Have you lost money through Zelle or similar payment systems?

Have you lost money through Zelle or similar payment systems?

Using various pretexts and methods, criminals hijack Zelle and similar payment system accounts and use the accounts to send themselves money from the victim’s bank accounts. The banks frequently refuse to reimburse the victims.

Often, the phone fraudster will send a text message purporting to be from the consumer's bank. If the consumer responds, they will get a phone call purporting to be from the bank's fraud prevention department. The caller will ask to verify the consumer's identity by asking for their username. If the consumer does not realize that a real bank employee would have this information, they provide the username. The fraudster uses the "forget password" feature of the bank's website to generate a code, which is sent to the consumer. The fraudster asks the consumer for the code (again, a real bank employee would have this -- the bank just created it). The crook then uses the code to rest the consumer's password, get into the account, and use Zelle to transfer the victim’s funds to others.

Zelle is a shared service operated by Early Warning Systems and funded by some of the biggest banks in the United States, including Bank of America, Capital One, JPMorgan Chase, US Bank and Wells Fargo. The service often comes with a bank account. (Consider carefully whether you want to decline it.)

The conduct of the banks in refusing to reimburse victims of such frauds is often illegal. The Electronic Funds Transfer Act and Regulation E require banks to investigate unauthorized transfers and refund the stolen money. Even if the criminal obtained your access information through fraud or theft, the bank is often still liable. Furthermore, there are substantial statutory damages for failing to properly investigate and remedy reports of unauthorized transfers.

The Electronic Funds Transfer Act also provides for the award of attorney’s fees against the financial institution. If you have a good case, we are willing to prosecute it for the statutory fees.

The one instance in which the liability of the bank is debatable is where the consumer is tricked into initiating a transfer by wire or electronic means. For example, the criminal may convince the victim to transfer their funds into a new account on the pretext that the existing account has been compromised. Under those circumstances there may still be a claim, but it is not as clear.

Under no circumstances should you initiate a transfer in response to someone contacting you. Under no circumstances should you provide a caller with information that a real bank employee with access to the bank's systems should have.

If you believe that your account has been compromised or need to transfer funds, contact the bank holding the funds using information on a statement or from its website.

It is absolutely essential that you notify the bank promptly upon discovery of the theft. This also means that you need to read your statements when they are issued. Oral notice to the bank should be confirmed in writing.

To avoid such scams, never, ever give out account information over the phone or in response to emails or other messages. If you receive a call or message that appears to come from your bank, do not provide any information. Look up the number or email address of the bank on a statement or its web site and contact them at that number, asking for your banker or the fraud department.

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