Zelle, a payments app owned by seven of America’s largest banks, began reimbursing victims of imposter scams on the platform, according to an emailed statement from the company. Early Warning Services, the network operator of Zelle, says it will process refunds for scams dating back to June, which is a change of attitude by American bankers.
“As of June 30, 2023, our bank and credit union participants must reimburse consumers for qualifying imposter scams, like when a scammer impersonates a bank to trick a consumer into sending them money with Zelle,” said a spokesperson for Early Warning Services, LLC in an email to Gizmodo.
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Massachusetts lawmaker Elizabeth Warren told CEOs of American banks that “Zelle is not safe” in a 2022 Senate hearing due to reports of fraud on the platform. JPMorgan CEO Jamie Dimon told regulators during the hearing that it was unreasonable to make banks reimburse for every claim of fraud on the platform. The decision from Zelle, first reported by Reuters on Monday, does just that, however, as banks claim responsibility for the fraud on their free services.
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Zelle has always reimbursed certain victims, like if a hacker gets into your Zelle account and steals your money. This new reimbursement policy announced Monday, however, is a different category of fraud involving imposter scams, where users are duped into sending money to a fraudulent Zelle account claiming to be someone else. America’s largest banks have long tried to escape responsibility on this front.
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“You built the system, you profit from every transaction on the system and you tell people that it is safe. But when someone is defrauded, you claim that’s the customer’s problem,” said Elizabeth Warren at the 2022 Senate Banking Committee hearing.
The operator of Zelle is co-owned by Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo. Zelle is the payments platform of legacy finance in the United States, with 2,100 financial firms on the platform.
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Zelle’s data shows that 99.9% of its transactions are without any reported fraud or scams. The payments processing platform handled $629 billion worth of transactions in 2022, which means that up to $600 million could have been fraudulent. Impersonator fraud accounted for $2.6 billion in American losses in 2022, according to the Federal Trade Commission earlier in the year.
There’s no law making Zelle responsible for fulfilling these imposter refunds, but American banks felt enough pressure to take responsibility. U.S. regulators have also put pressure on big tech companies, like Apple and PayPal, who also have a meaningful presence in the payments processor space.
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