Zelle finally caves after years of refusing to refund scam victims

[underwater]

> Zelle has said that 99.9 percent of money transfers go through as users intended, without a fraud or scam report ... Zelle usage has grown significantly since its launch, from 247 million transactions in 2017 to 1.8 billion in 2021.

Their defense is that they only process two million fraudulent transactions a year?

[IG_Semmelweiss]

A big portion of them happening now thanks to chatgpt.

For example, my partner posted an item for sale in FB marketplace.

The buyer said she couldnt pick up item, but her brother would. She could pay via Zelle, all she needed was an email & phone # . None of that seemed weird, so my partner agreed.

The buyer then said she sent a Zelle payment. My partner got an email from "Zelle Pay" saying money was pending due to my partners account not being a business account.

Luckily, we know zelle and didnt fall for it. The sender was a Gmail account.

My partner must have been talking with a bot.

5 min later, another buyer showed up. She also could not pick up but her brother would. She was to pay via zelle.

Be careful with FB marketplace. It's a mess now.

[sib]

"Only two million reported fraudulent transactions per year" :)

[swatcoder]

That's the same defense used for all recent failings of Big Tech at scale: "Well, when you sell as many apples as we do, of course you'll sell a few billion rotten ones. You can't expect us to check them all at this volume!"

[Suppafly]

The flip side is that zelle has always been equivalent to handing someone cash. You wouldn't expect to get your cash back after you handed it to a scammer in real life. But since zelle feels like a credit card transaction, people expect there to be safeguards built in, despite being told all along that once you send the money it's gone.

It's like the people who used to abuse the friends/family policy on paypal to cut out paypals fees and then were surprised when they had no buyer/seller protection, when they had to click through several messages specifically telling them that.

[jacquesm]

Yes. VISA and MC are at many orders of magnitude above that in an absolute sense.

[Cody-99]

One of the main benefits of zelle was it couldn't be clawed back. Scams suck but paypal and other related apps have a major problem where the money gets clawed back after a legitimate transaction/deal is complete. Hopefully steps are taken to ensure this type of fraud doesn't become an issue.

[Analemma_]

In theory I like the idea of an instant-settlement irreversible payment service, but realistically I don't think such a thing can exist for long. Pretty much by its nature, it will attract more and more scams until anger and political pressure build up enough that it is forced to implement protections and clawbacks. "Delayed settlement with clawbacks" is a stable equilibrium in a way "instant settlement with no protection" is not.

[vkou]

Zelle could always place a high bar for clawbacks, like, say, requiring a police report.

[distortionfield]

There are always two error rates.

[dylan604]

Does an escrow based transaction help prevent scams. What does history have to shows us with SilkRoad as an example?

[tryptophan]

Yeah this was the only good thing about zelle...once you got money...you had it. Now there is all this nonsense about how your money could just disappear at anytime in the next 90 days and there is nothing you can do about it. Guess the feds really hated the idea of normal peasants having a way to transact with finality; something we obviously need to be "protected" from.

[pxmpxm]

RIP free money transfer is what that means - the service can't be both free and liable for people falling for scams.

[lxgr]

Where are you hearing this from? The article claims no such thing: It suggests that banks will attempt clawing back the money in case of disputes.

That obviously can't be the entire truth, though – unless there's some mechanism to arbitrate claims, it would effectively make Zelle unusable for many of its current uses.

[cgb223]

I was scammed out of a few grand in a moving scam a few years ago over Zelle, via my bank

Does this mean I can get that money back? Who do I talk to/where do I go to do so? My bank? Zelle itself?

[itake]

Are you able to sue them in small claims court? If not, why not?

[ceejayoz]

Absolutely not. The clawback mechanism will work on scales of a few days, weeks perhaps. Retroactive for years? No way in hell.

[jxi]

What was the scam?

[nneonneo]

Canada has had eTransfer for several years now, which is functionally the same as Zelle (irreversible, instant, free bank-to-bank transfers), but somehow I haven’t heard the same level of complaining about fraud. I wonder why that is?

