
Zelle users are finding out the hard way there’s no fraud protection - deegles
https://techcrunch.com/2018/02/16/zelle-users-are-finding-out-the-hard-way-theres-no-fraud-protection/
======
ghshephard
Most of the article was pretty good up until the close:

 _And as word gets around that Zelle and the banks are not helping people who
were scammed, it will ultimately damage Zelle’s reputation and send users back
to PayPal, where buyer protections exist._

This isn't "damaging" Zelle's reputation - you should _never_ use Zelle (or
Venmo) for this type of transaction. Asking your bank to "help" is like asking
the US government for a refund when you mail an envelope full of cash to some
anonymous person.

~~~
zuminator
On one of Zelle's site pages, it states: "EASY. FAST.SAFE. DONE. Forget
running to the ATM or mailing a check. With Zelle, there’s a new way to move
money. Backed by the nation’s leading banks and credit unions, you can send
and receive money with peace of mind and without the hassle."

So, two problems here. It's not "safe." It safely arrives at its destination,
but for most people, a safe money transaction is one that's protected from
fraud somehow, which this is not. And it's not "backed" by banks so much as it
is backed by your bank account. Again, backed by banks sounds like fraud
protection. I don't think there's anything wrong with Zelle. It sounds like a
useful service. But unless they are sanguine about these kinds of problems
occurring then they ought to make it very clear to not send Zelle to a
destination you don't 100% trust. That the only guarantee here is for
guaranteed delivery of your cash and nothing else. So that's not quite the
same as mailing an envelope of cash, which I know from personal experience as
a lad is inherently unsafe even if the destination is your best friend's
house.

~~~
ghshephard
Safe in the sense that me sending money doesn't expose my bank account to
being ripped off. We have a huge problem in the office right now in that we
don't have any mechanism to pay each other digitally for things like lunch -
seriously! A lot of the office feels really weird about giving their banking
credentials to Venmo (even though it's pretty popular here in Ann Arbor, MI)
and a bunch of people think paypal is shady (I use both of them, but I'm
probably a little more open to risk).

Zelle sounds like it will be exactly what we've been looking for - a safe way
to send cash to each other, with the exact same risk profile of _cash_ \- that
is, I give you my cash, and you have my cash, but nothing else.

I 100% agree with you though, that the banks need to make it clear that this
is to be used to send money to friends, and family - not strangers - unless
you are okay with strangers just taking your cash. Poor communication on their
part.

~~~
tzs
> We have a huge problem in the office right now in that we don't have any
> mechanism to pay each other digitally for things like lunch - seriously!

Have you considered running an internal credit system? Those who pay for
other's shares of a given lunch get credits for those, and those whose lunch
is paid for get debits.

When a group of people go to lunch, the person with the persons with high debt
should pick up the tab.

Once a week or once a month or something, people should bring cash to settle
their debt, with the cash then distributed to those with credit.

We almost did that at an office I worked at...but got bogged down in
bikeshedding other features. In particular, our biggest lunch problem was not
settling the bill. It was agreeing where to go to lunch. So some people wanted
the lunch manager to also handle that, and wanted to do it in a way that was
fair.

How to do it fair is not obvious, and no one could agree on the solution.

~~~
helper
We used splitwise to do this at work for while. Its designed for splitting
roommate expenses, but ended up working pretty well for accounting for who
should pay for the next lunch.

When someone would leave the company we would settle up with cash.

------
djsumdog
Zelle exists because the US government hasn't mandated free person-to-person
transfers like nearly every other country on the planet. It tries to be a
private initative to allow for electronic transfers.

That being said .. it's still just a virtual check. If you write a real check
to someone and they cash it and then don't give you what you ask for, you do
have to get that person or entity arrested or take them to court somehow.

Even if Zelle was an official US federal reserve system (which it really
should be and not this hacked together bank program), I think you'd still have
the same exact issue.

Judging from the comments even Venmo appears to have the same issues, even
though it's owned by PayPal. Their parent company PayPal has some protection
because there's that buffer that exists in the PayPal account before it goes
to your bank account (although I though Venmo had this too?) so they can
recover money from that layer, but not always when it gets transferred all the
way out.

~~~
sitharus
It’s also a difference of expectations. I live in a non-US country where
escrow services never took off and consequently nobody expects fraud
protection from financial service providers. The banks cover unauthorised use
but not authorised transfers for fraudulent reasons. That is dealt with by the
police.

PayPal has set some interesting expectations for what a service provider
should cover.

~~~
ltrcola
I'd argue that it's not just PayPal though, although they've played a part for
sure. Credit cards in the US are ubiquitous and offer a very high level of
fraud protection that consumers are used to.

