Consumers defrauded on Zelle are left high and dry by the banks that created it [pdf](warren.senate.gov)
warren.senate.gov
Consumers defrauded on Zelle are left high and dry by the banks that created it [pdf]
https://www.warren.senate.gov/imo/media/doc/ZELLE%20REPORT%20OCTOBER%202022.pdf
104 comments
It’s not a unique product and I worked for some bank startups in the early 2000s trying trying the thing.
And really this was the original idea for PayPal, dwolla, and lots of other digital cash payment systems.
And really this was the original idea for PayPal, dwolla, and lots of other digital cash payment systems.
Well, unlike PayPal with had been around for years, this was basically SWIFT for the US, which is kind of what Zelle is. From what I heard the big problem they faced was banks couldn't see how to monetize it.
Nearly all of which have pivoted from the free at point of use model since moving money for consumers at no cost is not often profitable.
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It's not just fraud you need to worry about. Here's a horror story for you. A few years back I was moving to a city for graduate school and needed to rent an apartment. A friend of mine toured the place and when we decided to rent the landlord asked if we could send him the security deposit using Zelle. I sent the deposit using his contact information, but he never received it.
I spent three weeks being passed back and forth by one bank being told I needed to speak with they other bank. They confirmed the money had been debited from my account, and confirmed it was not deposited in his, but nobody could tell me where the money went. I called Zelle multiple times, but all they would tell me is I needed to talk to the banks. Eventually after three weeks the money was quietly returned to my account with no explanation. After a bit more digging it appears my transaction triggered some fraud alert, but neither myself, the depositor, or either bank was notified of this.
To add insult to injury, during this process the people in charge of Zelle at my bank (which rhymes with Space) told me I was out of luck, because using the Zelle for any type of commercial transaction, including sending rent or security deposits, is against the terms of service. Looking back over the terms of service I found they were 100% correct.
I also found that Zelle is basically just a front-end for the existing ACH Direct Deposit system. It was created by a consortium of banks to compete with services like Venmo, but it at it's core a very different service. Venmo actually provides value by acting as a middle man: Venmo pays the recipient and collects the money from me. Zelle is just a way to send money directly to someone's checking account, but by using their email address or phone number instead of the account and routing number. This is why there is absolutely no recourse if anything goes wrong.
tl;dr do not ever use Zelle.
I spent three weeks being passed back and forth by one bank being told I needed to speak with they other bank. They confirmed the money had been debited from my account, and confirmed it was not deposited in his, but nobody could tell me where the money went. I called Zelle multiple times, but all they would tell me is I needed to talk to the banks. Eventually after three weeks the money was quietly returned to my account with no explanation. After a bit more digging it appears my transaction triggered some fraud alert, but neither myself, the depositor, or either bank was notified of this.
To add insult to injury, during this process the people in charge of Zelle at my bank (which rhymes with Space) told me I was out of luck, because using the Zelle for any type of commercial transaction, including sending rent or security deposits, is against the terms of service. Looking back over the terms of service I found they were 100% correct.
I also found that Zelle is basically just a front-end for the existing ACH Direct Deposit system. It was created by a consortium of banks to compete with services like Venmo, but it at it's core a very different service. Venmo actually provides value by acting as a middle man: Venmo pays the recipient and collects the money from me. Zelle is just a way to send money directly to someone's checking account, but by using their email address or phone number instead of the account and routing number. This is why there is absolutely no recourse if anything goes wrong.
tl;dr do not ever use Zelle.
I use Zelle all the time but with people I know. In fact, I can't remember where my check book is. I use Apple Pay all the time and I use an actual credit card about once a month. I use cash at one place, my taco truck of choice. And for the record, I've never touched bitcoin.
I've used PayPal and Venmo but I don't see their utility now and prefer Apple Pay.
All of these modern tools have their benefits and risks. I got burned for $40 on Zelle for a bike part. It was a $40 lesson.
I've used PayPal and Venmo but I don't see their utility now and prefer Apple Pay.
All of these modern tools have their benefits and risks. I got burned for $40 on Zelle for a bike part. It was a $40 lesson.
Agreed. I'm being hyperbolic when I say "do not ever use Zelle". I'm sure it's fine for passing money between friends. It's just that my version of the $40 lesson had a few more zeros on the end, and so stings a bit more.
For me I only use Venmo because that's what most people in social circles use. If they used Cash App or Apple Pay, I'd use those instead.
For me I only use Venmo because that's what most people in social circles use. If they used Cash App or Apple Pay, I'd use those instead.
lol checkbook, never had one
an employer’s direct deposit system, at a third party payroll company asked me for a voided check
I photoshopped my bank account and routing number on a stock image of a voided check
I get paid no problem. dumb process.
an employer’s direct deposit system, at a third party payroll company asked me for a voided check
I photoshopped my bank account and routing number on a stock image of a voided check
I get paid no problem. dumb process.
The point of a voided check is to prevent an issue in case you make a mistake manually recording your checking and routing numbers. It’s just an insurance policy- there’s really no reason not to do it.
yes its good that its just to help avoid user error instead of a real requirement, its bad that its masqueraded as a real requirement
It’s the easiest way to collect this info from most people. Getting a voided check will pass the info from people who don’t know the account number and routing number.
