A recurring theme in banking and financial services so far in 2022 has been the rise in complaints from consumers about fraud involving Zelle, the payment service provided by Early Warning Services. In fact, the situation has gotten so out of hand that it was reported in April that two United States Senators – Elizabeth Warren of Massachusetts and Bob Menendez of New Jersey – had been questioning Zelle after finding the news about the rising cases of fraud to be “distributing”. One of the reasons these cases are gaining attention is because (thus far) financial services companies are not taking responsibility. What this means is that consumers that fall victim to Zelle fraud often have no recourse. Given the growing prevalence of Zelle in the United States, with nearly half a trillion dollars sent on the network in 2021, it is important for consumers to understand how fraud is being perpetuated as well as what they can do to protect themselves. In the below we provide some background information on Zelle, discuss the most common tactics being used in Zelle fraud and share some thoughts on how consumers can counteract the growing efforts of fraudsters.
Zelle Has Gained Ubiquity In The United States
Since its launch in 2017, Zelle has grown rapidly and is now one of the most popular ways for consumers to send money to one another in the United States. Not only is Zelle very fast (transactions get processed in minutes) but it is also completely free to both sender and recipient. These aspects of the payment service are in large part why it has rapidly gained popularity. There are currently thousands of financial institutions that partner with Zelle which means that their consumers’ bank accounts are linked to the Zelle network. The list of banks that use Zelle and credit unions that use Zelle is now well into the thousands and continues to grow each year. In 2021 alone there were 1.8 billion payments sent through the Zelle network which represents $490 billion of transferred funds. That payment number is most likely going to be even higher in 2022.
Common Types Of Zelle Fraud
The most common approach scammers are taking to perpetuate the fraud is to impersonate bank officials. There have been several examples of consumers getting contacted by people claiming to be representatives of their bank or credit union and then proceeding to solicit information from the consumer which in turn gives them access to the consumer’s bank accounts. Once they have access to the consumer’s bank account they can authorize the sending of Zelle payments. WSB-TV discussed a case where a consumer had $15,000 stolen from their Bank of America account using Zelle by a scammer that impersonated a bank official. In another example which ABC 7 News detailed, a woman received a text on her phone from someone alleging to be from Bank of America. This was followed by a phone call from someone alleging to be from Bank of America claiming that there had been several fraud attempts on her account. The scammers were able to get access to the consumer’s account and stole a total of $18,500.
These scams work through an approach that is quite sophisticated. The scammers send out text messages pretending to be from your financial institution notifying you about a suspicious bank transfer that’s been attempted and prompting you to respond “Yes” or “No” to indicate whether you recognize the transfer. However, anyone that simply responds will then receive a phone call from the scammer pretending to be a bank representative. The fake representative will then start the process of soliciting information to try to gain access to your bank account. This usually starts with the scammer – who is pretending to be from your bank – asking you for your bank login credentials to verify that you are the account owner before discussing the account details. Of course, by sharing your bank login credentials the scammer has succeeded and will be able to log into your bank account and initiate Zelle transfers.
In fact, some scammers have an even more clever tactic: they simply ask the consumer for their login name, and then after a few moments ask them to read back to them the passcode which was just sent to them via a text message. To the consumer this seems like a legitimate security protocol and the fact that the person on the phone did not ask for their password might increase their legitimacy. However, what is happening here is that the scammers have used the consumer’s username to start a “forgot my password” process by sending a text message with a passcode to the consumer. In short, the consumer has unknowingly provided access to their bank accounts to the scammers, who are now able to initiate Zelle transfers out of the account.
The irony is that scammers and fraudsters have turned one of the main advantages of Zelle – instant bank transfers – into a significant disadvantage that is now plaguing consumers. Because Zelle transfers get completed in minutes, once scammers have initiated fraudulent transfers to themselves, they have access to the funds very quickly and can withdraw the cash or transfer it to other accounts. All of this happens in minutes and so it is often too late for banks or credit unions to intervene.
How To Avoid Zelle Scams
It is a good idea to be extremely cautious about providing any information about your financial accounts over the phone especially when the phone call was initiated by someone else. If you call your bank or credit union using the phone numbers listed on their websites, in those situations you at least know that you are speaking to someone at your financial institution. However, anyone can call you pretending to be a representative so in those situations it is a good idea to terminate the call and call your bank at their listed number. If it was actually the bank trying to reach you the first time, it would be noted in the records. Zelle scams only work with the participation of consumers.
So the best way to avoid falling victim to these fraudulent scams is to minimize the possibility that you willfully participate by providing any information to unauthorized individuals. Always be vigilant to avoid frauds and scams like this one from Zelle!
