Fraud on payment apps like Zelle is increasing so much that federal authorities have begun investigating.
This week, the Consumer Financial Protection Bureau launched an investigation into JP Morgan, Bank of America and Wells Fargo – all part owners of Zelle – after Senator Richard Blumenthal wrote a letter to the agency.
The Senate Permanent Select Committee on Investigation found that the three banks’ refunds for transactions disputed by Zelle users fell from 62% in 2019 to 38% in 2023, Blumenthal said in the letter.
“PSI’s investigation of the three banks shows that they give their respective employees broad discretion to determine whether a disputed transaction is unauthorized and, in turn, whether a consumer is entitled to a refund,” the letter said.
Ben Chance, senior fraud risk manager at Zelle, told Fortune that the app is doing everything it can to minimize the risk of fraud. He also told the newspaper that the best way to prevent fraud on money-sharing apps is better user education, sensible policies and more resources for law enforcement.
“The real solution is to focus on the criminals who are committing these crimes via phone, SMS, email, digital marketplaces, social media platforms … and of course working with those platforms, as well as financial services providers and law enforcement agencies, to prosecute and take down those criminals,” Chance told the outlet.
But even for law enforcement, recovering money lost to fraud can be difficult. On August 2, Democrats in Congress introduced a bill that would provide greater reimbursement protections for people who lose money to fraud on peer-to-peer payment apps.
The Protecting Consumers from Payment Fraud Act, proposed by Representative Maxine Waters, Senators Richard Blumenthal and Elizabeth Warren, would increase the responsibility of financial institutions to assist consumers in resolving fraud disputes.
Consumers can be compensated for unauthorized transactions, according to existing Federal law, such as purchases on a stolen Credit card. However, it is much harder to get money back after it has been sent through Zelle or other payment apps.
If you accidentally send money to a scammer, the Federal Trade Commission recommends asking the company you’re sending the money through if there’s a way to get the money back. If you lose the money through a money transfer app, the agency recommends reporting the fraudulent transaction to the app’s parent company.
“If you linked the app to a credit or debit card, report the fraud to your credit card company or bank. Ask them to reverse the charge,” the FTC says.
Zelle did not immediately respond to Business Insider’s request for comment on Saturday.