So it’s a good, real requirement because it works more frequently than any other alternatives.
So it’s a good, real requirement because it works more frequently than any other alternatives.
at least photoshop works and I don't have to go get a real check or order checkbooks
you know what works even better though? copy and paste. banking and technology illiterate wage slaves aren't the only ones that wind up with employment on occassion. payroll companies should offer multiple ways to get this done.
you know what works even better though? copy and paste. banking and technology illiterate wage slaves aren't the only ones that wind up with employment on occassion. payroll companies should offer multiple ways to get this done.
I worked an a site that did lots of ach transactions.
We had so many support tickets and errors from people making errors with entering routing and account numbers. Like 20% of all new payees enters bounced back or went to the wrong place. This worked out because new payees were rare since people typically pay the same people over and over.
I think HR does the cancelled check thing because the risk of error is so great and consequential. If people’s paycheck fails, that’s bad.
Walking people through cutting and pasting is harder than “give me a check.”
We had so many support tickets and errors from people making errors with entering routing and account numbers. Like 20% of all new payees enters bounced back or went to the wrong place. This worked out because new payees were rare since people typically pay the same people over and over.
I think HR does the cancelled check thing because the risk of error is so great and consequential. If people’s paycheck fails, that’s bad.
Walking people through cutting and pasting is harder than “give me a check.”
BTW, the solution for problems like this is complain to CFPB. Banks are afraid of CFPB and complaint will help solve problems.
Zelle has their own instant transfer system, and banks settle up overnight. My understanding is that there isn't ACH transaction for each transfer. Banks have less visibility into Zelle.
I hope FedNow kills Zelle. That should be better integrated. I think Venmo and other payment apps will stick around cause offer useful app.
Zelle has their own instant transfer system, and banks settle up overnight. My understanding is that there isn't ACH transaction for each transfer. Banks have less visibility into Zelle.
I hope FedNow kills Zelle. That should be better integrated. I think Venmo and other payment apps will stick around cause offer useful app.
You should write that up as an Op-Ed or contact some journalists to use it as part of a story.
You've got a lot of details in there that are definitely not common knowledge and would be of wide interest.
You've got a lot of details in there that are definitely not common knowledge and would be of wide interest.
Thanks, but I don't think I know enough about this to speak about it on the pubic record. My experience is based on remembering what random customer service reps said a few years ago and a bunch of reddit and forum posts. For example, I don't know if Zelle is literally just direct deposit--if it was how did they freeze my transaction for 3 weeks?
But I do get the sense that of all the payment platforms, Zelle is uniquely risky because of the way it's set up. I do with a journalist would look at it from that angle rather just from the "wow there's a lot of fraud here". It seems to be that the banks are incentivized just to get have this product out here to undercut the competition from digital payment platforms, but have absolutely no incentive to make it a functional or safe platform.
But I do get the sense that of all the payment platforms, Zelle is uniquely risky because of the way it's set up. I do with a journalist would look at it from that angle rather just from the "wow there's a lot of fraud here". It seems to be that the banks are incentivized just to get have this product out here to undercut the competition from digital payment platforms, but have absolutely no incentive to make it a functional or safe platform.
> I also found that Zelle is basically just a front-end for the existing ACH Direct Deposit system. [...]
>
> tl;dr do not ever use Zelle.
I can't figure out how to do ACH transfers to friends with my credit union, and I've been told Zelle is the solution for that. I guess I should stick to Venmo?
I can't figure out how to do ACH transfers to friends with my credit union, and I've been told Zelle is the solution for that. I guess I should stick to Venmo?
In the US, Zelle vs. Venmo is comparable to debit card vs. credit card. With Zelle/debit, you're basically mailing cash - it might get lost in transit, your money is gone right away. With Venmo/credit, there's a middleman with a big pile of cash that assumes the risk of money being in-flight, and usually eats fraud/errors as a cost of doing business in exchange for selling data about your spending to advertisers.
This exactly. And this is the reason that Venmo or Paypal need to charge fees for commercial transactions, because they're providing a service. What bugs me is that Zelle seems to be marketed as equivalent to those other digital payment platforms, but in reality it's very different.
It's not a front end for ACH. If it were ultimately ACH based, reversals would be no big deal. It'd be business as usual.
Yes
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I agree that at some point people need to take some responsibility for being scammed. However, it seems that Zelle is engineered in the perfect way to help scammers.
It is as though a committee of engineers and consultants sat together and said "How do we create the perfect vehicle for as many different types of scams as possible?"
It is as though a committee of engineers and consultants sat together and said "How do we create the perfect vehicle for as many different types of scams as possible?"
- Maybe! instant settlement
- No standardized audit trail
- No way to know who's really on the other side
- Send money into the void
- 2FA but not really - No standardized audit trail
- No way to know who's really on the other side
Ideally you know that because banks have KYC (Know Your Customer). And Zelle accounts must be populated by a bank. Individuals cannot just create a Zelle account. They must open an account with a bank -- and thereby undergo KYC -- who then creates their Zelle account.
