Americans are increasingly relying on payment apps such as Zelle to transfer money quickly and easily for various purposes. However, the convenience of these platforms has also made them a prime target for scammers posing as legitimate businesses. In 2023 alone, consumers reported losing $210 million to fraudsters through payment apps, a significant increase from two years prior. Despite the rise in fraud, it is often difficult for consumers to recover their losses, with big banks like JPMorgan, Wells Fargo, and Bank of America rarely reimbursing customers who have fallen victim to scams.
To address the issue of payment scams, Democrats in Congress are introducing new legislation aimed at closing loopholes in existing laws. Led by Rep. Maxine Waters in the House and Sens. Richard Blumenthal and Elizabeth Warren in the Senate, the bills seek to protect consumers who are defrauded when using platforms like Zelle and Venmo. The legislation would apply to all peer-to-peer payment platforms, but recent focus has been on Zelle, the largest player in the industry. With the increasing popularity of these platforms, it is essential to provide consumers with adequate protection against scammers.
The proposed legislation aims to protect consumers from liability when they are tricked into authorizing transfers to scammers. This would involve closing loopholes in the Electronic Fund Transfer Act of 1978 and ensuring that victims of fraud can be reimbursed by the banks receiving the fraudulent funds. While Zelle has emphasized its efforts to combat fraud and scams, the platform does not offer payment protection to users. Some of its competitors, such as Venmo and PayPal, provide purchase protection options for customers sending money to unknown sellers.
Despite assertions from Zelle’s CEO that the majority of transactions are completed without issues, reports of fraud and scam payments on the platform have raised concerns about consumer protection. In response to pressure from lawmakers, banks on Zelle have started refunding some victims of imposter scams. While there are efforts being made to address fraudulent activity on payment platforms, the legislation introduced by Democrats faces potential opposition from the banking industry and uncertain prospects of passing a Republican-controlled House. Sen. Blumenthal remains hopeful that the bill will receive bipartisan support, but acknowledges the challenges in getting it approved.
