18 million Americans defrauded

Scams and fraud committed via the Zelle platform and other peer-to-peer services are surging. According to one lawsuit, 18 million Americans were defrauded by schemes perpetrated via apps like Zelle in 2020. Some 1,500 member banks and credit unions participate in the Zelle service. People sent $490 billion via the app in 2021.

However, Zelle’s owner, Early Warning, and its consortium, comprising Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo, have refused to refund customers for most of their losses. Sen. Warren issued a report that the claims for fraud received by just four banks will likely exceed $255 million by the end of 2022 – a $165 million increase over 2020. The senator and consumers claim that Zelle is violating federal consumer protection laws.

What is fraud?

The heart of the problem is this: banks and consumers do not agree on the definition of “fraud.”

For clarity on issues surrounding the Electronic Fund Transfer Act (EFTA) and its implementing regulation—Regulation E—listen to my interview with fintech attorney Brad Rustin of Nelson Mullins.

In addition to chairing the firm’s Financial Services Regulatory Practice, Brad counsels financial institutions in regulatory matters, including strategic agreements, product development, and operational compliance.  Brad is a Certified Anti-Money Laundering Specialist and a Certified Regulatory Compliance Manager.  He received his JD, magna cum laude, from the University of South Carolina School of Law and his BA in Political Science and History, cum laude, from Furman University. Brad is also the FinTech advisor on the  Editorial Advisory Board of the Journal on Emerging Issues in Litigation.