Zelle is refunding scam victims — here's how to use the payment app safely (2024)

In a major shift, peer-to-peer payment app Zelle has started refunding some customers victimized by scammers. Only those tricked into sending money to imposters claiming to be from a government agency, bank or existing service provider will have their payments returned, Zelle's parent company, Early Warning Services (EWS), told Reuters.

According to the Federal Trade Commission, these "imposter scams" cost Americans more than $2.6 billion last year.

Federal law requires banks to reimburse payments made without a customer's authorization. But transactions actually made by an account holder are not covered, even if they were misled by the recipient.

The new policy "goes beyond legal requirements," a company spokesperson said.

Used by more than 2,100 financial institutions, Zelle was launched in 2017 by seven of the largest banks in the US, including Bank of America, JPMorgan Chase and Capital One.

You can send and receive funds through Zelle with a Capital One 360® checking account, our pick for the best no-fee checking account. It also has a top-rated mobile app and no minimum balance requirement or overdraft fees.

EWS began issuing refunds on June 30, according to the spokesperson, but did not disclose details of the updated refund policy earlier over concerns it could encourage false claims.

CNBC Select explains how to spot a Zelle scam, how to use the app wisely and what to do if you've been targeted by a scammer.

According to data from EWS published in a report by Senator Elizabeth Warren, Zelle users lost an estimated $440 million to fraud and scams in 2021 alone.

Zelle defines fraud as someone gaining access to your account and making a payment without your knowledge. Since you weren't involved with the transaction, it's considered "unauthorized activity" and a refund is guaranteed under law.

In a scam, though, the customer is "knowingly involved in the transaction," according to Zelle. Because you technically authorized payment to the scammer, the company says, you may not be able to get your money back.Zelle's new policy only requires banks and credit unions to reimburse victims of "qualifying imposter scams."

Here are some common examples of scams you might encounter onZelle:

• Financial institution impersonators. A scammer pretends to be from a bank or credit union and claims they need updated account information or to verify a transaction, with the goal of getting you to click on a link.
• Business account scam. Consumers attempting to receive money are contacted by a scammer claiming they need to pay for an account upgrade to collect the funds.
• Refund scams. A scammer claims to be a Zelle agent flagging a fraudulent transaction on your account. During the "refund" process, you're asked to pay to retrieve money you never lost.

Unlike competing apps like Venmo and PayPal, Zelle does not offer purchase protection. But it now requires banks to flag transactions that are considered risky — including if a customer attempts to send payment to an account that has never had a transaction on the network before.

According to Zelle, 99.9% of its transactions between 2022 and 2023 were reported free of fraud or scams. Of course, no system is perfect and you should always employ caution when sending money through any app.

Here are some good rules of thumb when using Zelle.

• Only use Zelle to pay family, friends and other people you trust. Zelle transfers are similar to cash and funds are hard to recover once sent.
• Be cautious about unsolicited or urgent requests. If you're being rushed into sending payment or are told you'll face penalties, that's a sign to take a step back and verify your transaction.
• Be suspicious if someone demands you use Zelle. If the recipient says they have no alternative payment options, that's a red flag. "If you don't know a person or aren't sure you'll get what you paid for, using your credit card may be a better payment option," Zelle said in a statement on its website.

Zelle also has a Safety Education Center with more resources to help spot scams and transfer money safely.

If you believe you are the victim of a Zelle scam, you should start by filing a report on the Zelle website. You'll have to include your contact and payment information, details about the transaction and information about the recipient.

You should also contact your financial institution directly and request a chargeback or other way to regain your funds. It is common for financial institutions to have their own process for dealing with fraud which might vary from place to place, but it's important to contact them to ensure you are collaborating in order to provide the best options for you financially.

In addition, you can report the event to the FBI through their Internet Crime Complaint Center which provides them with further information in their attempt to cut down on cybercrime.

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