Zelle Scam Spreads While Banks Avoid Aiding Victims

A scam involving the popular online payment portal Zelle is rapidly spreading. This issue is double-edged as victims first get duped by scammers, allowing access to their bank accounts. Then, as they watch these accounts drain, the financial institutions involved often avoid accountability and offer little assistance or support to resolve the issue.

The scam is highly effective, with criminals often stealing five-figure sums before victims realize what’s happening. With far-reaching potential and the number of consumers affected steadily growing, understanding what this scam is, how it works, and how you can reduce your risk are essential to anyone who uses Zelle.

Zelle Scam Explained

The current Zelle scam uses several tried-and-true fraud tactics to trick victims into providing access to their bank accounts.

It starts with a text message to the consumer pretending to be from their financial institution. This message states that there is suspected fraud associated with the account while asking if they have recently authorized a Zelle transaction. No matter the response to this text, it raises obvious alarms and puts the victim in an emotional state for the next level of the scam.

The scammers then call the victim directly, faking the phone number on caller ID and imitating a representative from their bank. With direct contact made, the victim gets a set of instructions to follow which ultimately exposes their personal information and allows the criminals to steal money from their accounts. These scammers tell the victim that a large Zelle transaction has been attempted from their account and ask for personal information such as passwords or PINs to resolve things. From there, they are directed to make a “reverse transfer” to fix the fake issue.

Once this information is provided, it doesn’t take a cybercrime expert to figure out what comes next. The thieves steal as much money as they can from the accounts in question while the victims watch helplessly, not knowing what is happening. It’s a smishing, spoofing, and bank imposter scam all rolled into one – and it’s proving to be highly effective.

The Scam in Action

A quick look at several examples of this scam in action helps to provide insight into what victims are experiencing and how successful the criminals have been in their efforts.

A woman in California lost around $18,500 from the Zelle scam. She was lured into giving out her personal information to a phony Bank of America representative after receiving a text message claiming fraud attempts occurred on her accounts. This money was just secured from a loan to help launch a new small business.

Another consumer lost $3,500 after receiving a text and immediate phone call from a spoofed Wells Fargo number. This victim stated that she felt the emotional response caused by the scammer, which made her react quickly before realizing it might be a fraud.

Banks and Zelle Offer Limited Support

Compounding the issue of losing large sums of money, victims are also dealing with a lack of help and support from their financial institutions and Zelle. It turns out that most banks and peer-to-peer payment apps classify this sort of criminal activity as a scam and not fraud. If you’re wondering what the difference is, so are all the victims asking for help in getting their money back.

Since scammers trick victims into authorizing the Zelle transactions, it is not considered a fraudulent activity in the eyes of financial institutions. That distinction allows banks to deny liability for the loss, leaving victims without any recourse for getting their money back. And Zelle also highlights the differences between fraud and scams on its website, stating that “even if you were tricked or persuaded… because you authorized the payment, you may not be able to get your money back.”

The regulatory status of Zelle transactions and associated banks is murky at best, which allows the financial institutions to deny reimbursement or assistance for what they deem “authorized transactions” from this or similar scams. Many victims have filed fraud claims, only to be rejected because of this not at all consumer-friendly loophole. Some people have gotten their money back by sending letters to the bank, police, and regulators, citing Regulation E under the Electronic Fund Transfer Act. And there are now potential class action lawsuits in the works to specifically assist victims of the Zelle scam.

Are You at Risk?

If you are one of the 100 million+ people who use Zelle, you are at risk of this scam. Most victims use large corporate financial institutions, including Bank of America, Wells Fargo, and US Bank. Scammers can get the information of who has a Zelle account through data breaches, so you are a target if your information has already been exposed.

How to Avoid the Scam

As with any smishing (text-based) or phone scam, being suspicious of any random alert can help you to avoid monetary loss and other consequences. If you receive such a text and phone call involved with this Zelle scam, don’t engage with the supposed representative, or provide any personal information. Hang up and call your bank’s customer service line directly to check for any real fraudulent or suspicious activity with your Zelle account.

Also, don’t trust the caller ID on your phone. It can be easily spoofed, and this bogus authentication via legitimate phone numbers is an integral aspect of scammers tricking victims. Banks will not typically ask customers to make transfers between accounts or request sensitive personal information out of the blue. Since the Zelle scam involves making transfers to “reverse the unauthorized payment,” that request on its own is another red flag for suspicious criminal activity.

Zelle is a fintech company owned by some of the largest banks in the US, including U.S. Bank, Wells Fargo, PNC Bank, Capital One, JPMorgan Chase, Truist, and Bank of America. The peer-to-peer lending service is registered under Early Warning Services, LLC, which is owned by the institutions just mentioned.

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