 got his phone physically stolen, and apparently hadn’t secured it - since the thief was able to access his wallet.
I’m not seeing how, in either case, the use of a phone was the real issue. Scammers have tricked people into giving them cash since time immemorial; and your cash can be stolen if someone else has physical access to it.
Not much sympathy (Score:2)
1. Everytime I use Zelle, it asks me, do you really know this person?, and I say yes, because I do not send money to people whose email addresses or phone numbers I do not know.
2. When I send Zelle $ through my phone, I do it via my browser on my bank's web site, not a stupid app. The browser does not save my password.
So far I have no concerns about getting scammed.
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Uhm, your bank's App is more secure than your bank's website on your phone. Apps can access FaceID, meaning you don't repeatedly type your password with somebody looking over you.
Re: Not much sympathy (Score:2)
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Oh, I'm using a popular third party app to reduce typing of passwords. Why are you asking?
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I actually had the bank help me with some potential fraud related to Zelle, though my situation was far simpler to address.
A few years back, I saw $100 suddenly appear in my checking account. Upon investigation, I determined that it had arrived via Zelle from a phone number I didn't recognize. Being an honest person, I wanted to return the money, but had I simply sent them $100 in return, Zelle's policies indicate that they are able to cancel the original transaction up to something like a week or a month a
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I actually had the bank help me with some potential fraud related to Zelle, though my situation was far simpler to address.
A few years back, I saw $100 suddenly appear in my checking account. Upon investigation, I determined that it had arrived via Zelle from a phone number I didn't recognize. Being an honest person, I wanted to return the money, but had I simply sent them $100 in return, Zelle's policies indicate that they are able to cancel the original transaction up to something like a week or a month after it appears in my account. They could wait for my $100 to land in their account, cancel the $100 they sent me, cash it all out, and then abscond with the funds. Zelle doesn't provide any apparent means for the recipient to cancel a transaction or refund money, so I could easily see a naive person sending $100 of their own money back without regard for the fact that the $100 they saw in their account wouldn't necessarily remain there.
In the end, I had to hop on the line with my bank to get it sorted out. It was the first time the chat agent had ever had to cancel a Zelle transaction initiated from the recipient's side, which he thought was pretty hilarious, but he agreed that he saw the potential for fraud and understood what was at stake.
It may have been back then but Zelle's current policy is
You can only cancel a payment if the recipient hasn’t yet enrolled with Zelle®. You can go to your activity page within the Zelle® experience, either within your mobile banking app or the Zelle® app, choose the payment you want to cancel, and then select “Cancel This Payment.”
If your recipient has already enrolled with Zelle®, the money is sent directly to your recipient’s bank account and cannot be cancel
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Two weeks, that's nothing.
Recently, it took me over 30 days to get a refund on a wire transfer that was refused by the destination bank. I had sent a trial wire transfer for a small amount, which was accepted and credited to the destination account. Then, a day or two later, after I had initiated the larger transaction, they emailed to say that they would not accept further wire transfers using that set of numbers. Instead any wire transfer had to go through 2 intermediary banks. My second wire transfer was
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It may have been back then but Zelle's current policy is
You can only cancel a payment if the recipient hasn’t yet enrolled with Zelle®. You can go to your activity page within the Zelle® experience, either within your mobile banking app or the Zelle® app, choose the payment you want to cancel, and then select “Cancel This Payment.”
If your recipient has already enrolled with Zelle®, the money is sent directly to your recipient’s bank account and cannot be canceled.
You've been Zelled [zellepay.com]
Interesting! Thanks for the link and the info. I distinctly remember reading something to the contrary back then, so I'm very glad to hear it's been changed in the years since, though I'd still want to confirm that there isn't something around that's functionally equivalent but with a different name (e.g. chargeback).
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That doesn't sound like Zelle - that sounds like the old Venmo scam.
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That doesn't sound like Zelle - that sounds like the old Venmo scam.
