Zelle Fraud Lawsuit

The Zelle payment platform is facing backlash as fraud and scam incident reports continue to pile up on behalf of its users. Senator Elizabeth Warren released a report revealing the mounting claims and the lack of reimbursement and accountability from the banks that own the service, including Bank of America and JPMorgan Chase.

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The office of Senator Elizabeth Warren issued a report on October 3rd, 2022, revealing the increasing number of fraud and scam incident reports on bank-owned Zelle, a peer-to-peer payment service, and the lack of reimbursement from the big banks that own the platform.

The report, titled Facilitating Fraud, states that the banks are profiting from Zelle but “failing to make their customers whole for both authorized and unauthorized fraudulent activity on the platform, despite their claims that it is safe and that they have a ‘zero liability’ policy for fraud.”

According to data from Early Warning Services, LLC (EWS), Zelle users lost an estimated $440 million through frauds and scams in 2021. Sen. Warren’s investigation noted that “the banks that participate in the network appear not to have provided sufficient recourse to their customers.”

We will not stand for this at Levin & Perconti. Our civil litigation attorneys are skilled in fighting against large corporations that have done wrong to their consumers. If you have encountered a fraud or scam incident through Zelle that you were not appropriately warned about or reimbursed, you may have grounds to pursue compensation. Contact our law firm to get started today.

What is Zelle?

Zelle is the largest peer-to-peer payment system in the United States. Its transactions totaled $490 billion in 2021, a 59 percent increase from 2020. It processes more than CashApp and Venmo combined, which are two of its biggest and most well-known competitors.

Early Warning Systems, LLC (EWS), which operates the payment service, is a fintech company owned by seven of the largest banks in the United States:

  • Bank of America
  • Capital One
  • JPMorgan Chase
  • PNC Bank
  • Truist
  • Wells Fargo
  • U.S. Bank

EWS founded Zelle in 2017 as an initiative to create a payment service that could be integrated directly into the banks’ platforms. It markets Zelle as “the fast, safe, and easy way to send and receive money.”

Phone with the Zelle app

Key Findings of the Zelle Fraud Report

Senator Warren opened an investigation into EWS in April 2022 upon the emergence of several fraud reports. She, along with Senators Robert Menendez and Jack Reed, requested that EWS release their reports regarding frauds and scams through Zelle along with the company’s policies on compensating consumers.

Shortly after learning of the $440 million lost by Zelle users, the senators sent letters to each of the financial institutions in the partnership to gain more insight into the fraudulent activity, writing, “We seek to understand the extent to which Zelle allows fraud to flourish and the steps your company is taking to increase consumer protection and help users recover lost funds.”

The senators received no response.

In September 2022, Warren again requested that the banks share their information at the Committee on Banking, Housing, and Urban Affairs hearing. Of the seven, only four banks — Bank of America, PNC, U.S. Bank, and Truist — obliged.

Number of Fraud and Scam Claims

Senator Warren’s report called Zelle a “preferred tool of fraudsters and bad actors who abuse Zelle’s instantaneous, easy-to-exploit transfers to defraud consumers.”

The findings below support that notion.

  • Bank of America: fraud and scam claims increased from 49,652 to 131,509 in 2020 and 2021. An estimated 160,977 claims are expected in 2022.
  • PNC: fraud and scam claims tallied 8,848 in 2020 and 11,356 in 2021. Over 12,300 claims are expected in 2022.
  • Truist: fraud and scam claims reached 9,455 and 22,045 in 2020 and 2021, respectively. In 2022, nearly 20,000 claims are to be reported.
    U.S. Bank: fraud and scam claims totaled 14,886 in 2020 and 27,702 in 2021. Approximately 45,500 claims are to be reported in 2022.

This data represents a sharp increase in fraud and scam claims through the Zelle payment platform in just three years. JPMorgan Chase, Capital One, and Wells Fargo have yet to share their data.

In his opening statement at the September hearing, “Annual Oversight of the Nation’s Largest Banks,” U.S. Senator Sherrod Brown, Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, addressed the banks’ CEOs.

