Banks are required to refund customers if they lose money because of an error made by the bank. However, many banks will not pay back customers even though they lost money due to a mistake made by the bank. Banks may also charge fees for refunds. For example, Bank of America charges $5 per transaction. If someone loses $1,000 at a casino, they could end up paying $50 just to get their money back.
Argely Oriach was on his road home from a shopping trip when he was robbed at knifepoint. The thief demanded his phone and password. Argely gave them to the robber and ran away. Next morning, Argely, who lives in Brooklyn said he discovered that the robber had drained $8,284 from his bank account at Capital One, using money transfer apps like Zelle. He contacted capital one, fully expecting the bank will refund him the stolen cash as required by federal law, but the bank refunded only $2,000, saying it found no proof that the rest of the cash was stolen. Argely was shocked.
Mr. Oriach said he had filed a police report, but his case hadn’t gone anywhere. He tried to get help through the state attorney general’s office, but couldn’t get anyone to listen. He also tried to file a complaint with the Consumer Financial Protection Bureau, but got nowhere. Then he turned to the media. “It took me two years to figure out I could go public,” he said, adding that he didn’t want to name the bank because he feared retaliation.
Payments apps like Zelle, Paypal, Square Cash, Venmo, etc. have made sending money easy and convenient. Millions of people send billions of dollars every month using these apps. These apps are also great for small businesses because they allow them to accept credit cards and other forms of payment.
But the fact that these apps are free, fast and easy to use means that they are also an attractive target for scammers and thieves, who may try to trick users into giving away their personal information. Banks argue that they should not have to refund customers who accidentally gave scammers access to their accounts. But they have also been reluctant to refund customers who were victims of scams, like Mr. Oriach, whose money was stolen. That could potentially violate federal laws against wire fraud.
In the early 1980s, under the Federal Reserve Board’s regulation of financial institutions, banks had to cover losses caused by fraudulent transactions. This meant that when someone stole money from your bank account, you could get it back. But this did not apply to person-to-person transactions. So if someone else sent you money using a third party app like Venmo, Paypal, Square Cash, etc., then the bank wasn’t responsible.
“Banks are required to follow federal law when processing payments,” said Raffi Williams, an attorney at the National Consumer Law Center. “If you give them your card number, they must comply with all the laws regarding payment transactions. If they fail to do that, they could face penalties under the law.” Banks are not allowed to charge fees for processing credit cards, but they may impose other charges, including late fees, if a customer fails to pay within 30 days after receiving a statement.
In early February, Chuck Ruof said, a thief transferred Mr. Ruof’s mobile phone number to another phone through an attack technique called SIM swapping. The thief then used Mr Ruof’s number to access his account at Bank of America and withdraw $3,450 using the Zelle payment app. Mr. Ruof reported the theft immediately, but his claim was rejected because the transaction appeared to be authorized. The bank said the transfer had not occurred through its system.
Mr. Ruoff had already provided all the information he could think of. So when he got a call from the bank saying they were going to deny his application because he didn’t provide enough proof, he decided to try something else. He called Verizon and explained what happened. Verizon agreed to help him prove his identity, and then sent the bank a copy of the police report and a letter explaining what had happened. After 45 days, the bank still hadn’t responded. Mr. Ruoff kept calling them, hoping for a resolution. But after two months, he was told to stop calling and wait another month. Then he waited three weeks before getting any kind of answer. Finally, the bank said they were denying his application because there wasn’t enough evidence to prove his identity.
Mr. Ruoff had recently moved his account to another bank, and he had not yet received an updated statement from Bank of America. He also hadn’t made any transactions since moving accounts. So when he got a call from someone at Bank of America saying she wanted to send him money via Zelle, he didn’t recognize her name. She told him that he had sent $1,000 to someone else using Zelle.
