First he lost $1,600 to suspicious Zelle payments, then he couldn’t quit the payment platform. “Things like this shouldn’t happen.”

Andrew Keshner

Banks say their customers love Zelle, but lawmakers say Zelle isn’t doing enough to protect users who lose money to scams

As a software industry executive, Greg Miller knows his way around websites and smartphone apps.

But when a Park City, Utah, man discovered that $1,600 had been withdrawn from his bank account without his permission through a rarely used Zelle account that synced with his Wells Fargo checking account, Miller couldn’t find a way to deactivate his Zelle account.

He searched the bank’s website and app and even asked ChatGPT for instructions on how to close his Zelle account. Ultimately, a Wells Fargo customer service representative was able to do it on her end, Miller said.

“I was digging everywhere,” he told MarketWatch. “I was on the phone with the person and they had to do it. That was the second call.”

The initial phone call ended with a Wells Fargo representative informing Miller that the unauthorized $1,600 Zelle payment occurred too long ago, in November 2022, for the bank to provide assistance.

On the first call, “there was no offer,” he said. “No, ‘I’m going to explore this further.’ That was it.” Miller made his follow-up call because “it didn’t really resonate with me.”

A second call to Wells Fargo resulted in a request to investigate the missing money. Wells Fargo transferred $1,600 to Miller’s account earlier this month.

“I’m glad I got it back,” Miller told MarketWatch. “It’s not going to keep me at Wells Fargo, given the way they’ve handled it. I won’t be using Zelle,” Miller said. “That area of consumer protection is clearly not robust,” he later added.

Zelle is under scrutiny by lawmakers

Miller is not alone in his criticism. Zelle is a middleman that allows millions of people to send money to each other without hassle or headache. But the exceptions — the hurdles, scams and frauds — are drawing scrutiny from lawmakers and consumer advocates. They say Zelle doesn’t do enough to protect customers who lose money to scams, and victims don’t always get the refunds they’re entitled to under the law.

As for Miller’s case, Wells Fargo said its policies “have always required that all valid fraud claims be refunded. That was the case here; our customer was cured,” a bank spokesman said.

“We sincerely apologize for the experience our customers had,” the spokesperson said. “This was not typical and does not reflect the level of service we strive for in every interaction.”

Zelle is a “safe and reliable peer-to-peer money transfer service” that customers value, a Wells Fargo spokesman said. “Since 2017, more than 99.9% of Wells Fargo customers’ Zelle transactions have been successfully completed without fraud or deception.”

According to Cameron Fowler, CEO of Early Warning Services, the company that operates Zelle, 120 million individuals and small businesses used Zelle last year, and 99.9% of transactions were free from fraud or scams.

Early Warning Services is owned by seven of the country’s largest banks: JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Capital One (COF), PNC Bank (PNC), Truist (TFC) and US Bank (USB).

In 2023, EWS helped financial institutions review more than $10 trillion in transactions and stop nearly $3 billion in fraud, according to Fowler’s testimony at a Senate subcommittee on Zelle in July. Banks that use the Zelle network must comply with its rules, which include full refunds to customers for unauthorized payments, Fowler said at the time.

That did not convince Senator Richard Blumenthal, Democrat of Connecticut, who chairs a subcommittee investigating Zelle and the major banks that offer the payment service to customers.

Earlier this month, he asked the Consumer Financial Protection Bureau to investigate the dispute resolution practices of Early Warning Services, JPMorgan Chase, Bank of America and Wells Fargo.

This followed a July hearing in which the Democratic majority on the subcommittee released a report that claimed JPMorgan Chase, Bank of America and Wells Fargo refunded significantly fewer fraudulent fees last year than they did in 2019.

“When something goes wrong, Zelle and the banks are quick to blame the victim and claim they did not use Zelle for its intended purpose,” Blumenthal said during the hearing.

Banks Say Their Customers ‘Love’ Zelle

JPMorgan has defended its handling of consumer issues and in a statement to MarketWatch said it is prepared to sue the CFPB if its actions go too far.

