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According to a report by the office of Massachusetts Senator Elizabeth Warren, fraud and scams are on the rise at the cell payment service.
The report, released Monday, cites data from four banks, which counted 192,878 cases totaling $213.8 million in 2021 and the first half of 2022, in which a customer claimed they were fraudulent about a payment been tricked. In only around 3,500 cases, these banks refunded the customer, the report said.
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Additionally, in cases where clear funds were withdrawn from client accounts without authorization, only 47% of those dollars were ever refunded.
SPAIN – 2021/05/19: In this photo image azelle logo seen displayed on a smartphone with thezelle logo in the background. (Photo illustration by Thiago Prudencio/SOPA Images/LightRocket via Getty Images) (Photo illustration by Thiago Prudencio/SOPA Images/LightRocket via Getty Images/Getty Images)
Data for individual banks shows an increase in fraud and fraud, according to the report. PNC Bank had 8,848 cases on cell in 2020 and is on track to have about 12,300 cases this year. US Bank had 14,886 cases in 2020 and 27,702 cases in 2021. Truist had 9,455 cases of cell fraud and fraud in 2020, up to 22,045 last year.
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Early Warning Services (EWS), the fintech company owned by seven major US banks that operates Zelle, issued the following statement to FOX Business.
“Tens of millions of consumers are using cell without incident, with more than 99.9% of payments completed without reporting fraud or fraud. Cell usage has grown significantly since its inception, from 247 million transactions in 2017 to 1.8 billion in 2021, while fraud and fraud rates have steadily declined.”
“We need stronger consumer protections and we need to hold these banks accountable,” Warren argued in a Monday tweet about the cell fraud.
Introduced in 2017, cell has been used for over five billion transactions totaling nearly $1.5 trillion over five years, including $155 billion in payments in the second quarter of this year, according to a September news release from the payments service. Payment volume grew 27% year over year, the press release said.
Customers of over 1,700 banks and credit unions are currently able to use cell.
The report from Warren’s office comes in after the Massachusetts senator raised the payment service fraud issue during a September hearing before the Senate Committee on Banking, Housing and Urban Affairs.
Senator Elizabeth Warren, D-MA, speaks during a Senate Finance Committee on the nomination of Chris Magnus as the next U.S. Customs and Border Protection Commissioner at the Dirksen Senate Office Building on Capitol Hill October 19, 2021 in Washington (Mandel Ngan -Pool/ Getty Images/Getty Images)
At the hearing, she pressed the heads of some of the largest US banks on the number of customers who had reported incidents of fraud at Zelle. Warren also tried to get bank CEOs to require their banks to issue refunds in all cases where customers file fraud complaints withzelle.
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Banks are required under the Electronic Fund Transfer Act to repay customers when funds are withdrawn from their accounts illegally and without authorization. Banks have argued that in cases of fraud – meaning a customer’s account is somehow compromised and they send an unauthorized payment – they refund customers. Banks are more reluctant to reimburse customers who claim to have been scammed, arguing that customers would make such claims more often and it would be difficult to tell if the customer was telling the truth.
The Associated Press contributed to this report.