Fraud and frauds are becoming increasingly common on the popular peer-to-peer payment site Zelle, according to a report released Monday by Sen. Elizabeth Warren’s office, providing the public with its first look at the rising difficulties at Zelle.
According to the research received by The Associated Press, the huge banks that own a portion of Zelle have been hesitant to reimburse clients who have been victims of fraud or scams.
For example, less than half of the money clients reported sending without authorization via Zelle was repaid.
In April, Warren, D-Massachusetts, a long-time critic of the big banks, requested data on Zelle fraud and scams from seven banks.
Four banks agreed. According to the research, the four banks recorded 192,878 cases for $213.8 million in 2021 and the first half of 2022 when customers claimed they were duped into making a payment. According to the analysis, these banks only reimbursed customers in about 3,500 cases.
Furthermore, in cases where cash was clearly removed from users’ accounts without authorization, only 47% of those amounts were ever repaid.
Individual bank data demonstrates a rise in fraud and scams. PNC Bank had 8,848 Zelle instances in 2020 and has over 12,300 cases this year.
In 2020, US Bank had 14,886 instances, and in 2021, it had 27,702 cases. Truist reported 9,455 occurrences of fraud and scams on Zelle in 2020, up from 22,045 the previous year.
Since its debut in June 2017, Zelle has grown in popularity as a tool for bank customers to send money to friends and relatives. According to Early Warning Systems, the company that manages Zelle, about $500 billion in payments were sent using Zelle in 2021.
The banking industry’s response to the growing popularity of peer-to-peer payment platforms such as PayPal, Venmo, and the Cash App is Zelle.
The service enables a bank to send money to someone instantly via their email or phone number, and the funds will be transferred from one bank account to another.
However, the program has gained popularity among scammers and criminals. Once the money is sent through Zelle, it needs the intervention of a bank to recover it.
The Electronic Fund Transfer Act requires banks to reimburse customers when funds are improperly withdrawn from their accounts without authorization.
Banks have argued that they refund clients in fraud, which occurs when a customer’s account is compromised in some way, and they make an unauthorized payment.
Banks are more hesitant to compensate consumers who claim to have been defrauded, stating that customers will claim to have been scammed more frequently, making it difficult to determine whether the client is telling the truth.
At a Congressional hearing last month featuring the CEOs of the central Wall Street banks that utilize and partly own Zelle, Warren asked each of the CEOs to reveal fraud and scam incidence data at their respective banks.
The seven are JPMorgan Chase, Wells Fargo, PNC Financial, Truist, Bank of America, and US Bank. Bank.
The hearing included a scenario in which Jamie Dimon, the CEO of JPMorgan Chase, apologized to Warren for not providing her with the necessary data and stated that she would have it by the end of the day.
According to Warren’s office, JPMorgan’s data on Zelle ultimately did not offer the data they were searching for.
Thus, JPMorgan’s information is not included in the report.
Wells Fargo was the other bank that did not disclose data to Warren’s office.
JPMorgan and Early Warning System have both declined to respond.