Zelle is like cash. And like cash, it has the same problem.
Once you give it, you can't demand it back without courts.
Once you give it, you can't demand it back without courts.
The common Zelle scams I've heard of rely on how Zelle doesn't work like cash. It is possible to reverse Zelle payments, but only in very specific circumstances like compromised bank creds. So the scammer will manipulate you into giving a clean, irreversible payment in exchange for a dirty one that later gets reversed.
It's also a lot easier to send like $5K to some faceless entity with Zelle than with cash.
It's also a lot easier to send like $5K to some faceless entity with Zelle than with cash.
TIL! Tricky.
I assume everyone's familiar with the overpayment scam - it's probably the second most common cheque scam after simply passing bad cheques in the first place. You're accidentally paid too much, and are asked to return the remainder, or pass it on to someone else. Then the original cheque bounces and you're out product plus the remainder you passed along.
This version relies on banks being required to make "funds available" in a timeframe that's often shorter than how long it takes a cheque to actually clear - so you can dig yourself into a hole before the cheque finally bounces.
The zelle version is essentially the same thing. Someone "accidentally" sends you a sum, and being a nice, reasonable person, you return it. The problem is this isn't a rollback; you don't (can't) revert their transaction - you create a second transaction.
So when the source of the original transaction turns out to be fraudulent - and as the parent post says, fraudulent can be reverted, the house always wins - that first transaction is reverted. The second, where you "returned" their overpayment, is an entirely distinct transaction and needs to be fought separately. And it's a much harder fight to win, because it doesn't involve the house winning.
(And yes, this could be almost entirely mitigated by having a user-facing return/revert/refund function that undoes the original transaction instead of creating a second.)
This version relies on banks being required to make "funds available" in a timeframe that's often shorter than how long it takes a cheque to actually clear - so you can dig yourself into a hole before the cheque finally bounces.
The zelle version is essentially the same thing. Someone "accidentally" sends you a sum, and being a nice, reasonable person, you return it. The problem is this isn't a rollback; you don't (can't) revert their transaction - you create a second transaction.
So when the source of the original transaction turns out to be fraudulent - and as the parent post says, fraudulent can be reverted, the house always wins - that first transaction is reverted. The second, where you "returned" their overpayment, is an entirely distinct transaction and needs to be fought separately. And it's a much harder fight to win, because it doesn't involve the house winning.
(And yes, this could be almost entirely mitigated by having a user-facing return/revert/refund function that undoes the original transaction instead of creating a second.)
I've heard of that scam, and there are variants where you're not "undoing" a transaction but sending another one in some way. I think it needs to be made clear to customers that transactions are never final.
For anyone extolling the virtues of credit cards as the ultimate payer-friendly solution, my "exhibit A" is a vendor who charged my card and then put a freeze on actually shipping the product. Then they tried calling me while my phone didn't have a signal. Then they sent me an email saying their "verification" department couldn't reach me and to let them know when they can call. I replied telling them when they could call. They didn't call.
So I called them and sat on hold until someone finally picked up and told me that my order was flagged for some reason. After I confirmed my address (?), they seemed to confirm my order and then hung up. I still haven't gotten any confirmation that my item shipped yet.
In general I try to avoid ordering from Amazon, but if I had done that instead, I would have my item in my hands right now. Instead I had to waste my time playing phone tag, and I'm still wondering whether or when they'll actually ship my item. All because the vendor is apparently super-averse to credit card fraud and would rather push me to Amazon for future purchases than take whatever chance they'd be taking by sending me what they've already charged me for.
I'll have to be calling them again after the weekend to see if they've actually sent it. If they haven't, I'll tell them to cancel my order. And then I'll have to wait for them to refund the charges. If they don't, then I'll have to make another call to my bank to reverse the charges.
All the while, I still don't have my item. So if you don't pay for fraud in lost cash, you're definitely paying the overhead of vendors trying to avoid being "stuck holding the bag" by throwing arbitrary verification processes in your face, introducing delays and possibly leading to you needing to make multiple phone calls to resolve problems while being left without the thing you need.
So I called them and sat on hold until someone finally picked up and told me that my order was flagged for some reason. After I confirmed my address (?), they seemed to confirm my order and then hung up. I still haven't gotten any confirmation that my item shipped yet.
In general I try to avoid ordering from Amazon, but if I had done that instead, I would have my item in my hands right now. Instead I had to waste my time playing phone tag, and I'm still wondering whether or when they'll actually ship my item. All because the vendor is apparently super-averse to credit card fraud and would rather push me to Amazon for future purchases than take whatever chance they'd be taking by sending me what they've already charged me for.
I'll have to be calling them again after the weekend to see if they've actually sent it. If they haven't, I'll tell them to cancel my order. And then I'll have to wait for them to refund the charges. If they don't, then I'll have to make another call to my bank to reverse the charges.
All the while, I still don't have my item. So if you don't pay for fraud in lost cash, you're definitely paying the overhead of vendors trying to avoid being "stuck holding the bag" by throwing arbitrary verification processes in your face, introducing delays and possibly leading to you needing to make multiple phone calls to resolve problems while being left without the thing you need.
