Chase Bank, Zelle Aware of ‘Widespread Fraud’ Yet Do ‘Virtually Nothing’ to Stop It, Class Action Alleges

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Chase Bank and Zelle face a proposed class action over their alleged failure to prevent, properly investigate, warn consumers about or reimburse victims of “widespread” fraudulent activity on the popular money transfer app.

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The 37-page lawsuit was filed by a Pennsylvania consumer who claims the defendants have refused to refund $6,500 stolen from her account via fraudulent Zelle payments in June 2022. Chase Bank and Zelle have failed to reimburse the plaintiff despite their obligation under the federal Electronic Fund Transfer Act (EFTA) to reimburse consumers who experience unauthorized transactions, the filing relays.

The case says that under the EFTA, the financial institutions are liable for fraudulent Zelle transactions unless they can prove that a consumer authorized the payment. Per the filing, Zelle and Chase “knowingly and willfully” skirt this liability by determining that consumers have approved fraudulent Zelle payments without providing an adequate explanation of these findings.

The plaintiff says that Chase temporarily credited the stolen $6,500 back to her account after she filed a fraud claim on June 11, 2022. Then, on June 24, the bank denied her claim and removed the sum from her account based on its conclusion that the transactions were processed “according to the information you provided or was authorized,” the suit relays.

However, the case contends that “such conclusions could not reasonably have been drawn from the evidence available to the financial institutions at the time of the investigation,” especially since Chase continued to deny the plaintiff’s claim even after she provided documentation that proved she was not in the geographic location where the transfers originated from at the time they were initiated.

The filing notes that Zelle, Chase and the six other major banks that own the app reimburse only about half of all fraud claims reported by consumers who had money fraudulently transferred from their accounts.

“Banks, however, including Chase, are aware of the widespread fraud on Zelle but are doing virtually nothing to stop it and little to nothing to help consumers get their money back,” the case says, taking issue with the defendants’ alleged failure to adequately inform consumers about the risks of using Zelle, which is automatically integrated into the Chase mobile banking app.

Rather, the defendants misleadingly advertise Zelle as a safe and secure payment transfer method, the lawsuit alleges. Moreover, Chase’s website portrays the platforms as “one intertwined service,” leading consumers to wrongly believe that Zelle offers the same protections against fraud and unauthorized transactions as Chase banking, the complaint contends.

“Had Defendants properly disclosed the risks associated with using Zelle, and been forthcoming to consumers that the protections of their Chase accounts did not extend to their use of Zelle, consumers would not have believed that any fraud they experienced entitled them to reimbursement by Defendants,” the lawsuit states.

Finally, the case claims that consumers have lost millions of dollars to fraud on Zelle due to the defendants’ failure to adequately safeguard customer financial information and protect their financial accounts from malicious third parties.

The lawsuit looks to represent anyone in the United States whose Chase bank account was debited via an unauthorized transaction using the Zelle mobile application and who was not permanently credited by the companies in full within 45 days of a dispute by the customer or the customer’s authorized representative concerning the transaction.

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