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When Customers Say Their Money Was Stolen on Zelle, Banks Often Refuse to Pay

Argelys Oriach was on his way home from a shopping trip one night in March when he was struck by a gun and robbed. The thief requested his iPhone and passcode. Oriach turned them over and ran away.

The next morning, Brooklyn-based Oriach said he discovered that a thief had used multiple money transfer apps, including Zelle, to withdraw $ 8,294 from Capital One’s bank account. He contacted Capital One and was fully hoping to refund him the cash stolen by the bank, as required by federal law. The bank refunded only $ 250, saying it couldn’t find any evidence that the rest of the money had been stolen. Oriach was stunned.

“I submitted a police report, identified the suspect in the precincts, and even testified at a grand jury,” he said. “But that didn’t seem to help me.”

After the New York Times asked Capital One about Mr. Oriac’s case, a bank representative said he had determined that there was a fraud and would repay him. “We have contacted our customers to apologize for the additional stress caused by this issue,” Capital One said in an email statement.

In recent years, payment apps such as Zelle, Venmo and Cash App have become the preferred way for millions of customers to transfer money from one person to another. Last year, people sent $ 490 billion to Zelle, the country’s most popular payment app, and $ 230 billion through its closest rival, Venmo.

However, for the same reasons that attracted customers to these apps (free, fast, convenient), they are more likely to be targeted by scammers and thieves. Banks claim that they don’t need to refund customers who mistakenly allow fraudsters to use their accounts, but they are also reluctant to refund money to customers like Oriach who have stolen money. Is often. It may be against the law.

A federal regulation called Regulation E in 1978 requires banks to complete their customers if money is stolen from their consumer accounts through electronic payments initiated by others, as in Oriach’s case.

Reg E was created long before the payment app existed, so the Consumer Finance Protection Agency Guidelines issued last year The law says it covers online payments from person to person. The bureau has stated that all unauthorized online remittances, that is, payments initiated by someone other than the customer and made without the customer’s permission, are the responsibility of the bank.

“When a consumer notifies a financial institution that money has been stolen from the consumer’s account, it is the responsibility of the financial institution to show that the transfer of funds from the consumer’s account has been approved by the consumer.” Spokesman Raul Cisneros said. For the station.

However, despite updated guidance, banks often refuse to refund customers who claim that money has been stolen from their accounts. Banks rarely provide clear explanations for their decisions and can barely rely on the victims.

The updated guidelines for the Consumer Department “caused a lot of anxiety and confusion in banks,” said payment consultant Peter Tapling. “Regulation E was not intended for instant money movement products.”

In early February, according to Chuck Ruoff, the thief used an attack technique called “SIM swapping” to transfer his mobile number to another device. The thief then used Ruoff’s number to enter the Bank of America account and withdraw $ 3,450 through Zelle. Ruoff immediately reported that he had found the theft, but his allegations were denied. The bank did not appear to be authorized for this transaction, he said.

Ruoff sent additional documents to the bank, including a police report and a letter from Verizon explaining what happened, asking them to revisit the case. He was told to wait 45 days for a response. When the deadline passed, he was told to keep waiting. Ruoff spent hours on the phone, every few days asking for updates on his claims.

“I repeatedly said,’I have never used Zelle. I have never approved this,” said Ruoff, a 34-year-old customer of Bank of America. “I told the woman I spoke to once, do you think I would go to the police and make false reports? It’s a crime.”

After the Times contacted Bank of America, it refunded Mr. Luoff’s money. Bank spokesman Bill Haldin said the bank was already reviewing the decision and paid the claim taking into account the additional information provided by Luoff.

Zelle, the most popular payment app, is owned and operated by Early Warning Services, a Scottsdale-based company in Arizona. Early Warnings are owned by seven banks: Bank of America, Capital One, JP Morgan Chase, PNC, Troist, US Bank and Wells Fargo. However, the 1,600 banks and credit unions that offer Zelle to their customers each use their own security settings and policies.