Of course, that fraud protection (and the multiple points & cash back systems)
are all covered by overhead in the system. Merchant fees are quite expensive,
although the consumer never usually sees them except for small things like
cash discounts or minimum transaction amounts at small businesses. There have
been some interesting court cases about the ability for merchants to pass
those fees onto their customers.

------
ikeboy
I've been scammed in reverse by the precursor to zelle, quickpay. I accepted a
transfer and released goods, then the transfer was reversed.

I was told multiple times by chase reps that transfers were not reversible
once initiated, but they never reimbursed me even after I filed a complaint
with the CFPB. It wasn't enough to be worth suing over.

------
otakucode
Well, no fraud protection other than, you know, the law. It's still quite
illegal to defraud anyone, especially "over the wire". Since Zelle is all cozy
with the banks I'd expect there wouldn't be too much pushback when the police
ask who was responsible for some fraud...

~~~
guelo
Most police departments or prosecutors are not going to spend any time on your
$200 concert ticket.

~~~
eadmund
Perhaps they ought to spend time on actual crime (e.g. a $200 ticket) rather
than non-crimes like which particular natural substances someone chooses to
burn and/or ingest? It seems to me that police departments could earn a good
return on investment simply by, y'know, chasing down criminals who defraud
others. Maybe I'm a starry-eyed optimist.

------
refurb
Correct me if I'm wrong, but if I send a scammer money through Venmo (which
Zelle is competing with) the money is gone.

How is this different?

~~~
detaro
You are wrong, which is why Venmo is used to scam sellers instead of buyers:
[https://www.thebalance.com/venmo-
scams-315823](https://www.thebalance.com/venmo-scams-315823)

~~~
refurb
_The user agreement specifies that the service is for “payments between
friends and people who trust each other,” and that there is no buyer or seller
protection._

That sounds the same as Zelle, with the exception that Venmo _might_ help you
if scammed. Sounds like you're very unlikely to get help on the Zelle
platform.

------
klipt
Zelle is _great_ for things like splitting rent. Just don't use it to buy
things from strangers.

~~~
HedgeSparrow
This makes sense to me as a Venmo equivalent, but doesn't Chase have a
QuickPay feature that uses Zelle? Is it more secure from there or corner-
cutting?

~~~
JoshGlazebrook
Their quick pay is literally called "Quick Pay with Zelle". Seems to be the
same thing.

~~~
rexf
That's interesting. They can include anyone that uses Chase Quickpay in their
"Zelle" metrics. Mind you, I'm referring to people who use QuickPay in the
Chase app and not those who have downloaded the newer Zelle app.

------
DrScump

      PayPal... which has long been the standard for these sorts of anonymous transactions
    

No sane seller would use PayPal for such a transaction. PayPal offers _no
seller protection whatsoever_ for items that are not shipped via a common
carrier and with tracking.

~~~
paulie_a
Except if you sell on eBay. I have a friend that is routinely ripped off and
eBay and PayPal basically tell him to fuck off. He does a 500k in revenue
through them and just has to suck it up. Both those companies are scum in my
opinion

~~~
DrScump
The only eBay difference is that eBay effectively forces you to accept
"returns".

------
mirimir
It strikes me that Zelle is basically repackaging of wire transfers. And banks
have always been reluctant to reverse wire transfers. Because, I think,
they're _intended_ to be irreversible, and executed between knowledgeable
parties.

~~~
sizzle
I believe it's ACH payments

~~~
mirimir
OK, but aren't those just as readily reversible as checks? I've read that
banks readily reverse even cashier's checks. Which was the basis of a common
Craigslist scam. Maybe it's just the Zelle doesn't care to be bothered.

