Scammers Easily Siphon your Money through Zelle

An angry man an screams into a telephone.

Instant payment apps have taken the world by storm over the last few years. Whether you’re paying back a close friend or transferring money to a pop-up shop vendor, peer-to-peer payment services allow individuals to make easy digital money transactions every day. Though convenient for simple transactions, these platforms have become a playground for scammers and con artists. Roughly 18 million Americans fell victim to scamming tactics in 2020 through trusted instant payment applications like Zelle. US Senators bring this issue to the Consumer Financial Protection Bureau’s feet in hopes of establishing protective measures.


Senator Elizabeth Warren, alongside other Senators, issued a letter to the Consumer Financial Protection Bureau (CFPB) in July 2022 to establish updated rules for instant payment applications. Peer-to-peer payment services, such as Zelle, have seen an uptake in scams without many customers receiving reimbursements for the millions of dollars lost.

Zelle's Operation

Zelle is one of few mainstream and convenient instant payment services, but its convenience does not negate the lack of sufficient protection that its parent institutions provide. Though these instant payment services are fairly new to the scene, the lack of proper regulations has allowed scammers to creatively con app users.

Customers have reported incidents of money being sent to outside or unknown users via Zelle, all without the customer’s authorization. Scammers also pretend to be bank representatives and trick unsuspecting customers into transferring funds to the scammers’ accounts. An investigation reported that in situations where it was clear funds were removed from a customer’s account without authorization, less than half of all money was ever reimbursed. And for those who were tricked into sending scammers the money themselves, Zelle owners and banks make it clear that it is not their problem.

Unlike peer-to-peer competitors like CashApp or Venmo, Zelle is backed by large banks. While the platform operates under Early Warning Services LLC (EWS), EWS is jointly owned by seven of the most influential banks in the United States, including JPMorgan Chase, Wells Fargo, PNC Bank and others. And although this enables banks to provide a trusted service through their internal banking systems, it also leaves room for lax regulations.

Senators Taking Action

At a Senate hearing on September 22, 2022, several CEOs were questioned on consumer protection issues, including this contentious topic revolving around Zelle. Senator Warren pressed the bank CEOs on the lack of protection or recourse available to customers.

Under the Electronic Fund Transfer Act (EFTA), banks are required to repay customers who were illegally defrauded. And while banks have provided reimbursement for fraud cases where an account has been compromised, they push back on folks who have been scammed, arguing that it becomes more difficult to discern who is being truthful.

Because the Banks are deflecting the responsibility of these claims to the customers, the CFPB plans to strengthen Regulation E, a set of rules in the EFTA that protects consumers when they make electronic fund transfers. While the current form of Regulation E covers erroneous and unauthorized transactions, the CFPB hopes to expand the liability asserted onto Banks and operators of these peer-to-peer transaction services. If scammers can so easily use a platform such as Zelle to con consumers out of their money, these consumers shouldn’t have to bear the brunt of the consequences.

How to Prevent Zelle Fraud

Customers should treat Zelle like they’re trading cash. A former employee acknowledges just how easy it is to lose money through Zelle; just a push of the button and your money is now in someone else’s digital hands. It is clear that banks are electing to pass on the responsibility to their customers without any repercussion to themselves or to the scammers. Here are a couple of ways consumers can protect themselves from falling victim to a scam on peer-to-peer payment platforms:

  • Be wary of texts: Many of these apps verify your identity and authorize your payment with just your phone number. So if someone sends you a text message saying your account has been hacked, raise your red flag. Delete the text, don’t engage with any links or attachments, and contact the bank or payment service yourself to address the issue.
  • Regulation E: Banks often deflect responsibility because they assume that customers don’t know their own rights or the rules that these banks should be following. Familiarizing yourself with Regulation E of the EFTA can provide some insight on the rules of electronic fund transfers. If you ever find yourself getting scammed on these platforms without your consent, address Regulation E when discussing your situation with the bank or service operator.
A person scans a code off a vendor's phone to access their instant payment service.
Be careful when sending money via peer-to-peer payment services. It's like giving someone $100, turning around, and walking away.

Scams on Zelle and other platforms aren’t slowing down now that the situation is out in the open. Many still suspect that peer-to-peer payment apps are wholly secure. While Senators and agencies work on stricter regulations for electronic fund transfers, customers are left to do their own due diligence when transferring funds. If you find yourself being scammed through these services, contact Shub Law today and stay updated on avenues you can take for recourse in the future. 





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