Zelle Scam Victims Often Struggle to Get Refunded

While Zelle updated its scam refund policy this year, many Americans are still losing thousands of dollars or due to fraudsters across the payment platform.

Zelle is one of the top peer-to-peer payment apps used today, along with PayPal and Venmo. All three make it easy for users to send money with the click of a button, connecting to bank accounts for easy money transfers whenever people want to split rent, dinner and other expenses.

However, scams are growing on these platforms. A Security.org study found scams or attempted scams had occurred to 68 percent of peer-to-peer payment app users this year. That was a sharp increase from 42 percent just two years ago, showing fraudsters are becoming increasingly prevalent.

The Official Policy

In June, Zelle officially updated its policy so that all consumers of "qualifying imposter scams" would be fully reimbursed.

"We continuously review and update our operating rules and technology practices to improve the consumer experience and address the dynamic nature of fraud and scams," a spokesperson for Early Warning Services LLC, the network operator of Zelle, told Newsweek.

Early Warning Services said Zelle has seen a significant decline in fraud, with 99.9 percent of transactions reported without scams in 2022 to 2023.

The new refund rules apply to all 2,100 participating bank brands under the Zelle network. Imposter scams, including when an independent agent impersonates a bank to trick a consumer into sending them money, are subject to refunds under the policy, but many victims said this doesn't reflect their experiences.

Zelle said most fraudulent transaction claims, which include situations in which a "bad actor initiates a Zelle transaction from a consumer's account without authorization," are reimbursed.

However, the issue of "without authorization" might mean your refund will never go through. That's because if you click on the scammer's name and choose to send the money without realizing what you're doing or that it's a scam, the argument can still be made that the transaction was "authorized" and had your consent. This differs from other cases in which a fraudster gains access to your account on false pretenses and takes the money.

Zelle's user service agreement instructs consumers to use Zelle only for sending money to family, friends and other people they know and trust, the company said.

"Whether consumers use Zelle in their banking apps or the Zelle app, the user experience includes a series of alerts such as validating the recipient's first name as enrolled as an 'in flow' message back to the sender during the payment initiation and alerts to the sender that once you send a Zelle payment, you generally cannot get it back," Zelle told Newsweek.

In cases in which users experience fraud or scams, they are encouraged to report it to Zelle and their personal banking institution. The report can be used to deliver users a refund.

However, Zelle does not release its specific requirements in order to get a refund or the percentage of refunds offered to scam victims due to concerns over how bad actors would use the information, a company spokesperson said.

"It is a continuing problem across the industry," the spokesperson said. "It isn't specific to Zelle."

One Story of Many

The scams on payment apps like Zelle and Venmo can look quite different, but they nearly always end in lost money and financial distress.

Even those looking to adopt an animal can be attacked by the scammers, as was the case for a member of the WeLoveDoodles community. WeLoveDoodles is a search platform to help users find top recommended doodle dog breeders.

Garrett Yamasaki, the founder and CEO of the platform, said one woman was devastated after losing her money.

"She had been scammed while attempting to purchase a doodle puppy from what appeared to be a reputable breeder," Yamasaki told Newsweek. "The 'breeder' insisted on a Zelle payment for a deposit. Trusting the process, she sent the money. Sadly, it turned out to be a scam. The breeder vanished, leaving her without a puppy and out of her hard-earned money."

Despite Zelle's stated refund policy, the journey to actually getting one proved frustrating.

"Zelle's policy, as we learned, is not very forgiving in fraud cases, especially when the transaction isn't unauthorized but is sent to a scammer under false pretenses," Yamasaki said. "The response from Zelle was that since she had 'willingly initiated the transaction,' they couldn't offer a refund. This left her feeling helpless and disillusioned with the security of digital payment platforms."

Many other Zelle and Venmo scam victims have shared similar stories on Reddit.

One user, who goes under the name RobbedInNYC, said they went out with family members to a club in New York City and were scammed by a cab driver.

Outside the club, they were greeted by a line of taxis and ended up accepting a ride from a man who stepped out of the line. The man gave the family a ride back and asked for payment via Venmo or Zelle.

"He asks if he can put his number in my phone for the transaction," the user wrote. "He takes it for a minute, then says it's not working and he will send me a Venmo request. My phone dies. Get out of the car and pass out."

The next day, they woke up feeling guilty, thinking the transaction never went through. Upon using their phone, they find out the news: two different Zelle withdrawals had come out of their account, totaling a loss of $1,700 for what should have been a $20 taxi ride.

Even after filing a claim at their bank as well as a police report and having a suspect profile, the user was never able to secure a refund for the money lost. Even a call to Wells Fargo did nothing to get back the stolen money.

While digital payment platforms offer convenience, some believe they are among the more dangerous to use if you are sending money to a stranger, even if you believe it is for an actual good or service.

"While digital payment platforms offer convenience, they also require vigilance and an understanding of the policies in place, particularly concerning refunds in fraud cases," Yamasaki said.