Banks on the US payment app Zelle have gone through a major policy change and have decided to refund money to victims of imposter scams. The app will refund affected victims to address consumer protection concerns raised by US lawmakers and the federal consumer watchdog. Zelle-parent Early Warning Services(EWS) has confirmed that the app has already started reversing transfers as of June 30 for customers who were duped into sending money to scammers.These scammers were able to steal money from costumers by claiming to be from a government agency, bank or existing service provider. Zelle, a peer-to-peer network owned by seven banks includingJPMorgan Chase and Bank of America, supports 2,100 financial firms.
As per the country’s rule, banks need to reimburse customers for payments made without their authorisation, such as by hackers, but not when customers themselves make the transfer. In a statement to news agency Reuters, Ben Chance, chief fraud risk officer at EWS said that it is “well above existing legal and regulatory requirements.”
In August, Zelle introduced a new reimbursement benefit for “specific scam types.” The company didn’t provide specific details on its new imposter scam refund policy. Zelle was worried that doing so might encourage criminals to make false scam claims, the report noted.
What caught the eyes of US lawmakers
The latest policy marks a major shift from 2022. When lawmakers started worrying about rising scams, bankers, including JPMorgan CEO Jamie Dimon said that it was unreasonable for banks to refund transfers that customers were tricked into approving.
Eventually, Zelle became one of the largest peer-to-peer payments networks by total payments in the US after its launch in 2017. According to EWS, more than 100 million people, all with US bank accounts, have access to Zelle.
As per the country’s rule, banks need to reimburse customers for payments made without their authorisation, such as by hackers, but not when customers themselves make the transfer. In a statement to news agency Reuters, Ben Chance, chief fraud risk officer at EWS said that it is “well above existing legal and regulatory requirements.”
In August, Zelle introduced a new reimbursement benefit for “specific scam types.” The company didn’t provide specific details on its new imposter scam refund policy. Zelle was worried that doing so might encourage criminals to make false scam claims, the report noted.
What caught the eyes of US lawmakers
The latest policy marks a major shift from 2022. When lawmakers started worrying about rising scams, bankers, including JPMorgan CEO Jamie Dimon said that it was unreasonable for banks to refund transfers that customers were tricked into approving.
Eventually, Zelle became one of the largest peer-to-peer payments networks by total payments in the US after its launch in 2017. According to EWS, more than 100 million people, all with US bank accounts, have access to Zelle.
An earlier report from March 2022 highlighted that scams were flourishing on Zelle. This caught the attention of US lawmakers, including Senator Elizabeth Warren, who were frequently critical of big banks.
Warren and other lawmakers started an investigation that concluded Zelle users had lost nearly $440 million to all types of fraud in 2021. During a Senate hearing in 2022, Warren told Dimon and other bank CEOs that they had created a “perfect weapon” for criminals but weren’t supporting their customers.
FTC data shows that impersonator fraud was the most-reported scam in 2022 across all payment methods in the US which accounted for $2.6 billion in losses.