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The popular peer-to-peer money transfer system Zelle is under fire as fraud cases explode and consumers across the country lose millions, KTLA sister station WFLA reports.

Zelle, owned by major banks, is embedded into many online accounts. Transactions are instant, which is attractive to consumers. But they are also irreversible, which is attractive to criminals.

Scott Schaefer, of Pinellas Park, Florida, said he lost $9,000 through Zelle and that, unlike many reported cases, he did not fall for a scam and initiate the transfers himself.

$9,000 lost

“I’m looking at my account and all of a sudden money is being transferred to somebody, and I have no idea who they are,” Schaefer said.

He said he called Chase Bank immediately when he saw the first pending transaction and asked to stop the transfer.

“Two hours later — after dropped calls, folks giving scripted questions and scripted answers and so forth — they say they’ll look into it, and that’s it,” Schaefer said. “You head into the weekend, and you’ve lost almost $5,000.”

Not only did the transfer continue to go through, but Schaefer said he was hit once again after moving his money to a second, new account, and asking for Zelle not to be attached. That brought his losses to $9,000, he said.

His claims to get the money back were denied. He said Chase blamed him, saying the transfers appeared to come from his device, which Schaefer denies.

“Of course it looks like that,” he said. “That’s what fraud is.”

Schaefer now blames Chase.

“Why do you put money in a bank? To keep it safe. That’s the one job they have: Keep your money safe. They didn’t do it,” Schaefer said.

This story is playing out all across the country. Crooks either hack into consumers’ devices or get in using phishing techniques. Some trick consumers into unknowingly sending them money through Zelle.

Once the money is gone, it’s nearly impossible to get it back.

Demanding answers

The explosion of fraud cases via Zelle is getting the attention of federal lawmakers, including U.S. Rep. Gus Bilirakis, who says more consumer protections are needed.

“We need more teeth into the law because these scammers, they find a way,” Bilirakis said.

Bilirakis is the ranking member of the Consumer Protection and Commerce subcommittee. He says he plans to push for change, possibly similar to credit card fraud protections.

He’s not alone in asking questions. Two Democratic senators, Elizabeth Warren of Massachusetts and Robert Menendez of New Jersey, wrote a letter to Early Warning Services, Zelle’s parent company. In the letter, the senators say, “Your company and the banks have a clear responsibility to more aggressively protect consumers.”

The senators demanded answers, including how banks and Zelle determine which consumers get their money back and which don’t. They also want to know what’s being done to prevent the fraud in the first place.

How to protect yourself

Zelle is created and owned by a consortium of major U.S. banks, including Bank of America, Chase, Capital One and Wells Fargo. It’s free, and last year, people sent $490 billion through Zelle — more than twice Venmo’s $230 billion, according to The New York Times.

So how can you protect yourself?

Most Zelle fraud starts with tricks and phishing techniques, according to the FBI.

In one common scam, the crook pretends to be the bank itself. You may receive an email or text message asking you to confirm a large, fake Zelle payment. When the user replies that they didn’t authorize the transfer, the scammer follows up with a phone call pretending to be the bank. The phone number is typically spoofed so it shows up on caller ID as the bank. You’re then walked through instructions on how to reverse the unauthorized claims. What really happens, though, is that you are transferring money directly to the criminals.

Don’t give any personal information over the phone, and don’t click on text message links from people you don’t know.

Can you get your money back if you are a fraud victim?

That’s a tricky question. There have been reports around the country of some consumers receiving money back while others don’t. Schaefer says he has not.

When banks deny a request, it’s typically because they say the transactions were actually approved by the account holders.

The Consumer Financial Protection Bureau clarified its position on banks’ required compliance with the Electronic Fund Transfer Act of 1978 last year. The CFPB says “if a third party fraudulently induces a consumer into sharing account access information,” that consumer should receive the same protections as if the money were acquired from a stolen debit card or other banking “access device.”

If your bank refuses to reimburse you for a Zelle scam, you should quickly report it to local law enforcement and file a complaint with the CFPB.

Regarding Schaefer’s situation, a Chase spokeswoman sent this statement: “We’ve researched these transactions again and they are consistent with how Mr. Schaefer has accessed his accounts.”

No other information about his case was provided.

Schaefer says his case is under investigation by the Pinellas Park Police Department. He said he won’t stop fighting for answers.

“If I let that go, it’s basically saying, ‘Yeah, I’m responsible for this,’ and I’m not,” Schaefer said.

The Chase spokeswoman sent these additional general tips for consumers:

  • Never provide your personal account information via email, phone calls or text messages
  • Be careful when sending money. It’s important to verify who the recipient is before sending money, as you might not be able to get your money back if accidentally sent to the wrong person. When sending money to a registered user with Zelle from your Chase account, you can see whose name is registered to the phone number or email on the other end. Always confirm the recipient is who they say they are before you send money.