The core of the scam is actually decades old. It's a modern take on an old fashioned check cashing scam that takes advantage of the time gap between when a check hits an account and when a check fully clears with the ACH. Hand an honest person a check for something, say "oops, I wrote an extra zero and it's already in your account...can you pay me back the difference?", they cut you a check for the difference, you cash their check and cash out the account before ACH has a chance to bounce the original check
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Yeah, given that multiple people including yourself have said that's happened with Zelle... I believe you. I just didn't realize it was possible. Which is irritating, even though I'd never use Zelle except with someone I actually know (it's very useful for small stuff like splitting lunch checks - not that I've done much of that over the past two years!).
I knew that Venmo was easily manipulated like that because I've known multiple people who'd sold items and accepted Venmo payments, only to have those paym
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Based on some other replies, it sounds like they may have updated their policies since I encountered this situation, so they may actually be better than Venmo after all.
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So then why do they bother taking responsibility for other payment platforms, such as credit cards?
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> Of course the banks decline to take responsibility because that would cost them money.
So then why do they bother taking responsibility for other payment platforms, such as credit cards?
Because laws and regulations require them to cover credit card fraud.
Immediacy is a feature, not a bug (Score:3)
On Venmo, the lack of immediacy has benefitted scammers for years. Now, on Zelle, they’re complaining about the opposite. But cash has exactly the same issue.
Article is paywalled (Score:2)
Try this link instead [archive.org].
Zelle is cash .... so ? (Score:3)
There are so many places where I can see why people get angry with banks and their unwillingness to assist with fraud issues. The long-standing problem of using an ATM debit card to pay and getting scammed, only to find out it has no real protections (unlike if you used it as a credit card without providing a PIN code) would be one of them. Yes, the banks *usually* try to offer some level of recourse in these cases, but it's pretty much at their discretion and they'll take their sweet time investigating and closing the fraud cases for debit transactions.
But this Zelle situation sounds more like classic social engineering to me? I've used it to send money to my daughter and to pay back a few friends I owed for things, and was always happy with how quickly and easily it worked. It's like a "free wire transfer". I'd be worried if they found new security holes in it so people were authorizing transfers on your behalf that you never initiated, or something like that. But this is just like someone tricking a person into paying them cash and then the payee getting upset later that they got ripped off. Not sure it's the bank's problem, other that maybe educating users better about the risks.
You know what's worse? (Score:2)
Fraud and cons done with cash. It's extremely difficult to prove you were defrauded if you mailed someone a $20 bill, or if you paid for a car with an envelope of cash, or you get pulled into a con game where you help someone get a big payout at the casino, which they promise to split, by giving them a few hundred dollars "for the taxes or fees".
The traceability and cheapness of digital currency is why banks and governments want it so bad. And because banks get to write their own rules, they make it clear t
You fell for a scam, it's your fault (Score:1)
I'm sympathetic for people who fall for Zelle scams, but I don't understand why anyone thinks the banks should replace their lost money. The banks didn't pull the scam, and they don't have the stolen money. If somebody tricks you into walking into a bank branch and withdrawing $1000 cash and giving it to them, would you expect the bank to reimburse you? This just seems like an example of victim mentality and believing that anyone but you is responsible for your problems.
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Banks can reverse a lot of transactions a lot longer than you might think.
I sold a boat about 5 years ago. The first buyer gave me a $250 down payment mutually agreed as non-refundable for the privilege of taking it off the market and launching it for a test drive (a service which cost me real money). After the test drive, the guy got cold feet and told me he wasn't going to buy it. I had deposited his check more than week prior, but within 36 hours I had a message from the bank that the check had been c
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The problem is, "clawing back the money" (to use your phrase) is the way Venmo scams typically work. In my mind, not being able to do that is a feature.
