As peer-to-peer payment apps like Zelle and Venmo gain popularity, so does the opportunity for criminals to entice victims into sending money in transactions that are very difficult to reverse. Newly proposed legislation would allow people who make fraudulent P2P payments to be reimbursed by the apps.
The proposed bill would help consumers get their money back when they make payments to criminals on Zelle, Venmo, and other platforms. Currently, the Electronic Fund Transfer Act of 1978 only protects customers from unauthorized transfers, such as when a credit card is stolen. The new legislation would protect consumers from liability when they are defrauded into making a transfer to criminals.
The law currently has an exemption for bank wire transfers. The proposed legislation would eliminate that exemption and allow consumers to get reimbursement for fraud in that area as well.
P2P Fraud – A Growing Concern
Transfer fraud is a growing problem as P2P apps become increasingly popular. Consumers and small businesses sent $806 billion in payments on Zelle last year alone, 28% more than in 2022. By the end of the year, Americans were sending an average of more than $100 million via Zelle every hour.
Meanwhile, reports of payment app fraud have risen by 62% in the past two years, according to the Federal Trade Commission. Consumers reported more than 22,000 instances of fraud, costing a total of $98 million on payment apps and services in just Q2 2024.
A Senate investigation released last month reported that JPMorgan, Bank of America, and Wells Fargo collectively reimbursed consumers for approximately 38%, or $64 million, of the $166 million worth of fraud disputes at these banks in 2023. Those three banks handle nearly three-quarters of all Zelle payments.
The number of wire transfer fraud claims reported to the Consumer Financial Protection Bureau has also been growing. They jumped from 88 in 2020 to 355 in 2023, and reached a whopping $500 million in the most recent quarter.
The newly proposed legislation follows a similar measure that passed in the UK last year. Starting October 7, UK payment service providers must reimburse victims of authorized push payment fraud, following regulations announced by the government’s Payment Services Regulator last year.