Neither banks nor early warnings publish data on fraud, so it is difficult to determine how fraud and theft at Zelle are widespread. Incidents such as those described by Oriach and Ruoff are “rare” and are a small part of the platform’s work, said Meghan Fintland, an early warning spokeswoman.

Aite adviser Shirley Inscoe reported that a survey of about 1,400 people who accessed their accounts without consent last year found that Zelle or other personal payment services were used for fraudulent transfers. -Novalica Group of financial services consultants. This was second only to fraudulent credit card transactions.

Journalist and longtime consumer advocate Bob Sullivan Can be compared In the early days of online banking, where the current wave of fraud and theft, and banks are hesitant to absorb those losses, it is prevalent to obtain customer login credentials and passwords through phishing and other tricks. , Banks routinely denied customer claims.It took Orders from the Federal Reserve In 2005, to clarify that banks are expected to cover such cases.

Complete theft is just one aspect of the much bigger problem of fraud in Zelle and other payment apps. In March, The Times reported that scammers and other scammers often trick people into paying for themselves, such as by impersonating bankers or selling fraudulent merchandise. did. In such cases, the bank usually refuses the refund, claiming that it is not “unauthorized” by law because the customer himself initiated the transfer.

Some lawmakers are starting to pay attention.

When asked by the House Financial Services Commission about the surge in online payment fraud following the Times report, Consumer Bureau director Locht Chopra said it was high on the station’s radar. “Scams are piled up and that’s a big problem,” Chopra said.

Massachusetts Democrat Stephen F. Lynch expressed concern at a hearing about consumer protection against Zel’s transfer. “Banks are, in principle, responsible,” Lynch said.

Senator Elizabeth Warren, a Democrat in Massachusetts, recently criticized the big bank that owns Zel. Warren, a member of the Senate Banking Commission, said:

In april, she Biting letter The company and its owners were blown up by creating a “confused and unfair” situation for the victims in an early warning service with another Democrat, New Jersey Senator Bob Menendez.

Customers confirmed the status of the class proceedings against Bank of America, Capital One and Wells Fargo, claiming that the lenders did not do enough to protect consumers from fraud in Zell, separately. I filed a lawsuit. Wells Fargo and Capital One declined to comment. Bank of America said it disagreed with the allegations.

Changing regulatory guidelines can change the outcome of victims of theft. In May 2020, Martin Bronson, an 80-year-old retiree from Florham Park, NJ, was called by a man who claimed to be an Amazon customer service agent. Bronson used a remote control app, TeamView, to allow men access to his computer. The caller then entered a Bank of America account and used Zelle to send $ 3,316.

Mr Bronson sent a police report to the bank. His claim was denied.

He said after the Consumer Department issued guidelines clarifying that Reg E covers all unauthorized interpersonal transfers, and last month after the Times called Bank of America about Mr. Bronson’s case. I got some good news. The bank refunded him the money.

“We made the claim based on the facts and current Regulation E guidelines, as well as the client’s request,” said Bank of America spokesman Haldin.

In January, Carla Lisio, a Therapist in White Plains, NY, discovered that Chase’s checking account was short of $ 4,750. When she notified her bank, she found that she had been sent money via Zelle to a Gmail account she didn’t recognize. Licio claims she didn’t relocate.

The bank repeatedly rejected her refund request for finding no evidence of fraud. “The device used matched your history, no new devices were added, and there were no invalid login attempts,” the bank wrote to her in March.

Lisio said she was shocked that her perfect 25-year history as a Chase customer seemed worthless. “They call me a liar and they call me a criminal because they’re trying to steal $ 4,750 from the bank,” she said. rice field. “I really want to tell them, but I can’t explain what happened. All I can say is that I didn’t do this. And all you can tell me , You just don’t believe me. “

When the Times contacted Chase, it stuck to that decision.

Jack Beg Contributed to the research.

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