By | November 16, 2023

While Zelle updated its scam refund policy this year, many Americans are still losing thousands of dollars to fraudsters across the payment platform.

Zelle is one of the best peer-to-peer payment apps in use today, along with PayPal and Venmo. All three make it easy for users to send money with the touch of a button, connecting to bank accounts for easy money transfers when people want to split rent, dinner and other expenses.

But scams are growing on these platforms. A study by found that fraud or attempted fraud had occurred to 68 percent of users of peer-to-peer payment apps this year. That was a sharp increase from 42 percent just two years ago, showing that fraudsters are becoming more common.

While digital payment platforms like Venmo, Zelle and PayPal offer convenience, some believe they are among the more dangerous to use if you’re sending money to a stranger.
Vivien Killilea/Getty Images for REVOLVE

The official policy

In June, Zelle officially updated its policy so that all consumers of “qualifying fraudsters” would receive full compensation.

“We continually review and update our operating rules and technology practices to improve the consumer experience and address the dynamic nature of fraud and scams,” a spokesperson for Early Warning Services LLC, the network operator for Zelle, told Newsweek.

Early Warning Services said Zelle has seen a significant reduction in fraud, with 99.9 percent of transactions reported fraud-free in 2022 to 2023.

The new refund rules apply to all 2,100 participating banking brands under the Zelle network. Scams, including when an independent agent poses as a bank to trick a consumer into sending them money, are subject to refunds under the policy, but many victims said this does not reflect their experiences.

Zelle said most fraudulent transaction claims, which include situations where a “bad actor initiates a Zelle transaction from a consumer’s account without authorization,” are refunded.

However, the “no authorization” issue may mean your refund will never go through. That’s because if you click on the scammer’s name and choose to send the money without realizing what you’re doing or that it’s a scam, the argument can still be made that the transaction was “authorized” and had your consent. This is different from other cases where a fraudster gains access to your account under false pretenses and takes the money.

Zelle’s user service agreement instructs consumers to only use Zelle to send money to family, friends and other people they know and trust, the company said.

“Whether consumers use Zelle in their banking apps or the Zelle app, the user experience includes a series of alerts such as validating the recipient’s first name as recorded as an ‘in flow’ message back to the sender during payment initiation and alerts to the sender that once you’ve sent a Zelle payment, you generally can’t get it back, Zelle says Newsweek.

In cases where users experience scams or fraud, they are encouraged to report it to Zelle and their personal banking institution. The report can be used to provide users with a refund.

However, Zelle is not releasing its specific requirements for receiving a refund or the percentage of refunds offered to fraud victims because of concerns about how bad actors would use the information, a company spokesperson said.

“It is a continuing problem in the industry,” the spokesperson said. “It’s not specific to Zelle.”

One story out of many

The scams on payment apps like Zelle and Venmo can look quite different, but they almost always end in lost money and financial distress.

Even those who want to adopt an animal can be attacked by the scammers, as was the case for a member of the WeLoveDoodles community. WeLoveDoodles is a search platform to help users find the best recommended doodle dog breeders.

Garrett Yamasaki, founder and CEO of the platform, said one woman was devastated after losing her money.

“She had been scammed when she tried to buy a doodle puppy from what appeared to be a reputable breeder,” Yamasaki told Newsweek. “The breeder insisted on a Zelle payment for a deposit. Trusting the process, she sent the money. Unfortunately, it turned out to be a scam. The breeder disappeared, leaving her without a puppy and out of her hard-earned cash.”

Despite Zelle’s stated refund policy, the journey to actually getting one turned out to be a frustrating one.

“Zelle’s policy, as we learned, is not very forgiving in fraud cases, especially when the transaction is not unauthorized but sent to a fraudster under false pretenses,” Yamasaki said. “The response from Zelle was that because she had ‘willingly initiated the transaction’ they could not offer a refund. This left her feeling helpless and disillusioned with the security of digital payment platforms.”

Many other Zelle and Venmo scam victims have shared similar stories on Reddit.

One user, who goes by the name RobbedInNYC, said they went out with family members to a club in New York City and were ripped off by a taxi driver.

Outside the club they were met by a line of taxis and ended up accepting a ride from a man who stepped out of the line. The man gave the family a ride back and asked for payment via Venmo or Zelle.

“He asks if he can put his number in my phone for the transaction,” the user wrote. “He takes it for a minute, then says it’s not working and he’s going to send me a Venmo request. My phone dies. Get out of the car and pass out.”

The next day they woke up feeling guilty, thinking the transaction never went through. When they use their phone, they get the news: two different Zelle withdrawals had come out of their account, totaling a loss of $1,700 for what would have been a $20 cab ride.

Even after filing a claim with their bank as well as a police report and having a suspicious profile, the user was never able to secure a refund for the lost money. Even a call to Wells Fargo did nothing to recover the stolen money.

While digital payment platforms offer convenience, some believe they are among the more dangerous to use if you’re sending money to a stranger, even if you think it’s for an actual good or service.

“While digital payment platforms offer convenience, they also require vigilance and an understanding of applicable policies, especially when it comes to refunds in cases of fraud,” Yamasaki said.