You Will Not Get Your Money Back From Zelle

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Zelle is a popular money transfer app, in large part because it doesn’t charge fees to move money. But fraud is happening there, and banks aren’t giving the money back to defrauded consumers.

If you send money to the wrong recipient, good luck getting it back. You cannot recall a transaction and the bank will not reverse it for you. You’re left hoping the person who got the money does the right thing and sends it back.

A few months ago I received $100 via Zelle from someone I didn’t know. All that came with the transaction was a name. I tried to track the person down and found a possible suspect on LinkedIn, but she never replied to my message. If she doesn’t contact me and give me an email address or mobile number attached to her bank account, I have no way to give back her money.

Even worse is when someone is tricked into sending money to a person, thinking it’s someone else. The article linked above includes an interview with a guy who though he was sending $500 to Wells Fargo at the request of the bank, but he was sending it to a scammer.  He had no way to get his $500 back.

Banks know that fraud is occurring, but they’re operating within the law. The regulations say that banks have responsibility for electronic transfers that are unauthorized. The bank is only liable if someone other than an authorized party initiates the transfer. In the examples mentioned above, the transfers were authorized. They may have been authorized to go to the wrong people, but they were authorized nonetheless.

Approximately 1,425 banks and credit unions currently use Zelle, a network that is operated by Early Warning Services…. which is owned by seven big banks including Chase, Bank of America, and Wells Fargo. EWS says that banks need to educate consumers better so they understand the risks. They say treat it like cash. When you press the send button, it is like handing cash to someone who immediately walks away.

How can you mitigate your risk when using Zelle? Make sure you’re sending money to the right person. If I’m sending money to someone for the first time, I send them a small amount of money as a test, and ask them to tell me how much I sent. If they got my first transfer, then I’ll send the balance that I want to send.

If anyone asks you to send money via Zelle, make sure you’re sending money to who you think you are. Would Wells Fargo really ask you to send them money via Zelle? Take steps to verify where (and why) you are sending the funds before you hit send.

 

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