~~~
sizzle
Every transaction you make with a credit card is an ACH payment behind the
scenes, so yes they are readily reversible. The banks are hands off with Zelle
though, any payment is like giving call, they have no duty to reverse funds
over disputes between you and receiver unlike PayPal type services. You have
to trust who you are giving money to.

~~~
RodTheHotShot
Zelle is for PERSONAL payments only. It's for sending money to friends and
family and people you trust and know. It's free for both the sender and
receiver BUT you won't get any protection. Once it's sent, it's sent.

Don't people read? It's on Zelle's website "send money in minutes to your
friends and family". I also asked my bank about that and got told there's no
protection unless somebody hacked into your account. Yet, if you sent the
money, it's your responsibility.

Nonetheless, I do accept Zelle for payments and also pay for goods BUT I know
the people I deal with and it's mostly below $100. You can check out this link
below. [https://www.zellepay.com/support/im-unsure-about-using-
zelle...](https://www.zellepay.com/support/im-unsure-about-using-zelle-to-pay-
for-goods-or-services-from-someone-i-dont-know)

BTW: PayPal really sucks if you receive a lot of personal payments. I got my
account frozen because PayPal got nosy and wanted to know more about 15
transactions. It took me a while to get my account unlimited. So, that's why I
use Zelle for personal payments and use PayPal only for purchases. I would
ditch PayPal but I don't have any option for now.

------
gesman
Banks don't care about customers but care a lot about being compliant with
plethora of regulations. Non-compliance for a bank means the lights can a will
be turn off by a governing bodies, of which are many.

Hence - offering a money transfer service within the bank infrastructure and
services without consumer protection - is highly likely is a violation of some
regulation. Or more than one even.

Supplement the complaint with a proof of "misleading marketing practices" \-
and this adds couple extra zero's to potential damages.

Someone just need to dig it deeper and then push the button where it hurts.
Problem solved. Regulators will be on consumer side.

~~~
imajes
Except that'd probably fall into the CFPB remit, which has just been
significantly reduced in scope and veracity due to the current
administration... :(

~~~
gesman
Sending bank fails to disclose irreversability of a transaction implying that
typical consumer protection takes place.

Receiving bank fails to detect simple fraud pattern: Within short period of
time: New account opened, Zelle transfer received, Money withdrawn.

Let it rinse and repeat for long enough - and class action will take place.

------
paulcnichols
I guess its all about expectations. If this were cryptocurrency we'd be
blaming the victims.

------
ryanferg
Funny story. Someone, let's call him Mr. Unlucky, sent me $1700 via zelle a
few months ago. I called my bank and asked them about it and they had no info.
About a week later, a guy emails me saying he meant to send the money to his
land lord John.d.Doe@gmail.com but instead sent it to me, John.Doe@gmail.com.
Both me and this unlucky dude called the banks, called Zelle, etc trying to
get the charges reversed. No luck.

So lucky for this unlucky guy, I had been receiving John.D.Doe's email for
about a decade on and off. I had sent the guy mistaken emails and sort of had
a dialog with him. I knew he was in real estate. I emailed him and he
confirmed that this unlucky guy was indeed renting from him, and his rent was
this $1700 amount. So I took a leap of faith that this guy hadnt been playing
a long con on me and forwarded the money. It was reckless and probably stupid
but it wasn't my money and I felt bad for Mr. Unlucky. Zelle was no help, had
no protection, and allowed this silly mistake to be made. Mr. Unlucky sent me
a nice note and we both commiserated about the flaws in Zelles systems. I
don't think I would use them.

------
mancerayder
People below are rattling off lists of alternatives, PayPal (fees), Venmo
(requires another account setup), Google Wallet, Apple Pay, and so forth.

I'd hate to be that guy, but the cryptocurrency blockchain technologies have
some potential for something none of these other technologies have, which is
elimination of vendor lock-in. It's annoying to have such a variety of places
where I have username and passwords to apps which store my account
credentials. I forgot LevelUp which I use for (it turns out) just ONE
coffeeshop. I have accounts on all the others (linked to my bank account)
minus Venmo because I guess I decided, enough is enough.

The account proliferation due to inefficient competition and lock-in of
vendors is absurd. So in comes Zelle, perfectly positioned to solve that
problem, but for 'friends and family' only? My tenant pays me through it, and
I don't think we're related.

Banks are slow, conservative dinosaurs allowed to constantly play CYA with
consumers.

~~~
tzs
You don't need a username and password to pay by PayPal. For Apple Pay you
only need to use your username and password when setting it up, if I recall
correctly. When you use it to pay you only need your fingerprint (or face if
you have a phone with FaceID?).

Cryptocurrencies (at least the currently popular ones) only sort of match what
Venmo does from your list. The rest do things that cryptocurrencies do not do,
and that most consumers want.

PayPal (if you pay with a credit card), Google Wallet, and Apple Pay provide
you the protections that a credit card provides. Seller doesn't provide the
goods? Call your card company and they reverse the transaction. If you have a
PayPal account as a buyer and pay through a balance on the account, I think
you still get protection.

With Bitcoin and I think the other popular cryptocurrencies in actual use for
real world purchases you don't have protection. Like Venmo (and Zelle) they
are like sending cash, except unlike Venmo and Zelle cryptocurrencies are
essentially a foreign currency which adds some headaches to using them.

