Blog: Report: Banks Resist Refunds for Unauthorized Zelle Payments – PYMNTS.com

A slew of regulatory issues and new methods of stealing money from peoples’ bank accounts are changing how banks handle fraud and theft claims, The New York Times reported Monday (June 20).

The backdrop to all this is the ubiquity of services like Zelle, Venmo and Cash App in the world of transferring money from one person to another. Those apps, with their ease, have also become very popular among scammers and thieves.

The report referred to a case in which a man was robbed at gunpoint and the thief took his iPhone and passcode.

The thief reportedly took more than $8,000 from the man’s account. After that, his bank, Capital One, said it wouldn’t refund more than $250, as it didn’t see evidence the rest had been stolen.

Banks have said they shouldn’t have to refund customers who inadvertently made a transaction to a scammer on their own — but they’ve also been reluctant to refund customers who got stolen from, which might be illegal because of a federal rule from 1978 called Regulation E.

Regulation E, the report noted, makes it so banks have to make clients whole if their money is stolen via an electronic payment another person has initiated. However, this was written before payment apps existed. That saw the Consumer Financial Protection Bureau (CFPB) issuing guidelines saying the law covered all person-to-person (P2P) online payments, making any unauthorized transaction the responsibility of the bank.

The Times report said there are still instances where people are denied their money back by banks — though this could be changing as more banks begin abiding by the new CFPB rules.

Zelle is the most popular payments app and is owned by an Arizona company, Early Warning Services, which is owned by seven banks: Bank of America, Capital One, J.P. Morgan Chase, PNC, Truist, U.S. Bank and Wells Fargo. However, there are 1,600 banks and credit unions offering Zelle, all of which have their own security settings and policies.

Representatives have said fraud cases like the ones the Times piece described are a small amount of the total activity on Zelle. But, the Times report cited a report from Aite-Novarica Group adviser Shirley Inscoe, which said in a survey of 1,400 people, a quarter of respondents whose accounts had been illegally accessed said Zelle had been used to access their account.

PYMNTS recently wrote that Wells Fargo and Zelle are facing a lawsuit over allegedly violating the Electronic Fund Transfer Act and California’s Unfair Competition Law.

Read more: Wells Fargo Facing Class-Action Lawsuit Over Alleged Zelle Scams

The Kazerouni Law Group reportedly filed the suit for a Seattle resident who said he’d been the victim of a scam targeting Wells Fargo customers using Zelle.

The scammers reportedly stole $7,500 from the victim through mimicking a Wells Fargo customer service agent and asking him to send money, which he did.

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