US Bank ripped me off (Score:2)
The originating account said they were a fraud victim, So US Bank hit my account with $1400 in charges. Reversing the Zelle. Sending my account negative. I complained. US Bank would not even identify which Zelle transactions were said to be fraud. And wouldn’t tell me the account or even bank used. So I had little recourse. So I dropped US Bank. About 35 personal and business ac
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And that's a good thing (Score:1)
Getting ripped off for $500 was "actually really good," Mr. Faunce said the rep told him, because "many people were getting hit for thousands of dollars."
There's no Good here for most. For many that $500 could be crucial to their future. Good only because it re-affirms to the banks the people's ignorant trust in their systems, all in the name of convenience. Sad when you realize your deposits are an unsecured debt the banks owe you. Convenient alright. For the banks.
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If the bank is hacked or injures you financially through negligence, I would expect them to pay, but why should they reimburse you for money that they can't reclaim themselves, when you fell for a scam and gave someone money?
If you bought a PS5 from Walmart, left and then some guy on the street said "Hey, I'm the PS5 inspector - I need to check that to make sure it works" - you hand it over and he takes off, does Walmart owe you a replacement?
Honestly, I do sympathize with them, but people in general need t
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but why should they reimburse you for money that they can't reclaim themselves, when you fell for a scam and gave someone money?
Because they designed a purposefully and obviously flawed system, then encouraged their customer base to use it.
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It allows anyone to send money to anyone. Where is the flaw?
No signup as vendor (like with CC) needed to be able to receive money is supposed to be an advantage. Of course then, there is no need for the recipient of a transaction to through any vendor backgroundcheck.
Works as intended.
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>Because they designed a purposefully and obviously flawed system, then encouraged their customer base to use it.
Please detail the obvious flaws in the system. Please cite how they willfully designed these flaws into the system.
The first you should be able to do to in a snap since the flaws are so obvious. The second I suspect is beyond even your brilliance.
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You must be one of the developers of Zelle, it's the only explanation I can come up with for how dumb you are.
Obvious flaws:
Other payment platforms: Stripe, PayPal, Apple Pay, Google, Venmo. They all have the above and they generally work well.
Immediate Behavior? (Score:2)
Zelle is not immediate in my experience.
To transfer money from my WF account to my other, CreditUnion account, I can use Zelle, which takes about 4 days.
Or, I can write myself a paper-check at my desk, deposit the check via Mobile Phone App to the other account, and have the money in less than 24 hours.
I cannot understand why the Write-Yourself-a-Paper-Check method is faster than an online system.
But after reading this, I'm thankful that it is.
I will continue to use paper-checks for both security and speed.
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I cannot understand why the Write-Yourself-a-Paper-Check method is faster than an online system. But after reading this, I'm thankful that it is.
It's not, it's a feature of your CU (and many banks/CUs) that they make the funds available before the check properly clears. The bank is aware you're depositing the money (I'm guessing it's less than $500 typically) so they make these funds available rather than wait.
With Zelle, your CU doesn't know that money is coming from WF, so they have to wait for it to clear to make it available.
In reality, the CU doesn't get the money from WF for upwards of 5 business days.
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It's not, it's a feature of your CU (and many banks/CUs) that they make the funds available before the check properly clears. The bank is aware you're depositing the money (I'm guessing it's less than $500 typically) so they make these funds available rather than wait.
Every bank I've ever used has tracked balance vs. "balance available to withdraw today" separately... So you can't actually cash out on a freshly deposited check unless you already have sufficient "available" funds in that account to cover the eventuality that the check bounces.
What the hell(e) is Zelle? (Score:2)
I've never heard of it. Neither do I think that using 3rd party payment apps will ever be a good idea.
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Alternative to venmo
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But that’s the thing, this IS a 1st party feature provided by participating banks. That’s how it works instantly. It’s their answer to Venmo, Square Cash, etc.
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I've never heard of it. Neither do I think that using 3rd party payment apps will ever be a good idea.
I've seen banks pushing it. I guess it's a bank-created PayPal clone or something.
