Zelle® is a popular free peer-to-peer payment system for Americans. With just a phone number or email address, you can transfer funds.
Transactions are instant and irreversible once complete. This advantage makes Zelle® very attractive to cyber-criminals.
Unfortunately, Zelle scams are on the rise, so here’s what to look out for and how not to fall victim to one.
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What is Zelle?
Zelle was established in 2017 by a consortium of seven major banks in the US, including Wells Fargo, Bank of America, and JPMorgan Chase. It was created to compete with apps like PayPal and Venmo. There are no fees, and it partners with 1,700 banks and credit unions.
It’s already a built-in feature in around 1,000 US banking apps; many people don’t even realize they have it. Most transfers happen in minutes, and the only requirement is that the receiver has a US bank checking or savings account.
If a customer’s bank doesn’t support Zelle, that’s ok; a debit card can be connected via the app.
Zelle does not report transactions made on its network to the IRS. Something scammers love to hear.
What is a Zelle Scam?
Zelle is a well-protected app. It’s not hacking into their system that gets your money; it’s a creative activity called social engineering. The scam is done with the customer, and Zelle is merely the tool that gets used.
A Zelle scam is similar to other payment app scams, where the customer is tricked or forced into transferring money.
Typically, it begins with an email or text message stating that the customer’s account has been compromised. They’re then advised that they need to transfer all their funds to a new one immediately. Once a person replies, they’ll almost immediately call and offer to kindly ‘step them through’ the process. Naturally, the funds are going into their account, never to be seen again.
The scammers create a fake Zelle account with the customer’s name and phone number. During the ‘process,’ they’ll ask the user to remove their phone number from their account for the transaction to proceed. As that’s the link to allow the transfer to happen, that’s all it takes.
Other examples are similar, except that the scammer poses as a person from a utility company. They state that the utility will be disconnected if they don’t receive payment via Zelle in the next 30 minutes. The sense of urgency on the unsuspecting results in thousands of these fraudulent transactions occurring.
How Not to Fall For One
Remember, the scam relies on the customer to agree to the transaction, so there are ways to avoid them happening.
Don’t Respond Directly
If a message or email arrives from a bank or a utility company, don’t reply to that message. Instead, contact them via their direct channel, and get their number from their official website. Then ask if they’ve initiated the request. In 99.9% of the cases, it’ll turn out to be a scam.
It’s Rarely Urgent
Unless a person is seriously in arrears with their payments for 3–6 months, it’s unlikely any bank or utility company will provide 30 minutes to settle a bill.
Scammers use this sense of urgency, so the user doesn’t have time to check for themselves if it’s legitimate or not.
Always contact the provider via a publicly advertised way to confirm if the request is genuine.
What to do if You’ve Been Scammed
The challenge with being tricked this way is that banks are reluctant to return funds and the user did ‘authorize’ the transaction.
Recently, Wells Fargo refunded many customers who fell prey to Zelle scams.
First, contact the bank involved immediately after the transaction happens, and they may be prepared to do something to help. If not, file a complaint with the Consumer Financial Protection Bureau.
So is it dangerous to use Zelle? No, it’s not! It’s dangerous to get scammed. Only ever make transfers to people that you know.