Why Aren’t Banks Doing More About Zelle Fraud?

By Judith Dayan Persson

Vice President of European Operations and Business Development


Zelle is one of the most popular money transfer services processing $490 billion in client funds in 2021. However, not all of these funds are from legitimate sources, as more and more fraudulent parties are using Zelle for their illegal activities. Although Zelle was founded by banks to make digital transfers more convenient, the same banks have been criticized by customers and fraud victims for being slow to act on their complaints. 

Different Definitions of Fraud

In one case, a Zelle user was defrauded by someone pretending to be a Wells Fargo broker. When the imposter was discovered, the bank would not deal with the complaint because the customer had authorized the Zelle transaction. 

The definition of “fraud” is different for payment platforms such as Zelle and PayPal than it is in ordinary conversation. Most people would consider a broker taking money from an account as fraud. However, Zelle will return funds only if transactions are not authorized by a client, such as with hacking and actual theft. 

Banks often operate on this principle, particularly with the kind of authorization offered by Zelle, which is often direct, quick, and done through mobile devices. 

In one case, reported by The New York Times, a man reported that his phone was stolen while he was in the hospital. When he was released, he discovered that the thief had used Zelle and direct bank transactions to gain access to the victim’s money and make payments. 

When trying to make a claim to his bank, he was told that the bank could compensate him for any money taken directly from his account, but could not do anything about the money taken by Zelle, because the transactions had been confirmed by authentication codes sent by phone that was connected to the account. 

Although it may be distressing to many customers, banks are at least doing the minimum they are required to do by returning funds stolen through unauthorized transactions. However, according to the laws and regulations in most countries, they are not required to do anything. 

Why Zelle is Attracting Cyber Crime

While it may look to victims as if the banks are enabling the problems on Zelle, they are operating according to the law. However, the question arises of why more banks do not go beyond the minimum requirement and assist customers with complaints. One would think that working on behalf of customers would be in the best interest of the banks. 

However, the scale of cyber theft can create a significant challenge. Zelle is convenient for regular customers because it makes transactions instant that would otherwise take several days. However, instant transactions can mean less oversight since the approval process is expedited. Regular bank transfers are inconvenient for cybercriminals because of the checking and double-checking banks do before completing a transfer. 

The culture of instantaneous service is convenient but can compromise security as can be seen in many cases, including fraud on Zelle. Peter Tapling, a former executive of Zelle, warned customers to regard Zelle as if it were cash in terms of security. According to The New York Times, Tapling said, “Don’t hit the button to send this money unless you would hand this person $100 and walk away, because the moment you send it, it’s gone.”

However,  some may see statements like this as attempts to evade responsibility and put it all on the customers. There have been calls to tighten regulations on payment platforms and demand more accountability from the seven banks that developed Zelle ― Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank, and Wells Fargo.

What to Do If You Have Lost Money on Zelle

It is important not to give up hope if you have lost money to a fraudulent scheme on Zelle. Providing law enforcement and banks with intelligence reports and evidence of fraud can be the best way to encourage action on your complaint. Our professionals will consult with you and launch an in-depth investigation of your case. 

If you have lost money to a cryptocurrency scheme, seek fund recovery assistance right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive working knowledge and relationship with regulators as well as the dynamics of crypto recovery and can improve our prospects of getting your money back.