Zelle says it’s up to law enforcement to stop payment app fraud

As scams involving payment apps like Zelle become more common, federal authorities are starting to investigate them.

This week, the Consumer Financial Protection Bureau launched an investigation into JP Morgan, Bank of America, and Wells Fargo — all co-owners of Zelle — after Senator Richard Blumenthal wrote a letter to the agency.

The Senate Permanent Subcommittee on Investigations found that refunds from the three banks for transactions disputed by Zelle users dropped from 62% in 2019 to 38% in 2023, Blumenthal said in the letter.

“PSI’s research into the three banks shows that they provide their employees with broad powers to decide whether a disputed transaction is unauthorised and, therefore, whether a consumer is entitled to a refund,” the letter reads.

Meanwhile, Ben Chance, Zelle’s chief fraud risk manager, told Fortune that the app is doing everything it can to minimize the risk of fraud. He also said that the best way to prevent fraud on money-sharing apps is through better user education, sound policies, and more funding for law enforcement.

“The real solution is to focus on the criminals who are committing these crimes via phone, text messaging, email, digital marketplaces and social media platforms… and of course working with those platforms as well as financial services and law enforcement to pursue and take down those criminals,” Chance said in an interview.

But even for law enforcement, money lost to fraud can be difficult to recover. On Aug. 2, Democrats in Congress introduced a bill that would provide increased refund protections for people who lose money to scams on peer-to-peer payment apps.

The Consumer Protection from Payment Fraud Act, introduced by Rep. Maxine Waters, Sen. Richard Blumenthal and Sen. Elizabeth Warren, would increase the responsibility of financial institutions to help consumers resolve fraud disputes.

Consumers may be eligible for reimbursement for unauthorized transactions under applicable laws federal law such as purchases for stolen goods credit card. However, getting your money back once you send it through Zelle or other payment apps is much more difficult.

If you accidentally send money to a scammer, the Federal Trade Commission recommends asking the company you’re sending money through if there’s a way to get your funds back. If you lose money through a money transfer app, the agency recommends reporting the fraudulent transaction to the app’s parent company.

“If you linked the app to a credit or debit card, report the fraud to your credit card company or bank. Ask them to reverse the charge,” the FTC says.

Zelle did not immediately respond to Business Insider’s request for comment on Saturday.