Internet scams are becoming all too common, with scammers misrepresenting themselves as corporations or even government agencies. But since savvy scammers typically convince people to make bank transfers themselves, these users don’t have the same recourse as they would if they were hacked. That is, until now. Zelle, the payment app owned by seven banks, is now refunding users who were scammed. The massive shift comes amidst growing pressure from the U.S. government and other watchdog groups, according to a Reuters report. Zelle’s current refunds to scammed users goes beyond current federal law, and takes an interesting approach to protect both users and banks.
Individuals who are scammed are usually out of luck, and won’t get their money back. That’s because U.S. federal law does not require banks to reimburse customers who were scammed into making a transactions. By comparison, it does require banks to refund customers who were hacked, or had transfers made without their permission.
The big problem here is that since scammers trick users into giving their permission, they are often responsible for the transaction. “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’s website states. “Because you authorized the payment, you may not be able to get your money back.”
Though the webpage is still live, Zelle’s position appears to be changing. It has begun reversing scam transfers starting June 30, helping users regain their funds. Zelle notes that it is going “well above existing legal and regulatory requirements” by offering the reversals, according to the chief fraud risk officer at Early Warning Services (EWS). EWS is the parent company that owns and operates Zelle, under the seven banks.
How Zelle is getting users their money back
Initially, Zelle was concerned its new policy change would encourage false fraud claims, per Reuters. To combat this, it is taking a new approach to reunite scammed users with their funds on Zelle. Instead of having banks repay scammed users, EWS is creating a new mechanism to reverse bank transfers.
Essentially, this allows Zelle to reclaim the funds transferred from the scammer’s account. It would seem to be the best of both worlds, as it returns users’ funds without forcing the banks to take a loss. The changes have prevented U.S. lawmakers from stepping in. Although the Consumer Financial Protection Bureau (CFPB) was considering a mandate, it is satisfied with Zelle’s new policy, according to a Reuters source.