‘A Widespread Fraud Problem’: Class Action Alleges TD Bank Falsely Advertises Zelle as Safe and Secure

A proposed class action alleges TD Bank, N.A. has misrepresented Zelle as fast, safe and secure in an effort to encourage accountholders to sign up for the online money transfer service.

The 20-page lawsuit contends that using Zelle, in truth, comes with “huge, undisclosed security risks” that TD Bank and other financial institutions have left out of their marketing of the service.

Moreover, the case out of Florida says that TD Bank “omits a key fact” about using Zelle – that there is “virtually no recourse” as far as recouping money lost to fraud.

As a result, accountholders who have signed up for Zelle, which is free to use and integrated into many banks’ websites and mobile apps, have been deprived of the benefit of accurate information about the service and have ended up with “huge, unreimbursed losses due to fraud,” the complaint alleges.

“Indeed, unlike virtually every other payment method commonly used by American consumers—debit cards, credit cards, and checks—there is a [sic] no protection for accountholders who are victims of fraud, and virtually no recourse for accountholders attempting to recoup losses due to fraud,” the suit states.

The complaint alleges that the “unique, misrepresented, and undisclosed architecture” of the Zelle payment system means that virtually any money transferred via Zelle, for any reason, and lost due to fraud is “gone forever, without recourse, reimbursement or protection.” Worse, TD, the case alleges, “misrepresents and omits” that it will not reimburse accountholders for money lost on Zelle due to fraud, even when a consumer timely reports the losses.

“TD was required not to misrepresent the unique and dangerous features of the Zelle service in its marketing about it and in contractual representations,” the filing states. “But it failed to do so.”

The complaint argues that consumers would never have signed up to use Zelle “had they known of the extreme risks of signing up for and using the service.”

“[A] massive fraud problem”

Zelle was created in 2017 by the largest banks in the U.S. to allow consumers to make instant digital money transfers. Since its creation, the case relays, Zelle—which is operated by a company owned by Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo—has “by far” become the country’s largest, most widely used money transfer service, with a reported $490 billion in payments sent through Zelle in the last year alone.

According to the lawsuit, however, Zelle’s “massive fraud problem” exists in part because of the immediacy with which money transfers are made through the service. If a fraudster takes money from a Zelle user’s bank account, either directly or by “fooling the Zelle user,” that money is lost for good, the complaint says.

The case, citing statistics from Javelin Strategy & Research, states that nearly 18 million American consumers were defrauded through scams involving person-to-person payment apps such as Zelle in 2020 alone.

The filing charges that the 1,500 banks and credit unions within the Zelle network—including TD Bank—know full well that they have “a widespread fraud problem on their hands” yet have failed to warn accountholders of the risks, much less protect those who fall victim to fraud.

For example, a common scam involves a scammer impersonating a bank employee and requesting that the accountholder transfer money to a different bank account for testing purposes. Unsuspecting Zelle users, tricked into making a fraudulent transfer, in many cases send hundreds of thousands of dollars to fraudsters.”

Despite claiming in its marketing materials that Zelle is a “fast, safe and easy way to send and receive money,” TD Bank does not warn users of either the risk of fraud or the fact that they will not be reimbursed should their funds be stolen, the lawsuit says.

The plaintiff, a Broward County, Florida small business owner, claims to have lost $1,700 in a fraudulent Zelle transfer after a fraudster contacted her on Instagram. The scammer, the suit says, purported to be offering help with securing grants for small businesses. The plaintiff submitted an application for a phony grant and was “approved” almost immediately, the case states.

“After $1,000 was fraudulently transferred from Plaintiff’s bank account using Zelle, the fraudster requested an additional $700 to complete the grant application process,” the complaint reads. “At this point, Plaintiff determined she fell victim to fraud, demanded her money be returned, and reported the fraudulent account to Instagram.”

Although the plaintiff timely informed TD Bank of the situation, the bank “refused” to reimburse the business owner for the losses, even though the Zelle transaction at issue was still pending, the lawsuit alleges.

“TD Bank informed Plaintiff that there was nothing it could do to recover Plaintiff’s money,” the suit says. “Instead, TD Bank closed Plaintiff’s account, opened a new one, and opened a claim investigation. Ultimately, TD Bank denied the claim and refused to reimburse the Plaintiff her fraud-induced losses.”

Who’s covered by the lawsuit?

The case looks to represent all individuals with a TD Bank account who signed up for Zelle and incurred unreimbursed losses due to fraud.

How do I add my name to the case?

When a proposed class action is initially filed, there’s generally nothing you need to do to add your name to the case or otherwise be “included.” It’s only if the lawsuit moves forward and settles that the people affected by the allegations—who are called the “class members”—would need to act.

Should a class action settle, consumers covered by the suit would likely receive notice of the deal by mail or email. This notice will contain information on their legal rights, what they need to do to file a claim, what proof they might need to submit, and other specifics of the settlement.

Most class action cases take time to work through the legal process, however, usually toward a settlement, dismissal or arbitration. For now, Zelle users with TD Bank accounts, and anyone else interested in class action lawsuit and settlement news, should sign up for ClassAction.org’s free weekly newsletter.

The proposed class action detailed on this page was initially filed in Broward County Circuit Court on March 30 before being moved to Florida federal court on April 28, 2022.

A PDF copy of the complaint can be found below.