“Our customers love Zelle, one of the safest ways to pay the people you know and trust, in real time and at no extra cost, and if necessary, we will not hesitate to seek assistance from the courts to maintain the integrity of how these services are provided,” a JPMorgan spokesman said. Banks are leading the fight against consumer fraud and deception, they added, “and we would welcome cooperation with the government to tackle the real problem — criminals.”

A CFPB spokesman declined to comment.

Representatives from Bank of America and Wells Fargo also defended their handling of user complaints about Zelle during a hearing in July.

Fraud and scams are issues that all peer-to-peer payment networks face, and it’s not just a problem for Zelle users, Early Warning Services stressed to MarketWatch. The company said it’s continually improving consumer protections, which is evident in its customer satisfaction scores.

As an example, Early Warning Services cited a J.D. Power study of customer satisfaction among peer-to-peer payment platforms. It found that seven of the eight highest-rated platforms were part of the Zelle network.

Old laws, new headaches

Why is there a gulf between concerned lawmakers and banks that say they are doing everything they can to help customers who have trouble with Zelle?

One problem is the outdated Electronic Funds Transfer Act of 1978, which governs Zelle and other payment platforms including Venmo, PayPal (PYPL) and Cash App (SQ), said Carla Sanchez-Adams, senior staff attorney at the National Consumer Law Center.

Say someone uses their credit card to pay for something and never receives it. They have protections to dispute the charge with their credit card company and can usually get their money back, Sanchez-Adams said.

There is no comparable protection in the Electronic Fund Transfer Act, she said. Blumenthal is one of the authors of a new bill that would provide a much-needed update, she said.

Among other things, the legislation would strengthen consumer protections that kick in when a Zelle user sends money by mistake. Zelle payments are irreversible, while reversing a PayPal or Venmo payment is almost as difficult.

Currently, payment network users who mistakenly send money to someone must rely on the recipient to return it – a sometimes lengthy process, even if the recipient wants to return the money.

It took one Zelle user over two months to fix a $2,000 bug

Robert Hartling, a retiree living in New York, told MarketWatch that he accidentally sent a friend $2,000 through Zelle in June. The recipient initially feared it was a scam and asked his bank how to proceed. Then he realized it was an erroneous payment from Hartling.

Her bank, Bank of America, withheld suspected fraud on the money before sending it to Chase. It took about two months, plus several phone calls and visits to bank branches, before the money was returned to Hartling’s Chase account last week.

Hartling will continue to use Zelle and stick with Chase. He blames himself for the payment mix-up that started the whole thing. Still, he said, the constant searching for money left him “embarrassed.”

“I felt weird that they didn’t know where the money went,” Hartling said.

“We’re pleased to have recovered the customer’s money and apologize for the delay,” a JPMorgan Chase spokesperson said. “It’s always a good idea to remind yourself to slow down and check the recipient’s details before hitting send.”

“We have to keep fighting for this”

The Zelle network acts as a bridge between two financial institutions on either side of a transaction and does not store the funds.

That’s different from the likes of Venmo, PayPal and Cash App, Sanchez-Adams noted. All accounts live in the same place on those platforms, whereas Zelle is a conduit between two banks, each of which may have a different way of processing incoming and outgoing payments, she said.

Banks on the Zelle platform must adhere to rules set by Early Warning Services. The company noted that banks and credit unions on the platform return 100% of claims for unauthorized payments and fraud by fraudsters that they can verify.

Customer claims of unauthorized payments aren’t always what they seem, said a Wells Fargo executive who testified at a Senate hearing in July. The bank starts with “the benefit of the doubt that this is a fraud claim,” Adam Vancini, executive vice president, head of payments for consumer, small and business banking, said at the time.

But you can tell a lot from the conversation, he noted. Sometimes a customer forgets a payment or doesn’t recognize a payment made by a spouse on a joint account. Sometimes it’s a person trying to collect an important payment they now regret, he said.

Sanchez-Adams isn’t convinced that internal enforcement is the answer, noting that EWS is owned by big banks. Consumers have to be persistent in pressing for their money, and it’s likely that many will simply walk away when they encounter too many obstacles, she said.

Even with fraud, “I feel like we have to keep fighting for it,” Sanchez-Adams said.

That’s exactly what Miller did when he investigated an unauthorized $1,600 payment from 2022.

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