Bank data, finally shared with U.S. Senate, shows Zelle fraud is soaring

We finally have some numbers on how much fraud is happening at Zelle. Four large banks -- Truist, PNC, US Bank, and Bank of America -- tell Congressional investigators that consumers report about one-quarter of a billion dollars in fraud and scams on Zelle annually.  That doesn't include data from other large banks, like Capital One and JP Morgan Chase. And it doesn't include fraud which goes unreported.

The data shows Zelle fraud reports are soaring, doubling within two years at some banks.

Meanwhile, banks refund consumers less than half the time the transactions are "unauthorized," a violation of banking rules and the banks' own stated policies. And 90 percent of the time, when consumers are manipulated into sending money to criminals, banks declare those transactions are "authorized" and do not refund consumer losses.

Those findings were published Monday in a report by Sen. Elizabeth Warren (D-Mass).  In April, a group of U.S. senators demanded Zelle fraud data from large banks after repeated reports about widespread fraud on the system (such as the reports you've read here!). The request was ignored until September when a set of bank executives were criticized directly by Warren during a Senate hearing.   Despite a promise from JP Morgan executive Jamie Dimon to share fraud data during that hearing, Warren's office says JP Morgan later said it wouldn't provide the data.

"At nearly every turn, most of the big banks have stonewalled, refusing to provide the information requested by members of Congress," the report says.

Zelle fraud is up sharply, according to the data provided to Warren's office. The rate of increase isn't clear, however, because the report does not mention how fraud rates compare to overall transaction rates. Still, the raw data is compelling:

• PNC Bank reported that the number of claims increased from 8,848 in 2020, to 11,356 in 2021, and that in 2022 the bank’s customers are on a pace to report over 12,300 cases of fraud and scams.

• U.S. Bank reported 14,886 fraud and scam claims on Zelle in 2020, which increased to 27,702 in 2021, and its customers are on pace to report nearly 45,500 in 2022.

• Bank of America reported that the number of Zelle fraud and scam claims increased from 49,652 in 2020 to 131,509 in 2021. In 2022, Bank of America customers are on track to report 160,977 incidences of scam and fraud on Zelle

The dollar value of fraud claims is soaring, too: Four banks that reported the data received scam and fraud claims in excess of $90 million in 2020, and are on pace to receive scam and fraud claims in excess of $255 million in 2022.

The banks told Warren's office that when consumers report fraud, such as unauthorized transactions stemming from hacked accounts, reimbursement was granted for only 47% dollar value of those claims.  Meanwhile, when there are scam claims - for instance, a crime that begins when a consumer receives a call that appears to be from a bank employee which leads to a Zelle transfer to a criminal  -- consumers receive reimbursements only about 10% of the time.

"The findings of this report reveal that fraud and theft on Zelle are widespread and growing, with consumers losing millions each year," the report says. "The banks that own and profit from the platform are failing to make their customers whole for both authorized and unauthorized fraudulent transactions, while refusing to release information publicly or to their customers that could help keep all consumers safe. Given this uncertain landscape and the banks’ abdication of responsibility,
regulatory clarity is needed to further protect Zelle users."

If you are a victim of Zelle fraud or a Zelle scam, it's critically important that you dispute the transaction with your bank, and that you report the incident to the Consumer Financial Protection Bureau and to your state attorney general. Even if the bank refuses your dispute, I think there is a good chance some future regulatory action -- or lawsuit -- might lead to a different outcome. So make sure your paperwork is complete. For more, visit my Zelle fraud emergency kit and FAQ.