Now and then someone "hacks" my pathetic Javascript shopping cart to buy software for $1 instead of the usual price. I just send them an email with a balance due for the rest of the purchase price. Never hear from them again.
I accepted credit cards for many years until I was subjected to repeated "carding" attacks. The credit card processor blamed me for them, and was unable to tell me how to avoid such attacks. My solution was to not accept credit cards anymore.
I accepted credit cards for many years until I was subjected to repeated "carding" attacks. The credit card processor blamed me for them, and was unable to tell me how to avoid such attacks. My solution was to not accept credit cards anymore.
I, too, throw my baby out with my bathwater.
This is a really good story to highlight how good credit cards are for this situation. It’s totally reasonable for a vendor to freeze shipping via credit card purchase until they’ve received confirmation they will be paid. Basically modern escrow. Sorry you seem to have been caught up in a rare edge case, I’ve been in the same situation, but am super happy that the system makes 99% of payments totally frictionless unless occasionally I’m traveling abroad (or ordering abroad) and they have additional checks.
Long live the virtues of credit card payments!
Long live the virtues of credit card payments!
> It’s totally reasonable for a vendor to freeze shipping via credit card purchase until they’ve received confirmation they will be paid.
Exactly, but I come to the stellar opposite conclusion than you do in this scenario. I would much rather have used a payment mechanism with this vendor that immediately and finally transferred the funds so that I get my item more quickly without playing 3 days of phone tag. BTW, this is a large and established vendor that I trust. You have likely ordered something from them in the past.
Exactly, but I come to the stellar opposite conclusion than you do in this scenario. I would much rather have used a payment mechanism with this vendor that immediately and finally transferred the funds so that I get my item more quickly without playing 3 days of phone tag. BTW, this is a large and established vendor that I trust. You have likely ordered something from them in the past.
What part of that is the fault of using a credit card? I'm extra confused since Amazon came into this, where you distinctly are able to use credit cards?
With a credit card, you have the fallback of chargebacking. That's the benefit. You haven't gotten to that stage, although you certainly could have escalated to there by now.
With a credit card, you have the fallback of chargebacking. That's the benefit. You haven't gotten to that stage, although you certainly could have escalated to there by now.
> What part of that is the fault of using a credit card? I'm extra confused since Amazon came into this, where you distinctly are able to use credit cards?
Amazon, to my knowledge, will not charge you and then throw you into a "pending verification" quagmire.
But I would imagine most vendors don't want you ordering from Amazon. My point is that when I make an effort to order from another vendor when I could just order from Amazon, that vendor should introduce exactly zero friction to the process in order to be competitive.
Amazon, to my knowledge, will not charge you and then throw you into a "pending verification" quagmire.
But I would imagine most vendors don't want you ordering from Amazon. My point is that when I make an effort to order from another vendor when I could just order from Amazon, that vendor should introduce exactly zero friction to the process in order to be competitive.
Sure, and that's the merchant's issue? There are no lack of merchants that take credit cards without any further measures like that. And because you used a credit card, you can, and probably should, just file a chargeback and be done with it.
"Pay before the item ships" is nearly ubiquitous online even if you used Paypal or a debit card or whatever. Maybe if you'd used a method like that they'd not even be pretending to think about sending your item, vs just pocketing your cash.
I'm not sure "vendor is so paranoid about fraud because credit cards are too consumer friendly, thus credit cards aren't payer-friendly" follows from this story more than "vendor is just acting in bad faith."
I'm not sure "vendor is so paranoid about fraud because credit cards are too consumer friendly, thus credit cards aren't payer-friendly" follows from this story more than "vendor is just acting in bad faith."
"Consumers defrauded with cash are left high and dry by the Federal Reserve Bank that created it".
Did the Federal Reserve promise me that cash was always "safe, fast and convenient?" Are they getting a cut of every dollar I spend?
What part of Zelle isn't safe, fast, and convenient, that is actually scoped under Zelle's responsibilities? Zelle is for moving money from bank account A to bank account B - that's where its responsibilities end.
> Are they getting a cut of every dollar I spend?
They aren't.
> Are they getting a cut of every dollar I spend?
They aren't.
They get a cut after every dollar created.
I'm fine if a payment method is escrow-free and non-reversible, and I'm told that upfront. Oddly enough, that's like a rare luxury. Even Zelle is only half that: authorized payments are never reversed (i.e. they don't act as an escrow), but unauthorized ones (hacked account, etc) can be.
This is posted somewhere, but I also tested it myself. Previous landlord had stolen my security deposit. I went to my Chase branch and called several different numbers trying to reverse the final month's rent, which had been Zelle'd. After initially getting the half-truth that payments cannot be reversed, I found the right person who asked sternly if the payment was unauthorized, saying I could reverse it if it was. I had to say no. So no dice, I had to go sue the landlord instead.
This is posted somewhere, but I also tested it myself. Previous landlord had stolen my security deposit. I went to my Chase branch and called several different numbers trying to reverse the final month's rent, which had been Zelle'd. After initially getting the half-truth that payments cannot be reversed, I found the right person who asked sternly if the payment was unauthorized, saying I could reverse it if it was. I had to say no. So no dice, I had to go sue the landlord instead.