“All of your banks have promoted Zelle, the payment app that most of you own. You pushed this on customers — but you haven’t taken responsibility for the fraud that it’s perpetuated,” Sen. Brown said.

Monetary Value of Fraud and Scam Claims

In 2021 and the first half of 2022, scam claims from the four banks that reported their data accounted for more than $213.8 million. The data presented in the report shows that these banks are failing to reimburse their customers for fraudulent activity and scam incidents. Only 47 percent of the stolen funds were reimbursed.

Zelle’s policy stipulates that each participating institution is to “provide full refunds for Zelle transactions determined to be unauthorized within the meaning of the Electronic Fund Transfer Act (EFTA) and Regulation E.”

Under the Electronic Fund Transfer Act, banks must reimburse customers for unauthorized transactions — where funds are illegally taken out of an account without authorization. Regulation E, part of the EFTA, is a federal regulation that protects consumers against fraudulent and inaccurate electronic fund transfers to and from their bank accounts.

Despite the EFTA, data proved that banks were not reimbursing the amount they should have been for unauthorized payments. For example, PNC Bank reported over $10.6 million in unauthorized payments, yet only $1.46 million was refunded.

There is a reason for this. Banks are hesitant to cover transactions for customers who claim they have been scammed. They consider it an authorized transaction and are reluctant to believe every customer who claims to have been scammed.

According to the report, banks will likely not reimburse you if you fall victim to one of these sophisticated deceptions:

  • Spoofing: A bad actor’s use of a reputable institution’s name or use of a reputable institution’s branding
  • Me-to-Me: A bad actor’s use of a consumer’s contact information to disguise a payment to their account as a payment to the consumer’s account

The report concluded, “Given this uncertain landscape and the banks’ abdication of responsibility, regulatory clarity is needed to further protect Zelle users.”

Sending 20 dollars via the zelle mobile app

What should you do if you are a victim of Zelle fraud?

If you have been a victim of a Zelle fraud or scam, immediately dispute the transaction with your bank and report it to the proper authorities. Zelle users who access the service through their financial institution will need to report it to their customer support.

If you use the Zelle app, you can contact Zelle customer support directly. Experts also encourage you to report it to your banking institution or credit union.

You also have the option to report the fraudster or scammer to their banking institution or credit union or the FBI Internet Crime Complaint Center.

In the event your bank denies your claim for a Zelle fraud or scam incident, you may escalate it and file a complaint with the Consumer Financial Protection Bureau (CFPB).

You may also have grounds to file a lawsuit against the institution.

Can you file a lawsuit for bank fraud?

If a bank engages in fraudulent behavior, you may be eligible to file a civil lawsuit against the institution. In cases such as this, with many people suffering losses, a class action lawsuit will likely be pursued to hold the financial institutions accountable.

Is there a lawsuit against Zelle?

Several civil and class action lawsuits have been filed against the financial institutions that integrate Zelle on their platform or against the company itself. Some are still active, while others have been resolved.

The institutions named in the lawsuits include Bank of America, Capital One, JPMorgan Chase, Truist, Wells Fargo, and Early Warning Systems, LLC.

Payment sent and received in Zelle

Do you qualify to file a Zelle fraud lawsuit?

If a fraudster or scammer has stolen funds from you through Zelle and you were not properly informed about the risks of the platform or were refused reimbursement from the financial institution, you may qualify to file a lawsuit or join a class action lawsuit.

Zelle Fraud Lawsuits Claims

  • The financial institution failed to warn the consumer about the risks of using Zelle
  • The company (Zelle) did not do enough to protect its consumers from fraudulent activity
  • The financial institution failed to reimburse a consumer for fraudulent losses

To see if you qualify, please reach out to our civil litigation team today, who will assess your claim.

Contact Levin & Perconti Today

The investigations into Zelle’s frauds and scams are still underway, and, as reports of fraud and scams multiply, more lawsuits are expected to be filed against EWS and the negligent financial institutions that operate and market Zelle.

If you have questions about filing a Zelle fraud lawsuit, we can help. Contact our law firm today to schedule an initial consultation free of charge.

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