In response to lawmaker pressure, the peer-to-peer payment service Zelle is reportedly refunding money lost by imposter scam victims. According to reports, banks using the Zelle network have been reversing fraudulent transfers initiated after June 30.
What was the imposter scam?
Lawmakers have raised concerns about so-called imposter scams for many months, urging banks to reimburse scam victims. Those customers were tricked into approving transfers by bad actors who impersonated banks, government employees, and other providers. As pressure mounted for banks to address the problem, some argued that such reimbursement was not required by federal law.
Critics argued that federal rules only required banks to make reimbursement for fraudulent transfers initiated by hackers. That interpretation meant that banks had no responsibility for refunding any transfer that was authorized by the customers.
With more than 100 million U.S. bank account customers reportedly using Zelle, fraud-related issues have become a major concern. In fact, an investigation by U.S. lawmakers concluded that the network’s users had suffered $440 million in losses in 2021. Additionally, the Federal Trade Commission says that impersonator scams resulted in $2.6 billion in losses in 2022.
New policies moving forward
Going forward, Zelle will rely on new policies that seek to prevent fraud on its network. Those policies include tools to flag unknown user transfers and systems to help banks seize fraudulently transferred funds from bad actors’ accounts.
While many have praised this belated decision to refund scam victims, many questions remain unanswered. Zelle’s parent company, Early Warning Services (EWS) has offered little information about the scope of the refund effort. For example, there has been no disclosure about how much money will be returned—or when. In addition, no information has been made available to help scam victims report fraud and request refunds.
Bank CEOs are scheduled to appear before the U.S. Senate for hearings in December. It’s almost certain that issues related to Zell and imposter scam victims will be a major source of discussion at that time.