Oh really! Surprise Surprise! A new cash app, defrauds customers. I have not lost a cent because I do not trust any of them, except for Money Orders.
It's like cash. It's not the problem, scammers are.
Sounds to me some big banks and fintech got their lobbyists to stick it to Zelle.
Sounds to me some big banks and fintech got their lobbyists to stick it to Zelle.
Zelle is the big banks
What do the scams actually look like?
This happened to a friend of mine. She had listed a mattress with bed for sale on FB marketplace. Someone reached out and bought it and said would arrange pick up. They sent a screenshot of them Zelleing her. After a few minutes they reached out and told her they changed their mind because they cant pick it up and if they can Zelle them back. She did thinking it just hadn't hit her account yet. $1800 down the drain.
So she sent $1800 to someone without first seeing a pending transaction of any kind for a $1800 credit? Some things have to be learned the hard way if that's all it takes.
The solution for this is instant SMS narratives. If you do any kind of transaction, whether receiving or sending, you will get an SMS detailing the (completed) transaction.
Over time people will be conditioned to wait for the SMS before finishing any transaction
That is how UPI does it anyways
Over time people will be conditioned to wait for the SMS before finishing any transaction
That is how UPI does it anyways
No, the scammer stole someone’s credentials and the bank clawed back the payment. The bank can always reverse it at any point in the future. The consumer never, ever can.
This is Zelle's fault? A screenshot? Either you have low friction financial transactions or you bubble wrap the whole thing so people don't do incredibly stupid shit.
For one thing, they should make NEVER send any emails or SMS related to Zelle, and the app should say every time it starts "Zelle NEVER sends you an email or text message. Do everything from inside the app."
Theat would be a good start.
Theat would be a good start.
> NEVER send any emails or SMS related to Zelle, and the app should say every time it starts "Zelle NEVER sends you an email or text message. Do everything from inside the app."
is Zelle ever its own app?
I only use Zelle from my banks' apps, and banks use TFA with text messages all the time, including from the website, calls to support, and the bank app running on the phone. I'm not saying that TFA texts to your phone are 100% two-factor-valuable from an app on your same phone, but what you're talking about would be a major set of changes to the standard security model everybody follows.
is Zelle ever its own app?
I only use Zelle from my banks' apps, and banks use TFA with text messages all the time, including from the website, calls to support, and the bank app running on the phone. I'm not saying that TFA texts to your phone are 100% two-factor-valuable from an app on your same phone, but what you're talking about would be a major set of changes to the standard security model everybody follows.
Zelle does have their own app, and I have used it before.
The app is for folks using a domestic United States bank that isn't connected to Zelle. During registration, the Zelle app prompts you for your bank name, your mobile phone number, and email address. Those are all checked: If your bank isn't listed as a Zelle-supporting bank, and your phone number & email aren't already linked in the Zelle system, then you can use the app.
You also need to have a Visa- or MasterCard-based debit card. You did not need to provide your PIN. Zelle uses the same rails as VenMo's Instance Bank Transfer[0] payout option, so Zelle is subject to the same limitations.
IIRC, all logins required either mobile number or email, password, and SMS-based two-factor. I think your login lasted for maybe a day. I used the app in the days before app-based two-factor was a thing, so I don't know if they still use SMS-based two-factor today.
Sending and receiving money worked as advertised. In particular, money received would show up in my bank account fairly quickly (within a few hours, IIRC).
I was not charged any fees—for deposits or withdrawals—for using the Zelle app.
[0]: https://help.venmo.com/hc/en-us/articles/115015844068-Instan...
The app is for folks using a domestic United States bank that isn't connected to Zelle. During registration, the Zelle app prompts you for your bank name, your mobile phone number, and email address. Those are all checked: If your bank isn't listed as a Zelle-supporting bank, and your phone number & email aren't already linked in the Zelle system, then you can use the app.
You also need to have a Visa- or MasterCard-based debit card. You did not need to provide your PIN. Zelle uses the same rails as VenMo's Instance Bank Transfer[0] payout option, so Zelle is subject to the same limitations.
IIRC, all logins required either mobile number or email, password, and SMS-based two-factor. I think your login lasted for maybe a day. I used the app in the days before app-based two-factor was a thing, so I don't know if they still use SMS-based two-factor today.
Sending and receiving money worked as advertised. In particular, money received would show up in my bank account fairly quickly (within a few hours, IIRC).
I was not charged any fees—for deposits or withdrawals—for using the Zelle app.
[0]: https://help.venmo.com/hc/en-us/articles/115015844068-Instan...
Minor nit - those aren't Venmo's rails, but Visa/Mastercard's. Other vendors offer similar instant payout features.
Looks like one was released around 2019, I didn't even know. I can't find any specific dates mentioned or any press releases. Things around 2017 mention a Zelle app coming in the future, by 2019 articles are mentioning the Zelle app.
