Consumers Beware: Lawsuit Claims Zelle Users Are Not Safe From Security Risks

Bank of America is currently dealing with a group of very unhappy customers.

If you receive a call from someone claiming to be from your bank and telling you that your Zelle account may be compromised, hang up. They're trying to scam you out of money.

What is Zelle?

Zelle is a peer-to-peer (P2P) payment application that allows you to transfer funds to someone else free of charge. You sign up by connecting your banking app and cellphone number with the Zelle service. Once connected, money moves from your bank account to nearly any U.S. bank account within minutes.

Zelle works with more than 1,000 banking apps, making it a popular way for users to send money to friends and pay for goods and services.

While it may be convenient, recent history shows that Zelle users may be prime scam targets.

The scam

A class-action lawsuit was recently filed against The Bank of America in federal court in Charlotte, North Carolina. The complaint alleges that the bank fails to protect customers from Zelle scams.

Here's how one scam works:

• The scammer gains access to your account information. This may be through a data breach.
• To access the funds in your account, the scammer needs the two-factor authentication code sent to Zelle's customers when they log into their accounts.
• Posing as a representative of your bank, the scammer sends you a text saying your account may have been compromised.
• Once they plant the seed, you receive a phone call.
• With your help, they either try to log into your account or convince you to log into your account. Logging in triggers the two-factor authentication process, and you're sent a code.
• Once you have the code, they tell you they require it if you want them to "fix" the issue.
• The moment you give the scammer the code, they're off to the races. They have everything they need to access your bank account and steal your money.

Another scam:

• You're shopping for a particular item online and find what you want on a site like Ebay, Craigslist, or Etsy.
• The "seller" tells you that they only receive payment via Zelle.
• You send the payment, but never receive the item as promised.
• You try to contact the seller but they are nowhere to be found.
• Your money is now in their bank account.

The latest court filing claims that Bank of America refuses to offer its customers protection through reimbursement. According to the class-action suit filed earlier, the Zelle app is "neither safe nor secure."

Consumer issues

There are several issues at play, including:

• When a customer downloads their bank or credit union app, Zelle is likely built in. The association between a trusted financial institution and the payment system may offer a false sense of security.
• According to Zelle, payments should be treated like cash. Once the money leaves your bank account, it hits the recipient's account within minutes. Once it's gone, it's gone.
• Zelle does not offer payment protection for authorized payments.
• Once a Zelle customer has been scammed, they have no recourse.

Bank-owned

In an effort to compete with other P2P payment systems, these seven banks got together to create Zelle:

• Bank of America
• Capital One
• JPMorgan Chase
• PNC
• Truist
• U.S. Bank
• Wells Fargo

Reports indicate that some of these banks do a better job of protecting customers against scams than others. While the law says that banks must reimburse unauthorized transactions, some of the banks argue that customers authorized the transactions by following the scammer's instructions.

How to defend yourself

You can protect yourself from most scams by taking the following steps:

• Ignore texts from those you don't know.
• Never click on a link from an unknown party.
• Unless you personally know the person calling, allow calls to go to voicemail.
• Do not assume the caller ID is accurate. Scammers have the technology to "spoof" your bank's phone number, making you believe the call is coming from them.

The best advice may be this: It's your bank account, and you can't count on your bank to make things right if you fall for a scammer's pitch. Protect what's yours by hanging up on anyone who wants access to financial information.