JP Morgan Chase (Chase) has added restrictions to Zelle after scams originating from social media continue to rise.
The bank announced that starting next month, payments on Zelle that appear to come from social media will be blocked, as nearly 50% of scams reported to Chase are traced back to social media platforms.
Chase said: “We may in our discretion decline payments, restrict your use of Zelle through Chase, or take other actions as described in your account agreement if you do not respond truthfully to questions we ask or if you otherwise engage in risky use of the Zelle Service, which includes alleged deceit, fraud, or material misrepresentations in providing information about your payment.”
Zelle is a peer-to-peer (P2P) payment platform that allows users to send and receive money instantly using just an email address or mobile phone number and is integrated into the apps of participating banks and credit unions.
The platform is owned by Early Warning Services, a private company jointly owned by major US banks, including Chase, Bank of America and Wells Fargo.
Last year, the Senate’s Permanent Subcommittee on Investigations revealed that customers at Chase, Wells Fargo and Bank of America filed claims for $456m in 2022, related to fraud and scams on Zelle. Of those claims, the banks reimbursed $341m.
Furthermore, Zelle’s safeguards were noted as a serious issue by the Consumer Financial Protection Bureau (CFPB), which sued Early Warning Services for failing to provide users adequate protection against fraud.
A Zelle spokesperson said: “Banks are working to stop scams where they originate, helping to prevent criminals from stealing money from hardworking consumers,” adding that “combatting scams requires a multilayered approach.”
A global problem
Over in the UK, many financial institutions are pushing for social media platforms to hold more responsibility when it comes to fraud. Last year, the Payment Systems Regulator (PSR) created new fraud reimbursement guidelines that require sending and receiving firms to split the costs equally.
However, a major concern of these firms is that social media holds no accountability. This point was highlighted by Jessica Cath, Head of Financial Crime at financial services compliance consultancy Thistle Initiatives.
”One very positive outcome of the upcoming APP fraud regulation is that it will force payment firms to get their fraud identification and monitoring in order,” Cath said.
“They will only have a few seconds to block a transaction they suspect of being APP fraud, so this is what they need to focus on. It would be great to see social media companies brought into the reimbursement model and held more responsible for fraudulent activity, as they are often the source. This would encourage cross-industry collaboration, which would make APP fraud prevention far more effective.”