Due to Zelle's low transaction limits the amount lost in Zelle scams is hardly worth noting. Every bank already has a warning page before you use Zelle telling people what to look for in scams but based on this report it appears people are ignoring it. The losses from investment scams are much more worrying. I think all consumer bank accounts should require a mandatory two hour anti scam educational video before any outbound transfer > $10000 can be made.
That’s an elitist world view / statement. More than half of Americans have less than $500 in savings: https://www.gobankingrates.com/saving-money/savings-advice/n...
There is no way to do what the senators want without undermining the entire point of Zelle. If there are chargebacks then there needs to be a dispute resolution system and higher fees to compensate. These are authorized payments, banks are already obligated to reimburse all unauthorized payments.
I see other comments here saying it's intended to be digital cash, but as a programmer it makes no sense that we Zelle users cannot find out the identify and ultimate destination on the other side of the funds transfer - it's also annoying that the USA doesn't have a simple bank transfer system like many other countries do.
About 4 years ago, I got scammed when I sent a payment to a local preschool and later found out the preschool did not receive those funds. Someone was illicitly reading their emails and and also had control of a discarded email address the school no longer used and routed my Zelle payment to the bank account associated with that. The school suspected a former employee, but nothing ever came of it even though there was a police report and I also filed a complaint with the feds. A police officer called me several months later to say the case had ended up in his lap but he didn't see a way to do anything about it. Chase had multiple meetings with me, and they even knew which bank the funds had been transferred to, so it made no sense to me that there was nothing that could be done to retrieve the funds. Eventually the whole saga just ended with no resolution, and I figured if that person was so desperate they probably needed the money more than me.
Anyone have more insight into the underlying mechanics and why we can't confirm recipient identity/account as a Zelle user?
About 4 years ago, I got scammed when I sent a payment to a local preschool and later found out the preschool did not receive those funds. Someone was illicitly reading their emails and and also had control of a discarded email address the school no longer used and routed my Zelle payment to the bank account associated with that. The school suspected a former employee, but nothing ever came of it even though there was a police report and I also filed a complaint with the feds. A police officer called me several months later to say the case had ended up in his lap but he didn't see a way to do anything about it. Chase had multiple meetings with me, and they even knew which bank the funds had been transferred to, so it made no sense to me that there was nothing that could be done to retrieve the funds. Eventually the whole saga just ended with no resolution, and I figured if that person was so desperate they probably needed the money more than me.
Anyone have more insight into the underlying mechanics and why we can't confirm recipient identity/account as a Zelle user?
I don't think that one can't add security and verification, etc. I think the issue is those things are not free and it is supposed that adding them would just transform Zelle into something more akin to a credit card, which we already have.
In your example it seems you did actually send it to the school. The problem was an additional party also had access to school accounts, even if old. To me that's equivalent to a former employee having an illicit copy of keys to the till and stealing cash from it in the off hours. Police would probably treat that crime similarly.
At the end of the day the police have to prioritize their resources too. Technically they could "do" things. But is it worth the cost? When it comes to petty crimes it seems mostly the answer is no, and I have to agree. Even when I had my own phone pick pocketed. It sucks but life goes on.
In your example it seems you did actually send it to the school. The problem was an additional party also had access to school accounts, even if old. To me that's equivalent to a former employee having an illicit copy of keys to the till and stealing cash from it in the off hours. Police would probably treat that crime similarly.
At the end of the day the police have to prioritize their resources too. Technically they could "do" things. But is it worth the cost? When it comes to petty crimes it seems mostly the answer is no, and I have to agree. Even when I had my own phone pick pocketed. It sucks but life goes on.
I agree with you. It was just fascinating to me how in hindsight I couldn't access the full digital trail of those funds and other people wouldn't just reveal it to me on account of privacy. As other people have pointed out, the courts would be needed, because even though I showed them evidence with some screenshots, etc, I suppose I could have fabricated those to cause trouble for someone.
The cops don't care enough to do the paperwork and get the subpoenas. Next time suggest that the ex school employee is a terrorist. The KYC compliance and financial crime divisions won't get activated if you don't push the issue. Your average city cop just doesn't give enough of a damn. The paper trail and financial surveillance systems are there, you just have to make them pursue it.
You'd need to go through the legal process ie: get a court to issue a subpoena to Chase to get to the other bank, then to the other bank to get the customer info, then you sue the other customer.
I'm not sure if it would be you or the officer.
The banking system is supposed to know who everyone is, which is the point of the KYC regulations. Extracting that information out of them is work.
I'm not sure if it would be you or the officer.
The banking system is supposed to know who everyone is, which is the point of the KYC regulations. Extracting that information out of them is work.
Yeah, the ostensible reason is to be 'digital cash', but the more accurate reason is that it was created by the banks to shift the liability nexus to customers.
> ... it's also annoying that the USA doesn't have a simple bank transfer system like many other countries do.
FedNow is here and live.
FedNow is here and live.
