Customers scammed on Zelle banking app have virtually no fraud protection, consumer advocates say

METRO ATLANTA — People use apps like Cash App, Venmo and Zelle every day, but consumer advocates tell Channel 2 Action News they are seeing a skyrocketing increase in these apps being used to take money directly from bank accounts.

Ashli Lincoln learned there is virtually no consumer protection for victims in this situation with one app in particular: Zelle.

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There is fraud protection in some cases, such as if money was withdrawn from your account from an ATM without your knowledge, but in cases where Zelle is used to commit fraud, victims are left having to deal with the loss.

One metro Atlanta woman Lincoln spoke with, who didn’t want to be identified, said thousands of dollars were swiped from her Chase bank account using the Zelle app.

“This is definitely fraudulent. This is a scam,” she said. “Honestly, it’s kind of gross.”

Last February, she said thieves posed as representatives with the bank’s fraud department.

“(They had) my Social Security number, so they had it all, so clearly this is my bank,” she said.

They claimed to help stop fraudulent activity on her account, but actually, they were trying to get her personal information to trick her into sending money from her Zelle account.

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Channel 2 consumer adviser Clark Howard said scams involving third-party cash payment apps have hit a fever pitch.

“The ugly, ugly, ugly, events involving Zelle keep going on and on and on,” Howard said. “The scams stealing your money through Zelle will keep morphing.”

This month, Howard warned consumers on his podcast that unlike checking, savings and credit union accounts, there are no fraud protections when it comes to apps like Zelle.

“It is far more dangerous to use than the already dangerous Venmo or Cash App,” Howard said. “Zelle is married at the hip to your bank account, and if a criminal is able to tap into money in your account through Zelle, the money is gone forever because the banks have been able to stop any regulatory action, or laws being passed that would give consumers normal protection.”

Howard said it’s happening more frequently because criminals know this.

Last spring, Natalie Lieberman had $15,000 stolen from her Bank of America account using her Zelle account.

“It made me feel so incredibly vulnerable and exposed,” she said.

Howard said they’re able to get your money easily. You’ll get a fraud alert text confirming a Zelle withdrawal from your account. Then, you’ll get a call from a number using spoofing technology that has the same the same caller ID as your bank.

In some cases, they’re getting personal information to access your Zelle account, and in others they’re having users send money directly to them.

“And the steps they’re doing are the opposite that are allowing a criminal to use Zelle to empty out all the money from your bank account,” Howard said.

Howard says the best protection a consumer can do is simply deactivate their Zelle accounts tied to their banks.

“Chase is putting up their hands and saying, ‘We can’t do anything,’ saying, ‘We can’t control Zelle and we can’t control if they do this,’” he said.

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Lincoln found out this isn’t just impacting Chase Bank customers, but several other banks as well.

She found Bank of America has the greatest number of victims related to this scam, and Wells Fargo is right behind them.

As of now, Bank of America is the only bank offering fraud protection in these cases.

Zelle sent Channel 2 Action News a statement, saying:

“To confirm, Zelle® does not hold the funds. We provide messaging between financial institutions. Our partner financial institutions handle all enrollment and payment-related issues with Zelle® in their mobile app.

“Informing and educating consumers continues to be a priority for us, and we will take every action necessary to protect our customers. As discussed, we partner with financial institutions, educational nonprofits, and the media to educate consumers around all forms of digital payment scams. Here is some background:

  1. EVERFI: Through a strategic partnership with EVERFI—the leading social impact education technology company—we offer free financial education to consumers through modern banking courses and consumer protection resources. In addition to the class, representatives from Zelle® present at teacher and administrator conferences throughout the year, helping educate teachers on fraud and bringing awareness to common scams targeting teens.
  2. Cybercrime Support Network: Partnership with this nonprofit includes several initiatives—marketing to grassroots— to spread awareness and educate consumers and small businesses on avoiding financial fraud and scams.
  3. VOX Media: As part of its ongoing Pay it Safe initiative, Zelle® partnered with Vox Media’s award-winning Explainer Studio to develop a new campaign called The Science Behind Scams. The campaign provides “edutaining” creative, including videos, audio, social, and an interactive quiz to help consumers learn more about scammers’ common tactics and ways to avoid falling for them.
  4. Zelle® Financial Education Center: A section on zellepay.com provides resources to financial education, safety, and other learning materials, including links to consumer advocacy resources from the FTC, CFPB, and other credible sources.

“As part of National Consumer Protection Week (March 2022), we embarked on a campaign—created in partnership with influencers, media, and experts in their field—to feature daily information on the most prevalent scams and help consumers avoid them.”

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