SCOTTSDALE, Ariz.–The seven banks that own the payments network Zelle are preparing a major rule change early next year that will require financial institutions that participate in the network to compensate customers who fall victim to certain kinds of scams, two people familiar with the plans told the New York Times.
According to the report, the shift would reverse the network’s current policy, which typically sticks customers with the losses on any Zelle transactions that customers/members physically initiated themselves — even if they were tricked into sending their cash to a scammer.
As CUToday.info has reported, there has been a “groundswell of litigation” emerging around what plaintiffs have alleged is a lack of fraud warnings or reimbursements for customers/members who are defrauded via Zelle. Among those that have been targeted in such litigation is Navy FCU.
Details Being Worked Out
“Many details of the new policy are still being worked out, said the people, who requested anonymity to describe private discussions,” the Times reported, noting the Wall Street Journal had initially reported the story. “The approach would, for the first time, require banks to assume liability for certain transactions made on the Zelle network.”
The Times added that Zelle has become the nation’s most popular peer-to-peer payments platform; last year, customers used it for 1.8 billion cash transfers totaling $490 billion. The network lets customers move money instantly to others across any of Zelle’s 1,700 member banks and credit unions.
‘Biggest Vulnerability’
“That speed is the network’s biggest selling point but also its biggest vulnerability: Under the network’s current rules, all payments are irrevocable once made,” the Times noted. “That means that even when a transaction turns out to be fraudulent, neither the customer who sent the money nor the customer’s bank has any recourse for retrieving it.”
Several members of Congress, including Sen. Elizabeth Warren (D-MA), have raised concerns around the issue and demanded the banks provide a response.
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