How to Keep Your Money Safe on Payment Apps as Zel Scams Rise

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A person holds up the phone while looking at the Zelle app.

Getty Images and Chris Zuppa/The Penny Hoarder

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We live in the era of mobile payment apps like Venmo, PayPal, Cash App and the most popular Zelle. Launched in 2017, Zelle has become the largest money transfer app in the US, and it’s not even close anymore.

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But now Zell is facing criticism for the way it handles scams on its app — or the way it doesn’t handle scams.

Complaints of fraud and scams on the payments app are on the rise, but according to a new report from US Sen. Elizabeth Warren’s office, the big banks that run Zelle are refusing to reimburse swindler customers.

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We’ve got some useful tips for keeping your money safe on Zelle, Venmo, Cash App – all popular peer-to-peer payment services.

tens of thousands scams

Warren, D-Massachusetts, is known for being a fierce critic of America’s big banks and their business practices. Their report cited data from four banks – Bank of America, PNC Bank, Truist and US Bank – that collectively reported $214 million in 2021 and nearly 193,000 prison fraud and scam cases in the first half of 2022. Gave.

These were the cases in which Zel users said they had been duped into making payments. Here’s the kicker: Those banks reimbursed customers in only 3,500 of the 193,000 cases, the report said.

Zelle: That’s because we’re so big

Zelle’s owner, Early Warning Services, says the increase in fraud complaints is only because Zelle has become more popular in recent years: “Zel’s use has increased significantly since its launch, in 2017. From 247 million transactions to 1.8 billion in 2021, while the proportion of frauds and scams has steadily decreased.”

Zelle is operated by a coalition of seven of the largest banks in the country: Bank of America, Capital One, JPMorgan Chase, PNC Financial, Truist, US Bank and Wells Fargo.

Is this fraud or is it a scam? How does it matter?

Banks distinguish between “scams” – when a customer deceives a fraudster into sending money – and “fraud”, when a thief gains access to a customer’s account and withdraws money.

Banks typically do not reimburse customers who say they have been fraudulent because they cannot tell which cases are legitimate. But they’re supposed to compensate customers who had money stolen via electronic transfers they didn’t authorize—like if someone swipes your credit card and buys things with it.

Warren is accusing the banks of not paying the customers they are supposed to pay. Their report said that in cases where it was clear that money was actually withdrawn from users’ accounts without authorization, only 47% of the money was returned.

For what it’s worth, transferring money via a smartphone app is safe most of the time. When The Penny Hoarder reviewed money transfer apps, we gave Zelle a great review.

How to protect yourself on payment apps

The Consumer Financial Protection Bureau is considering issuing new rules that require banks to reimburse customers for more cases of fraud and scams.

In the meantime, here are some tips on how to protect yourself when using a money transfer app. The Federal Trade Commission recommends the following:

Do not send payments to claim prizes or win sweepstakes. Do not give your account credentials to anyone who contacts you. Protect your account with multi-factor authentication or PIN. Before submitting a payment, double-check the recipient’s information to make sure you’re sending money to the right person. If you get an unexpected request for money from someone you know, talk to them to make sure it’s actually from them – not a hacker who gained access to their account . What to do if you send money to a scammer?

Here’s The Penny Hoarder’s step-by-step guide to what to do if you’ve been scammed. And here’s the gist:

Lock your bank accounts and credit cards. Contact the three major credit bureaus. Change your password. Report the crime to your local police department, state regulators, and the FBI. Reporting fraud to your payment app

And finally, if you receive unauthorized payments or think you paid to a scammer, here’s how to report it on a mobile payment app.

Zele. Report it here: https://www.zellepay.com/support/report-scam

Cash App. Cash App recommends chatting through their app for the fastest service. To do so, open the app, go to your profile and select Support. You can also get help through Cash.app/help or by calling 1 (800) 969-1940.

Venmo. Venmo recommends chatting through its app for the fastest service. To do this, open the app, go to your profile and select Get help. You can also email Venmo through its contact form or call 1 (855) 812-4430.

Paypal. Report it online through PayPal’s resolution center or call PayPal at 1 (888) 221-1161.

Mike Brassfield ([email protected]) is a senior writer at The Penny Hoarder.

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