Security

Zelle begins refunding scam victims by clawing back funds from scammers

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November 14, 2023

Zelle, a peer-to-peer payments app owned by seven banks, has begun refunding victims of imposter scams after pressure from regulators. The 2,100 financial institutions operating on the app began the refunds on June 30 for customers who were tricked into sending money from imposters claiming to be from a bank, government agency or other service provider, according to a report by Reuters.

Early Warning Systems, the company that owns Zelle, has integrated a system that can retrieve funds from the recipients account and return it to the sender. It also implemented a tool to flag transfers with risky traits, such as a payment to an account that has never done a transaction on the network.

Although the Consumer Financial Protection Bureau had previously considered forcing lenders to reimburse scam victims, this current refund policy has satisfied the agency for now.

Big bank owners, including JPMorgan Chase, had previously refused to refund scam victims due to concerns of fake claims. However, in 2022, several lawmakers including Senator Elizabeth Warren began investigating Zelle and claimed that Zelle users lost $440 million to fraud in 2021. Warren told CEO Jaime Dimon that this was a "perfect weapon" for criminals and that they had not stood by their customers.

"Zelle's platform changes are long overdue," Warren said in a statement to Reuters. "The CFPB is standing with consumers, and I urge the agency to keep the pressure on Zelle to protect consumers from bad actors."