US Banks Devising Plan to Reimburse Zelle Scam Victims

Seven of America’s largest banks are reportedly working on a plan to reimburse victims of scams on their payment network Zelle amid calls for greater oversight in the peer-to-peer payment sector.

JPMorgan Chase, Wells Fargo and Bank of America are among the banks holding talks on a system to refund customers — and each other — for illegitimate transfers, the Wall Street Journal (WSJ) reported Monday (Nov. 28), citing sources familiar with the matter.

The new rules could kick in as soon as early next year, the sources said, after the banks conduct tests to ensure the changes wouldn’t lead to a new wave of scams. The sources also told the WSJ that if the rules go into practice, the hundreds of financial institutions that use Zelle would need to agree to them or risk being ejected from the system.

PYMNTS reached out to each of the banks named in the report for comment, with Wells Fargo and JPMorgan referring us to Early Warning Services (EWS), which operates Zelle.

An EWS spokesperson said the company spends “significant time and resources” protecting customers, including working with financial institutions to “evolve and enhance our network-wide rules to enhance the value of Zelle for all consumers.”

“As a result, more than 99.9% of Zelle payments have been sent without any report of fraud or scams,” the EWS statement said.

According to the WSJ report, the plan would work like this: If banks conclude that a customer was duped into sending funds, the bank that holds the account where the money was sent would return the money to the victim’s bank. That person would get a refund from their bank.

Sources familiar with the matter said the new rules wouldn’t apply to customers who want refunds for goods or services they didn’t receive, or for customers who made mistaken payments due to a typo. However, these people still would not be eligible for refunds.

The news comes weeks after Sen. Elizabeth Warren (D-MA) issued a report showing that fraud could exceed $255 million this year, vastly outpacing the $90 million in fraud reported in 2020.

“Banks are not repaying the vast majority of cases where customers were fraudulently induced into making payments on Zelle,” Warren said, citing data from PNC, Bank of America, Truist, and U.S. Bank.

The data in the report shows that four banks reported 192,878 cases were fraudulently induced into making payments on Zelle involving over $213.8 million of payments in 2021 and the first half of 2022.