FedNow is live, but not quite "here" since I can't personally send money to my neighbor with it yet. I'll be interested to see how the implementation looks to an end user such as myself, and how I can verify the identity/destination of the recipient. A little over a month ago, the Los Angeles Times said JPMorgan Chase would offer it soon. The JPMC website has a page about how people can implement it through their platform. However, when I log into my Chase account and search for fednow, this is what I get:
You asked: "fednow"
We're sorry but we need more details to give you a complete and accurate answer. Can you please rephrase your question?
https://www.jpmorgan.com/payments/solutions/fednow
https://www.latimes.com/business/story/2023-07-29/heres-now-...
https://www.frbservices.org/financial-services/fednow
You asked: "fednow"
We're sorry but we need more details to give you a complete and accurate answer. Can you please rephrase your question?
https://www.jpmorgan.com/payments/solutions/fednow
https://www.latimes.com/business/story/2023-07-29/heres-now-...
https://www.frbservices.org/financial-services/fednow
Lots of other countries offer direct to consumer rails. I think fednow is an absolute improvement over ACH but it’s still way behind some of the peer payment systems out there.
For a couple of initial test institutions in limited cases.
It's coming, but it's not really "here and live" fully yet.
It's coming, but it's not really "here and live" fully yet.
Not everywhere I guess but US Bank, Wells and JPMC have it [1]. Whole bunch more have RTP too. [2]
[1] https://www.frbservices.org/news/press-releases/072023-fedno...
[2] https://www.theclearinghouse.org/payment-systems/rtp
[1] https://www.frbservices.org/news/press-releases/072023-fedno...
[2] https://www.theclearinghouse.org/payment-systems/rtp
FedNow is not a service for end users. It's a service for banks.
My banks Zelle integration tells me the name of the other account and will specifically alert me if my Zelle "contact" name is different than the actual name on the account.
Yep, people are about to learn that those credit card fees actually buy you something.
Well several years ago I was a merchant, and every time I was victim of a fraud the Credit Card companies took their money from my payments, so those fee's did not cover the fraud at all. Not only was I out the product, I was also out the Money, and fee's a double whammy.
So I 100% disagree that the " credit card fees actually buy you something" because all they do it push the liability on to the merchant.
Visa and Mastercard is not covering the costs of fraud
So I 100% disagree that the " credit card fees actually buy you something" because all they do it push the liability on to the merchant.
Visa and Mastercard is not covering the costs of fraud
I think the general idea is credit cards take care of the card holders. They've certainly always have taken care of me. And merchants are supposed to take care of themselves by raising prices. The system is certainly not perfect but seems to mostly work.
Credit card fees, like insurance rates, are staggeringly high to cover all the crime and fraud. Just hope someday those companies don’t have to have their own law enforcement teams to go after the criminals who cause all that fraud and crime.
Most of the fee goes back to customers in the form of cash back and loyalty points. The networks only get some 0.3% ish, the rest goes to the issuing banks. That's why you can get a no-annual-fee 2% cash back card like the Citi Double Cash.
Debit cards that fall under the Durbin amendment to the Dodd-Frank act only charge 0.05% + $0.21
Debit cards that fall under the Durbin amendment to the Dodd-Frank act only charge 0.05% + $0.21
I don't think you are getting the Senate report's point. It's titled "How Consumers Defrauded on Zelle are Left High and Dry by the Banks that Created It"
When you say it would undermine the entire point of Zelle, I don't think that's the Senate's concern. I think the Senate's concern is that banks have created a money transfer system where they eschew their legal obligation to reimburse all unauthorized payments.
When you say it would undermine the entire point of Zelle, I don't think that's the Senate's concern. I think the Senate's concern is that banks have created a money transfer system where they eschew their legal obligation to reimburse all unauthorized payments.
But a payment as part of a fraud is often an nauthorized payment. This is what people don't realize. An authorized payment is one that you agreed to make; if you didn't get what you expected in return, that doesn't make the payment unauthorized.
Banks have no legal obligation to refund authorized payments, any more than they have obligations to refund people who took cash out of ATMs that they lost as part of a fraud.
Banks have no legal obligation to refund authorized payments, any more than they have obligations to refund people who took cash out of ATMs that they lost as part of a fraud.
The third bullet point on the first page says that the kind of fraud involved includes hacked accounts, which is the most classic type of unauthorized payment:
> Banks are not repaying customers who contest “unauthorized” Zelle payments – potentially violating federal law and CFPB rules. Zelle claims to have a “zero liability policy” for cases in which a bad actor gains access to a consumer’s Zelle account and uses it to make unauthorized payments, and the Electronic Fund Transfer Act (EFTA) and the Consumer Financial Protection Bureau’s (CFPB) “Regulation E” require that the banks repay customers when funds are illegally taken out of their account without authorization. But the data provided by the banks revealed that they reimbursed consumers for only 47% of the dollar amount of cases in which customers reported unauthorized payments on Zelle in 2021 and the first half of 2022.
> Banks are not repaying customers who contest “unauthorized” Zelle payments – potentially violating federal law and CFPB rules. Zelle claims to have a “zero liability policy” for cases in which a bad actor gains access to a consumer’s Zelle account and uses it to make unauthorized payments, and the Electronic Fund Transfer Act (EFTA) and the Consumer Financial Protection Bureau’s (CFPB) “Regulation E” require that the banks repay customers when funds are illegally taken out of their account without authorization. But the data provided by the banks revealed that they reimbursed consumers for only 47% of the dollar amount of cases in which customers reported unauthorized payments on Zelle in 2021 and the first half of 2022.
