JPMorgan Chase launches new restrictions on Zelle after $870 million lost in scams at Chase, Bank of America and Wells Fargo
The controversial payment service Zelle has been used by fraudsters, leading to a massive lawsuit against the operator and three big banks.
One of America’s biggest banks is making big changes after customers lost hundreds of millions of dollars in scams utilising the peer-to-peer payment system Zelle.
From March JP Morgan Chase will begin blocking Zelle payments that are linked to social media contacts or online marketplaces. The bank may ask customers to specify the reason for the payment and the medium of communication, blocking any transaction that appears risky.
“To help protect you from fraud and scams, the Zelle Service should be used for payments between friends, family, and others you trust and should not be used to pay for goods from recipients with whom you are not familiar,” a new notice from JP Morgan Chase explained.
“The Service is not intended, and should not be used, for the purchase of goods from retailers, merchants, or the like, including on or through social media or social media marketplaces or messaging apps.”
How many customers got scammed with Zelle?
Last year three of America’s biggest banks - JPMorgan Chase, Bank of America and Wells Fargo - were sued for failing to prevent scammers operating on Zelle. A complaint from the Consumer Financial Protection Bureau accused the banks, along with Zelle, of “allowing fraud to fester” on the online payments platform.
The lawsuit alleges that the banks were worried about the impact that the burgeoning system could have on the financial industry and “failed to put in place proper safeguards” to protect their own customers. Without
The complaint continues: “Defendants’ failures resulted in millions of complaints about Zelle fraud at (JP Morgan Chase, Bank of America and Wells Fargo) alone, including complaints of over $290 million in fraud losses by 210,000 Bank of America customers, over $360 million in fraud losses by 420,000 Chase customers, and over $220 million in fraud losses by 280,000 Wells Fargo customers.”
The banks have rejected the accusations of malpractice in relation to the Zelle scandal, arguing that they are not responsible for the actions of scammers. JPMorgan Chase has labelled the suit a case of overreach from the CFPB.
“As a last ditch effort in pursuit of their political agenda, the CFPB is now overreaching its authority by making banks accountable for criminals, even including romance scammers,” JPMorgan Chase spokesperson Patricia Wexler said in an email. “It’s a stunning demonstration of regulation by enforcement, skirting the required rulemaking process.”
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