After The New York Times contacted Bank of America about the issue, it refunded Mr Ruoff’s $1,000. The bank was already considering reversing its decision and paying the claim after taking into consideration additional information provided by Mr Ruoff, said Bill Halldin, a bank spokesman. “We were looking at it again and we decided to pay it back,” he said. Zelle, the mobile payment service owned by Early Warning Services, an Arizona-based company, was not immediately available for comment. Zelle, the largest mobile payments platform in the United States, allows consumers to send money to friends and family through text messages. It also lets businesses accept payments from customers using their phones.
Zelle doesn’t publicly disclose any information about fraud, so it‘s hard to tell how widespread scamming and theft are on the platform. However, according to a report published by the Federal Reserve Bank of New York in 2017, there were just under $1 billion in fraudulent transactions on Venmo in 2016. That number represents less than 0.2 percent of all transactions made through Venmo during the year.
A study of 1,400 consumers found that 24% of them had experienced a phishing scam in 2018. Phishing scams are often done via text messages and emails. They are designed to trick users into giving personal information like usernames, passwords, bank account numbers, social security numbers, etc. These details can then be used to steal money or commit identity theft.
Bob Sullivan is a journalist and long time consumer advocate. He likens the current wave of scams to the early days of internet banking, when phishing scams and other tricks to steal customer logins and passwords were rampant. Banks routinely denied customers’ claims. It took an Order from the Fed in 2005 to make it crystal clear that banks had to pay out on stolen accounts.
Fraudsters are constantly looking for ways to steal money from your account. Sometimes they will pose as someone you know, like an employee at your bank. Other times, they will sell fake products online. And sometimes they will even pretend to be a bank. Fraudsters may also try to get access to your information through phishing scams. Phishing is when criminals send emails pretending to be from legitimate companies, asking you to click links or enter personal information. If you fall for the scam, hackers could gain access to your banking information and steal your funds.
Some lawmakers have begun taking notice. A few weeks after The New York Times published its investigation into cryptocurrency scams, Representative Patrick McHenry asked the Consumer Financial Protection Bureau whether it had any plans to address the issue. “Fraud, including identity theft, is piling up, and is a major problem,’’ he wrote in an Oct. 17 letter.
Representative Stephen F. Lynch, a Democrat of Massachusetts, raised concern at that hearing about consumer protection for Zelle transfers. There’s a responsibility on the part of the bank to protect customers, he said. Senator Elizabeth Warren of Massachusetts, who sits on the banking committee, criticized the big banks that owned Zelle. Reports of widespread fraud harming consumers were deeply concerning, she said. She called on the companies to take responsibility.
The bank had previously told investors that it expected revenue growth of about $10 billion this year, compared with last year’s $9.7 billion, due to higher interest rates and fees. But analysts say the bank could face challenges if customers move away from using debit cards and instead opt for mobile payments like Apple Pay and Google Wallet.
In May 2020, Martin Bronsen, an 80-year old retiree in Florham park, New Jersey, got a call from a stranger claiming to be an Amazon customer services agent. He gave the man access to the computer with Teamview, a remote control app, and the caller then got into his bank account and transferred money using Zelle. The victim lost $3,316.
Mr. O’Brien sent the bank his police reports. He claimed that he had been defrauded by an employee at the bank. After the Consumer Bureau issued guidelines clarifying that Regulation E covers all unauthorized person-to person transfers, he got some good news: The bank refunded him $1,000.
“We decided the claim was legitimate because the facts were accurate and current regulations allowed us to pay the claim. We followed all applicable laws and regulations when processing this payment.” – Mr. Halldin
Ms. Lisio said she had never heard of a company called Fidelity until last year when she received an email from the bank. She said she was surprised to see that her account had been flagged for suspicious activity. “I thought, well, maybe somebody put something in my account,” she said, adding that she had not opened any new accounts since she moved to New York City. “It’s like they’re accusing me of doing something that I didn’ t even do.”. She said she tried to reach out to the bank several times, including through its online chat system, but got nowhere. “I’ve been trying to get answers for two months,” she said.. When asked why she believed she was targeted, she said, “Because I’m black.”.