That number doesn't really tell you anything. I mean, 23% of people admit to committing friendly fraud via credit card chargebacks.
I'm not sure how that's actually a response to what I wrote. You are just disputing some categories of payments. It has nothing to do with the fact that the banks created a money transfer system where they eschew their legal obligations.
You'll have to be more specific about what you think their legal obligations are, then. As far as I'm aware, Regulation E requires banks to resolve errors appropriately, including unauthorized transfers. It does not require them to reverse arbitrary transfers, including ones where a fraud was perpetrated on their customer.
The report is explicit about it, I'm not sure why you are having difficulty with that. The report mentions, for example, when their accounts are hacked. That's just one example. Are you confused or are you just being obtuse? Someone else provided this exact answer to your identical question, upthread, prior to your asking me the same exact thing here again.
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The entire foundation of the US banking system is directly opposed to the claimed point of Zelle. Which is why any business that wants to convert the very "soft" money of the banking system into anything harder (eg cryptocurrency) inevitably needs to plan for and eat losses.
I'm somewhat sympathetic with your point as applied to fraudulently induced yet properly authorized payments. But it's utterly untenable when talking about unauthorized payments from someone else gaining access to a bank web interface and things like that - the security posture of banks and the security properties they expose to customers would have to change drastically to change that. And frankly assuming a system already has to deal with the second kind, dealing with the first carries basically the same burden.
I'm somewhat sympathetic with your point as applied to fraudulently induced yet properly authorized payments. But it's utterly untenable when talking about unauthorized payments from someone else gaining access to a bank web interface and things like that - the security posture of banks and the security properties they expose to customers would have to change drastically to change that. And frankly assuming a system already has to deal with the second kind, dealing with the first carries basically the same burden.
>>Higher fees to compensate
Really?
My bank was charging me $40/month just to have the service active to use it for occasional payments. I did not even realize that using it once "subscribed" me to the service, and fortunately was able to have months of bogus fees reversed.
Plus, it was not even actually all that convenient.
Just skim the report. It id damning.
One thing I learned a long time ago:
Never mistake a bank (or banker) for a friend, no matter how much they try to market their "friendliness". They may sometimes be necessary or even useful, but they are never your friend when it comes down to it.
Really?
My bank was charging me $40/month just to have the service active to use it for occasional payments. I did not even realize that using it once "subscribed" me to the service, and fortunately was able to have months of bogus fees reversed.
Plus, it was not even actually all that convenient.
Just skim the report. It id damning.
One thing I learned a long time ago:
Never mistake a bank (or banker) for a friend, no matter how much they try to market their "friendliness". They may sometimes be necessary or even useful, but they are never your friend when it comes down to it.
Whenever I see that it's always less than $x in a savings account which would include me. My net worth is high 6 figures and I have 50k ish of CC availability. So completely meaningless.
Edit: ok this one says it's a survey. But the results are that overall 58% don't have 500 in savings, but young people are actually doing better with only 39% of 18-24 year olds having less than 500. I'm not buying that.
Edit: ok this one says it's a survey. But the results are that overall 58% don't have 500 in savings, but young people are actually doing better with only 39% of 18-24 year olds having less than 500. I'm not buying that.
Low transaction limits? I regularly send $xx,xxx through zelle. Guess I got to up my game..
At which bank?
The highest available limit I can find is $5,000 per day, and that's limited to private clients and businesses:
https://www.gobankingrates.com/banking/mobile/zelle-limits/
Common limits vary between $500 and $2,500 as you can see.
I've never heard of anyone being able to use it to send $10K in a single transaction, so it would be very helpful to know where you can do that.
The highest available limit I can find is $5,000 per day, and that's limited to private clients and businesses:
https://www.gobankingrates.com/banking/mobile/zelle-limits/
Common limits vary between $500 and $2,500 as you can see.
I've never heard of anyone being able to use it to send $10K in a single transaction, so it would be very helpful to know where you can do that.
BofA/ML appears to have default limits of $15k/day for wealth management clients, and $25k/day for private bank clients, though there is a footnote stating that limits may actually be higher depending on the client. So at least for BofA/ML, they seem to essentially make higher transfer limits dependent on how much you're paying them in management fees.
My business account says: "Daily limit: instant delivery $7,000"
Do you have a business account? I have a $1500/day limit. Looking it up it seems like for popular banks it tops out at $2500/day, and some go as low as $500/day.
How privileged is it to say that a $1500 loss is "hardly worth noting"? Median take home pay is under $45k, so that's more than half of the median paycheck gone in a single mistake.
Obviously for an individual person it can be bad, bad enough to cause problems that take months to solve, but not lose your life savings and retirement bad. The report identifies a few hundred million dollars in losses but my point is more that for instance there are single "pig butchering" case losses in the millions (and totals in the billions, which is likely an underestimate because some people feel too ashamed to report to ic3.gov) and not much is being done in the way of educating people on how to avoid being swindled.
But the core concept is digital cash, so you HAVE to treat it as such.