A surge in Zelle scams linked to social media contacts has compelled JPMorgan Chase Bank to prohibit payments executed through social media platforms and messaging services.
Chase emphasized that Zelle was designed for transferring funds to family, friends, and other reliable contacts, and should not be used for online purchases…
Zelle Scams
During the pandemic, peer-to-peer payment applications like Zelle, Venmo, and Apple Pay Cash gained immense popularity, becoming a mainstream method for instant cash transfers among friends. Unfortunately, scammers have exploited the relatively loose regulations surrounding these apps, leaving users with limited options in cases of fraud.
Zelle was specifically scrutinized by the US Consumer Financial Protection Bureau (CFPB) for its minimal safety measures, resulting in hundreds of thousands of users losing a total of $870 million to scams.
Initially, Zelle dismissed responsibility, asserting it was up to customers to verify they were sending money to the right individuals, with the banks supporting the app not liable. However, the CFPB initiated legal action against the app’s operator and affiliated banks, prompting potential legislative changes and a slight policy adjustment late last year.
The 2,100 financial institutions associated with Zelle, a peer-to-peer network owned by seven banks including JPMorgan Chase and Bank of America, began reversing transactions as of June 30 for customers who were tricked into transferring funds to scammers posing as government representatives, banking personnel, or other service providers, according to Early Warning Services (EWS), the company that manages Zelle.
This implies that reimbursements will be offered if the scammer impersonates a government entity or bank. Conversely, if a scammer poses as a business, you may only receive a refund if you are already a customer of that business. Finally, it appears there may be no recourse if the scammer masquerades as an individual, like a family member or friend.
BleepingComputer noticed updates to Chase’s terms and conditions regarding Zelle payments, which will take effect next month.
“For your protection, Chase will not allow you to send Zelle payments identified as originating from contacts through social media. We will decline such transactions because Zelle is intended for payments to friends, family, and other trusted recipients you know, not for others you encounter on social media,” the bank stated.
“We may ask for information from you (for instance, when you initiate a payment or add a recipient) regarding your payment’s purpose, the method you used to contact the recipient, or other details we consider necessary to evaluate whether your payment poses an increased risk of fraud or scam, or is an illegal, ineligible, or improper payment.”
While Chase may not always detect social media transactions, it will block them wherever possible.
DMN’s Perspective
The standard advice remains unchanged. Never make a payment unless you are anticipating it, and be particularly wary of claims of urgency, such as limited windows for refunds. Always avoid peer-to-peer payment apps for purchasing goods and services: use a credit card instead to ensure consumer protections apply.
A comparison made back in 2018 revealed that Apple Pay Cash provided the best blend of security and privacy among P2P payment applications.
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