Criminals use Zelle’s bank payment service to trick unsuspecting consumers.
Created by major banks, Zelle offers easy electronic payments, but poses serious security risks.
Continued fraud could hamper the bank’s efforts to expand Zelle into retail payments.
The Zelle payment service has become one of the most popular online money transfer methods. More than 100 million people use our free payments app to send money directly between bank accounts. Although the service is free, simple, and supported by major US banks, its immediate and irreversible transactions have made it a popular tool for scammers.
The story of Zelle users losing thousands of dollars to money transfer scams continues to be reported in breaking news every week.
In a letter dated April 26, Senator Elizabeth Warren and Senator Robert Menendez, members of the Senate Banking Committee, told Zelle’s parent company Early Warning Services about the extent to which the Zelle scam allows and what the company is taking to grow. I asked about the steps. To protect consumers and help users recover lost money “
Criticism of the emergence of Zelle scams and lack of security protection could thwart plans to use Zelle as a retail payment system. According to the Wall Street Journal, Bank of America and Wells Fargo want to expand Zelle’s payment options to include in-store shopping, while fellow owner JP Morgan Chase wants to focus on consumer protection first. Read on to learn how Zelle works, how criminals use it to trick consumers, and what to do if you fall into the Zelle scam.
What is Zelle and how does it work?
Zelle is a peer-to-peer payment service created by a consortium of major US banks including Bank of America, Chase, Capital One, and Wells Fargo. It charges no fees and works with nearly 1,500 banks and credit unions.
Designed to compete with other electronic payment services such as PayPal, Venmo, and Cash App, Zelle allows banks to process unofficial electronic money transfers without paying fees to third parties. Customers of banks that do not support Zelle can link their debit cards to the Zelle app. Last year, people sent $490 billion through Zelle, more than double Venmo’s $230 billion, The New York Times reported.
Zelle allows users to send money electronically to anyone. To transfer money, all you need is the recipient’s email address or US phone number. Transactions are completed instantly and are irreversible, making Zelle very attractive to criminals.
What’s Happening in the Zelle Scam?
Most of the scams reported to Zelle are pure social engineering, manipulating people with deceptive information and blackmail tactics. Scammers use false claims and statements to trick people into sending money unintentionally.
Common scams include emails or text messages asking users to confirm large amounts of fake Zelle payments. If the user replies that they did not authorize the transfer, the scammer will pretend to represent the bank and spoof the phone number of the financial institution. They instead direct callers to false instructions on how to cancel unauthorized claims that are throwing money at criminals.
Another common scam starts with a message claiming that your bank account has been hacked and that action must be taken immediately to fix the problem. When you answer, a scammer will call you and guide you through the transfer process, pretending to be a bank.
In addition to masquerading as a bank, scammers can also represent organizations such as utility companies. A woman in Lorraine, Ohio, faced threats of severing her connection with someone impersonating her electricity company, who demanded that she pay her Zelle to save her energy.
Former Major League Baseball player Keith Hernandez almost fell for the same utility scam. Targets of scammers claiming to represent Florida Power & Light:
Keith Hernandez tells the horrific story of nearly falling into a phishing scam. “Did you like it?” – Gary Cohen 🤣 pic.twitter.com/uyPfDVESMj
How can I protect myself from the Zelle scam?
Since most Zelle scams are socially designed, there are specific steps you can take to avoid them.
Do not respond to unsolicited text messages or emails. This advice applies to all suspected scams, not just those involving Zelle. If you receive a message that the bank has sent you, but have not contacted you first, do not reply. Instead, contact your financial institution directly to inquire about your account and potential security issues.
Assuming there are no problems with your account, you can also tell your bank that you have been scammed. If you have provided some personal information in a phishing attempt, we can work with your bank to protect your account.
Monitor “urgent” deadlines or requests from new recipients. If someone tells you that you need to take immediate action to solve your financial problems, the alarm should start to go off. Scammers use intimidation and urgency tactics to embarrass you and reduce your chances of thinking critically. Due to the utility scam in the section above, users have been told that they only have 30 minutes to act before powering down.
If you notice any suspicious behavior in which a person claiming to represent your bank, facility, or other organization is requesting immediate payment, hang up immediately and contact the company directly.
Also, be wary of requests from your bank, company or establishment for a new Zelle payment, especially if you have never paid through Zelle before. When you receive a payment request through Zelle, please contact the organization directly via the official website or phone number for more details.
Never give out your two-factor authentication password to anyone. Two-factor authentication (2FA), also known as multi-factor authentication, adds an extra layer of security to your account. Each time you log in to your account, you will receive an additional one-time password, typically by email or text message, lasting 30-60 seconds.
After you set up two-factor authentication (2FA) for your bank account, do not give out your one-time password to anyone. A criminal impersonating a bank or utility company can pressure you to give out your password for a number of reasons, but real institutions will never ask for it.
Use Zelle only when transferring to people or companies you know and trust. If you paid with Jelly, you may not be able to get a refund if you have been scammed by mistaken payment rights. Zelle offers a convenient and easy payment service, but limiting it to people you know personally reduces your risk of being scammed.
Last year, $490 billion was transferred through Zelle.
What should I do if I have been deceived by the Zelle scam?
First, immediately contact the financial institution that participated in the transaction. This allows the company to start an investigation as soon as possible. Because of Zelle’s immediate nature, you’ll want to respond quickly.
According to several regional reports, the bank was reluctant to make up for losses from the Zelle phishing scam because the transaction had already been approved by the account holder. Many of the new victims returned their money only after news reports of the scam put pressure on the banks.
In June 2021, the Consumer Financial Protection Agency clarified its position on banks.” stipulated that it must comply with the Electronic Fund Transfer Act of 1978, also known as Rule E. CFPB requires that “third parties fraudulently allow a consumer to share their account access information”, the consumer will receive a stolen debit card or other bank “access device” You should get the same protection you get from “.
The EFTA also includes great reasons to report the Zelle scam immediately. The law requires consumers to notify the bank of the loss or theft within two business days to obtain full protection.
Please note that the guidelines of the CFPB only protect consumers who are deceived into transferring money unknowingly.
If your bank denies compensation for the Zelle scam, the only thing you can do (besides promoting your story in local media) is to file a complaint with the CFPB.
For more information on how to protect yourself from scams, see Best Identity Theft and Surveillance Protection Services and learn about scams on the rise on social media.