Zelle doesn't say it is for friends and family only. What they say in their
FAQ is:

> Zelle is a great way to send money to family, friends, and people that you
> are familiar with such as your personal trainer, babysitter, or a neighbor.
> If you don’t know the person, or aren’t sure you will get what you paid for
> (for example, items bought from an on-line bidding or sales site), we
> recommend you do not use Zelle for these types of transactions.

Presumably your tenant is familiar with you, and so Zelle is fine for him to
use.

It's essentially equivalent to paying in cash. They should say that somewhere
prominent on their site. That would probably clear up a lot of confusion, as I
think most people in the United States have a good intuitive understanding of
when you should and when you should not use cash.

------
amluto
I don't know enough about this to comment authoritatively, but I would expect
KYC/AML rules to apply here. If I send money via any means to a bank account,
I think the bank should be able to produce information about the identity of
the account holder in response to a subpoena. If they can't, regulators might
be rightfully annoyed.

Also, shouldn't Regulation E apply to Zelle?

------
sametmax
So some people use a payment platform that looks like using cash, don't use
any of the common sense they would using cash, get scammed and complain ?

It's PEBCK in it's purest form.

Zelle is secure, as way to wire money. People can't put a gun in your face and
still it while you send it.

It's exactly what it advertises.

I don't see how anybody could be confused by "easy, fast, secure, done" here.

------
valuearb
The last time I looked the iOS app had the worst user reviews I’ve ever seen.
When I looked at it a few months ago it had a 2 Star average, but I just
checked and found its shot up to 4 stars. Curious, I read the user reviews and
...

Just as bad as ever. Can anyone say “gaming the app ratings system”?

Specifically to Apple?

------
forkLding
So Venmo doesnt have real fraud protection either? Any stories of Venmo users
being scammed?

Interesting to see that the only real form of fraud protection offered by
Venmo is a warning in their copy.

~~~
analogmemory
Oh yeah they've been having the same problems.

[https://www.theverge.com/2017/11/21/16681292/venmo-scam-
ipho...](https://www.theverge.com/2017/11/21/16681292/venmo-scam-iphone-
payment-fraud-andy-mai-paypal)

------
dragontamer
Zelle is basically a thin wrapper over ACH transactions. In fact, my
understanding is that Zelle is basically just "One-day ACH". I never really
considered the fraud aspects, but clearly a modern payment processor needs to
have a proper escrow involved somehow. ACH and Zelle don't look like they'd do
the trick.

Dwolla was a good middleman for this sort of thing, but it seems like Dwolla
pivoted to different services unfortunately.

Overall, this is why the USA has credit cards. A Credit Card company is the
middle-man that you trust to handle these issues.

~~~
loeg
Even ACH has a clawback mechanism for fraudulent transactions. It's ridiculous
Zelle does not provide the same protections.

~~~
dragontamer
I don't think its "ridiculous". Cash, Wire-transfers and Checks (especially
Cashier's Checks) do not really have a reversal mechanism IIRC.

Once a Cashier's check goes into someone's account, there's basically no way
for it to come out.

But the thing is: we all know these details already. When working with
Cashier's checks, we know its insanely dangerous and to keep track of those
little paper-slips. It seems like the general public doesn't know that about
Zelle yet.

~~~
ianburrell
Checks and cashier's checks can be reversed. It is common scam to send forged
cashier's check, have victim deposit, and send some of the money by
irreversible wire transfer. When the bank, or account holder, discovers the
fraud, it will be reversed and the victim is out the money.

~~~
djrogers
A _forged_ check yes, but not a valid one. That is not a direct comparison as
these stories are not about forged Zelle transfers.

------
deftturtle
I've never used Zelle and was quite annoyed when they were injected into my
banking data. Very shady nonsense from the big banks. I ended up closing my
Bank of America account for other reasons, but suffice it to say BofA is
horrible. All major banks are engagd in rampant thievery with their high fees
and perverse incentives. The Wells Fargo scandal demonstrates that perfectly.

------
microcolonel
Federal Reserve Note users are finding out the hard way that there's no fraud
protection.

------
trophycase
LOL Zelle. Never heard of it until a month ago until a massive market push
bythr massive banks started shoving it down my throat. I've never wanted to
avoid an app more

------
ravenstine
Whoa, whoa... people use Zelle and Venmo to buy things??? Everyone I know uses
those to send money to friends.

Banks not protecting mah fraud... better switch back to Western Union for my
Nigerian prince money!

------
adamsanders
Zelle's biggest hurdle will be growing their community. Currently, there's
insufficient feature differentiation from Venmo to warrant migration. None of
my friends are on Zelle, so there's no reason for me to be.