I just use PayPal. Never had a problem. But then, I don't send money to scammers.
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I've never heard of it. Neither do I think that using 3rd party payment apps will ever be a good idea.
The thing is, 3rd party payment is basically a necessity in the USA where banks for years have cashed in on the lack of regulation thanks to high transfer fees and lack of immediate transfer.
When PayPal first came out I was completely confused. I didn't understand what problem it thought it was solving and had zero use case for it in Australia. It was quite some time before I learnt that the American banking system is an utter shitshow.
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What alternative do you think is a good idea? Cash? Checks?
Every method of payment has its own kinds of security flaws.
You gotta pay for protection (Score:3)
Well guess what, this is that. Zelle is free, and unprotected. Your choice.
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People don't like Paypal because they steal your money without recourse.
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False convictions are unfortunately part of having a justice system, too
ok you really went off on a tangent there. We were talking about payment systems, not whether may flies die after a day.
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ok, but don't keep money in your PayPal account.
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People hate paypal because they charge a few percent and sometimes insert themselves into the transaction, or won't let you move the money out for a while.
Well guess what, this is that. Zelle is free, and unprotected. Your choice.
A better question is... why is a third party payment system required in the first place. In most countries you can send direct from bank to bank with a branch code (also called a BSB) and an account number. Whilst this doesn't grant you any extra protection against social engineering beyond allowing the bank to block known criminal accounts, it does let you know who you are sending the money to and that it is with a registered and regulated financial institution.
Even people in 3rd world countries can do
Oh really? (Score:1)
There, FTFY.
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So... smart customers love payment methods that are expensive, slow, and inconvenient?
Banks should not be responsible for stupidity... (Score:2)
If somebody really gives money to some Saudi prince so they can get thousands of dollars (or more) back, or if they purchase a time machine or some other stupid thing, banks should not be responsible for paying for their stupidity.
I'm sorry, but at some point each person must be held responsible for doing stupid things, I should not be responsible for helping to make them whole again.
Anecdotal (Score:2)
Uh, the rep told him? That is the evidence? One cherry-picked incident, out of how many overall transactions? How does it compare to overall percent of people being scammed generally in cash, and previous methods? Get me numbers, statistics, instead of some BS about how your cousin's ex-girlfriend's roommate's dog's previous owner's grandpa's friend got scammed. At least if you are gonna lie have the decency to do it with actual credibly verifiable statistics man. I mean, maybe this shit is happening, maybe
CSR (Score:2)
Is the CSR the right person to know the extent of this scam? Of course the CSR is going to think many people are being scammed, he might be going by the fact that he is busy all day. But then, maybe he is part of a small team, heck maybe he is the only guy on it. So out of millions of transactions, he gets all the scam ones. He is going to think man this shit happens all the time, when actually only a tiny fraction of the transactions are scams. If there are one billion transactions in a day, out of which 1
The finality is a feature (Score:3)
IMHO, like a bank transfer, bitcoin, or cash, the finality is a FEATURE. It's designed to be used in person-to-person transactions where the power balance is about equal and not in merchant to consumer transactions (where the power + trust balance is asymmetric and centralized consumer protections make sense).
Imagine trying to sell a widget on craigslist, etc. You meet up with the other person, hand over the widget, they pay you, and you both go your separate ways. A payment scheme which can easily be reversed after-the-fact makes no sense in such transactions, because then person B can end up with the money+widget and person A has no recourse.
In other words, this feature-set is supposed to replace cash transactions NOT credit card transactions. You should treat Zelle like cash. When you hit send, that money is gone forever the exact same way a wad of cash you handed to a scammer would be gone forever.
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I'm curious, what specific insecurities do you find in Zelle? I use Zelle regularly and don't see anything especially insecure, compared to alternative methods of payment.
Funny name (Score:2)
We use Revolut over here. I haven't heard anyone getting scammed over it yet.
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Now I feel cheated that Zelle doesn't give me the option of making payment in cabbages.