Update: CNBC reports that the Consumer Financial Protection Bureau has dismissed its lawsuit against the three lead banks, as the White House downsizes the consumer rights agency.
A high rate of Zelle scams originating from social media contacts has led JPMorgan Chase Bank to block payments made through social media networks and messaging apps. Chase said that Zelle was intended as a method of transferring money to family, friends, and other trusted contacts, and should never be used to make online purchases …
Zelle scams
Peer-to-peer payment apps like Zelle, Venmo, and Apple Pay Cash really took off during the pandemic, and are now a well-established way for people to make instant cash transfers between friends. However, scammers have been quick to take advantage of the relatively unregulated nature of these apps, with users initially having little recourse if they fell victim to fraudsters.
Zelle in particular was called out by the US Consumer Financial Protection Bureau (CFPB) for its very limited safeguards. That saw hundreds of thousands of users being scammed out of a collective $870M.
Zelle initially just shrugged at this, stating that it was the customer’s responsibility to ensure they were paying the right person and that the banks behind the app were not responsible. However, the CFPM initiated a lawsuit against the app’s operator and its owner banks, with legislation also threatened, leading to a limited change of policy late last year.
The 2,100 financial firms on Zelle, a peer-to-peer network owned by seven banks including JPMorgan Chase and Bank of America, began reversing transfers as of June 30 for customers duped into sending money to scammers claiming to be from a government agency, bank or existing service provider, said Early Warning Services (EWS), the banks’ company that owns Zelle.
This appears to mean that you will be reimbursed if the scammer pretends to be any government agency or any bank. However, it also suggests that if the scammer pretends to be a company, you’ll only get your money back if you are an existing customer of that company. Finally, it appears you’ll be out of luck if the scammer poses as an individual, such as a family member or friend.
BleepingComputer spotted a change to a change in Chase’s terms and conditions for Zelle payments, which comes into force next month.
“For your protection, Chase will not allow you to send Zelle payments identified as originating from contact through social media. We’ll decline those transactions because Zelle is meant to pay friends, family and other trusted recipients you know, not for others you meet on social media,” the bank warned.
“We may request information from you (for example, when you set up a payment or add a recipient) regarding your purpose of payment, the method of contact with your recipient, or other details we deem appropriate to assess whether your payment has elevated fraud or scam risk, or is an illegal, ineligible or improper payment.”
Chase won’t always be able to identify social media sales, but will block them where it can.
9to5Mac’s Take
The usual advice still applies. Never make a payment to anyone unless you were already expecting it, and be especially suspicious of any claimed urgency, like limited refund windows. Never use peer-to-peer payment apps to pay for goods and services: always use a credit card, so that consumer protections apply.
A comparison back in 2018 found that Apple Pay Cash offered the best combination of security and privacy among P2P payment apps.
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