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US-based payments app Zelle will now refund victims of imposter scams after mounting pressure from US lawmakers and federal watchdogs concerning consumer protection.
The peer-to-peer payment network, owned by seven banks — Bank of America, Truist, Capital One, US Bank, PNC Bank, JPMorgan Chase and Wells Fargo — via a financial services company called Early Warning Services (EWS), will begin reversing transfers made through Zelle, where customers were duped by scammers posing as government or bank agents.
According to Reuters, Zelle has begun reversing payments made to suspicious scammer accounts by victims since June 30.
According to an investigation by senior US lawmakers, Zelle users lost $440 million to fraudulent transactions in 2021. The FTC estimates that in 2022, imposter fraud accounted for $2.6 billion in total losses across all payment methods.
Zelle is currently used by more than 100 million people who hold a US bank account. Authorising transactions when reimbursing customers can cost billions of dollars for banks. To avoid this cost, Zelle’s parent company, EWS, has implemented a clawback mechanism to refund victims of imposter scams.
The Scottsdale, Arizon-based company has been working on reimbursements for imposter scams since August 30, when the company first disclosed repayments for a then-undisclosed scam type, fearing that scammers might start making false claims.
Zelle now also requires its lenders to implement a tool that flags risky transfers. However, the company maintains that scam rates on its platform are low- out of the $629 billion worth of payments in 2022, only 0.1% of fraudulent transactions were reported.
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