A lot of press has been given recently to scams perpetrated through the person-to-person (P2P) app Zelle. What the headlines get wrong is that it’s not just a Zelle scam – it is a payments industry issue that uses Zelle, Venmo, PayPal, Cash App, prepaid cards, and other form factors to facilitate funds movement from unsuspecting victims. The P2P app providers – all of them – have done a good job to try and educate consumers about these scams, and they trigger alerts to help users think twice about who they are sending money to, but the scams persist. Those of us in the banking and payments business may find it hard to understand how consumers can fall for some of these tricks, but the thieves are getting pretty sophisticated. Consumer Affairs outlined how many of these scams operate:
Like many scams, this one is based on the claim that the scammer is trying to protect the victim from fraud.
The target receives a text that appears to be from their bank asking if they attempted a Zelle transaction. Regardless of how they answer, the target next receives a phone call from the scammer, who spoofs the number so it shows up as coming from the target’s bank.
The victim will then receive a set of instructions that ultimately winds up compromising their bank account information. The scammers use the information to withdraw funds and make off with their ill-gotten gains.
Zelle draws sharp distinctions between fraudulent activity and scams. If the victim did not authorize a transaction, then the theft is fraud and the victim can usually be reimbursed. It’s a different story if the victim acts on instructions from a scammer.
“Even if you were tricked or persuaded into authorizing a payment for a good or service someone said they were going to provide, but they didn’t fulfill it, this would be considered a scam,” Zelle says on its website. “Because you authorized the payment, you may not be able to get your money back.”
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