~~~
briankirby
Alternatively, I never started using Venmo because I never trusted a third
party to have my banking data. Now I use Zelle because it's backed by my bank,
and since basically everyone I know now has it by default from their bank, I
have seen pretty high adoption rates with my friends.

~~~
majormajor
> I never trusted a third party to have my banking data

How do you pay bills? I know some banks offer their own bill pay services, but
I've never tested them out, and use the utilities' sites.

~~~
deecewan
Reading this makes me realise how good Australia is in this regard.

We have 'BPay', which every* bank supports from within their apps, and almost
all bills support. We have instant intra-bank transfers and next-day inter-
bank transfers.

Additionally, the big 4 banks (yup, we have just 4 big banks) have mobile
payments, so you can link your mobile number to an account and receive
payments into it. It's painful if you're with different banks, but the net
result is that no-one* here uses PayPal, et. al, to transfer money to each
other.

And now, we've just had PayID roll out, which is instant payments based on
email or phone number to any of the banks (I think most banks in AU are
participating, but it's backed by our Reserve Bank), which is a huge game
changer and pretty much negates the need for a third-party to do this for us.

~~~
henrikschroder
> Reading this makes me realise how good Australia is in this regard.

I'm from Sweden, I started paying bills through my internet bank over 20 years
ago. And it was never difficult or a big deal, because the existing giro-based
bill system that _every_ vendor uses and has been using since the 1960's,
slotted right into it, with zero technical integration required from the
payees.

Moving to the US was like stepping into a time machine when it comes to
dealing with banks and bills, it's ridiculously backwards. And Americans
generally have no idea how behind they are. It's so fucking frustrating having
this discussion every single time.

~~~
briandear
LOL. Spend some time dealing with French banks and then we can talk about
American banks. France is a place where people actually write checks for
things and you have to physically visit your specific branch to accomplish
certain transactions. The concept of “branch banking” hasn’t made it to France
yet. Even withdrawing cash from a bank requires an appointment (if you want to
withdrawal over a few hundred Euros for instance.)

French banks are a nightmare conpared to American ones.

------
rhizome
I think it's a little odd that they chose a name so close to the name of the
Nazi in the movie "Marathon Man."

~~~
JumpCrisscross
Zelle roughly translates to "cell," as in a room or a component or a group of
people. (It's also a town near the Austrian border.)

~~~
rhizome
It's not the same, no, but visually it's close.

------
toomuchtodo
Just like there are no “buyer protections” with checks or handing someone
cash.

It’s an expectations issue, not a technology issue. Can’t get your money back
with Western Union or TransferWise either if you’re not making intelligent
decisions.

Edit: _Do not send payments to a stranger unless it’s through a payment system
that offers you protection. That is not the role of person to person money
transfers._

~~~
scribu
> It’s an expectations issue, not a technology issue.

Nobody said it was a technology issue.

~~~
toomuchtodo
I believe my point is Zelle can’t fix users doing stupid things.

~~~
shkkmo
Yes, they can. They can make the correct use case clear on their website and
in their UI. A warning could be added when sending payment that there is no
fraud protection.

I blame both the banks and Zelle for implementing this poorly.

~~~
majormajor
Why wouldn't "add in fraud protection since that's many people's reasonable
default assumption" be the most desirable thing for them to do?

Why do we let people get away with such crappy ideas, and then just blame
users or implementers (UI designers, in this case)?

~~~
scott00
Because fraud protection costs money, and it's useful to have an electronic
payments medium that doesn't have it, and therefore avoids those costs.

~~~
majormajor
So if Paypal can give it to me for free, per the article, the answer just
seems to be "we should tell everybody as loudly that we can that this is a
shit product."

~~~
toomuchtodo
PayPal takes 2.9% and change off the top. Banks do not charge for person to
person transfers. There is no skim for expensive fraud prevention to come out
of.

~~~
majormajor
PayPal doesn't take that off the top for person-to-person. They haven't in...
five years? I don't know. It's been a while. You used to have to do some sort
of "it's a gift" thing, but I haven't seen that in a long time.

[https://www.paypal.com/us/selfhelp/article/What-are-the-
fees...](https://www.paypal.com/us/selfhelp/article/What-are-the-fees-for-
PayPal-accounts-FAQ690)

> There are no fees within the U.S. to send money to family and friends when
> you use only your PayPal balance or bank account, or a combination of your
> PayPal balance and bank account.

~~~
ianburrell
Paypal doesn't provide fraud protection for free friends-and-family payments.

There is scam where sellers will request select friends-and-family payments
both to avoid the fee but also to avoid the protections.

~~~
majormajor
Ah, thanks, that's not obvious from the original article. Or from Paypal,
either, to me. Very obnoxious, that.