[mschuster91]

Scammers focus on countries where they have already established ways of getting the money out. Indian callcenter scams are mostly focused on the US for that reason, here in Germany it's mostly Turkish callcenters if you go by police raid reports.

Another part of the reason is how "legacy" phone carriers operate... the US up until a year or two ago allowed pretty much everyone and their dog to spoof phone numbers using VoIP, which made life for scammers incredibly easy as they didn't need much of a local presence beyond some money mules. Here in Germany, it's way harder to get access to line trunks that allow caller ID spoofing, and on top of that we have strict regulations on what banks need to do to to verify customer identities so it's harder for scammers to open up bank accounts, and so our scammers have to rely on actual people picking up money from the scam victims (e.g. the "fake policeman" scam).

[BobaFloutist]

Probably because Canada has a tenth the population, a tenth the GDP, and I would assume considerably less than a tenth of the media dominance of the United States.

[lxgr]

This can obviously not be the entire fraud prevention mechanism:

> Zelle simply "implemented a mechanism that allows banks to claw back funds from the recipient's account and return them to the sender."

I'm curious to see what the prerequisites for such a clawback are, both on the side of the payer (a police report? a signed statement? a click in an app?) and the payee (what happens if the money isn't in their account anymore?).

[chatmasta]

It's possible there are no real protections to ensure a clawback is "legit," other than shifting the burden of verification from the customer to the bank. Now fraudsters need to convince the bank that a payment was invalid, compared to convincing a customer that an address is what they expected.

[bhewes]

Zelle is owned by Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo. They probably have enough data now to know what banks are backing zelle scammers and who in their own networks are scammers.

[throw7]

Zelle is ok for known people (face to face), friends, and family, but i don't trust using it for complete stranger's email or phone number.

I wonder if Zelle could be feeling competition from fednow?

[mixmastamyk]

How does one use fednow? I looked twice and haven’t found a bank implementing it.

[exabrial]

Zelle owes you nothing if you send money some place stupid.

If you’re selling items online, meet in person, pay cash. Simple as that.

[eclipticplane]

> CFPB may no longer be considering new protections, because Zelle's recent changes "have so far satisfied the agency."

At least codify what the banks agreed to implement -- otherwise they will just go back on this when it costs them too much money and they think no one is looking.

[lxgr]

As described in the article, this might just cost them nothing:

> Zelle simply "implemented a mechanism that allows banks to claw back funds from the recipient's account and return them to the sender."

I highly doubt that that's true, though. For one thing, this would trivially fail in case the recipient account has already cashed out the funds.

[donatj]

What is the actual mechanism of the scam? Just not providing goods or services paid for?

[the_svd_doctor]

Probably something like

(1) Scammer sends check / something like that, showing a larger than expected deposit

(2) Check is cached by victim

(3) Victim is asked to reimburse the difference using Zelle or other "irreversible" method (best being Bitcoin, I guess, but Zelle also works apprently..)

(4) Check bounces

(5) Victim looses the money send by Zelle

[brewdad]

Pretty much any scam you could think of. Previously, Zelle was like cash. Once it’s handed over it’s gone. Any recourse lies outside of Zelle. Now it sounds like you may be able to work with Zelle to get your cash back in some cases.

[cmurf]

Clawback. There's an innovation.

[sylvainkalache]

I hate Zelle; in South Florida, that's all the rage. No one wants to use Venmo or other more user-friendly apps.

[lotsofpulp]

I hate PayPal (Venmo). I see no reason to give an unnecessary middleman control of my funds, or see my transactions.

[lxgr]

Zelle's usability is entirely down to your bank's app. I've seen both atrocious and pretty usable integrations.

Other than that, Zelle has one huge advantage over the competition: The money is available in the recipient's bank account immediately. Venmo, Cash App etc. charge quite a bit of money for instant payouts.

[throwawaysleep]

People hate it for the same reason it can be used for scams. It is trivially refundable to someone if they complain, even if the transaction is legitimate.