Zelle Fraud Protection Arbitration: Scam Victims Denied Refunds?

Attorneys working with ClassAction.org suspect that Zelle may have violated consumer protection laws by failing to reimburse fraud victims, and they’re now pursuing legal action on behalf of people who lost money to fraudulent Zelle transactions.

Specifically, the attorneys believe that Zelle and the banks it works with may have misleadingly represented the platform as a safe and secure payment method while failing to protect customers from fraud, properly investigate reports of fraud and reimburse customers for funds stolen through Zelle. They’re now gathering Zelle account holders (including those with Chase Bank accounts, separately) who had money stolen to sign up for a type of legal action called mass arbitration.

Zelle Fraud Sparks Lawsuits, Draws Scrutiny

As Zelle has risen in popularity, the peer-to-peer payment platform has reportedly become a favorite among scammers and fraudsters due to the instantaneous and irreversible nature of its money transfers.

Indeed, Zelle and some of its participating banks have been hit with lawsuits alleging they’ve failed to prevent and address “widespread” fraud on the payment platform. One lawsuit filed against Chase and Early Warning Services, the company that operates Zelle, claimed the companies refused to reimburse a Pennsylvania woman who had $6,500 stolen from her account via fraudulent Zelle payments. According to the case, Zelle and the seven major banks that own Early Warning Services only reimburse about half of all fraud claims reported by customers and do “virtually nothing” to stop fraud from occurring through Zelle—despite representing it as a safe and secure payment method.

Another lawsuit was filed against Zelle and Wells Fargo by a Washington resident who claims to have lost $7,500 when a scammer impersonating a Wells Fargo representative tricked him into transferring funds into what he believed was his own account, purportedly as a way to confirm his identity and stop suspicious transactions from going through. Losses from these so-called “me-to-me” scams are often not reimbursed by banks or Zelle, according to reports.

Only within the last year, Zelle began refunding some victims of certain “imposter scams” after facing pressure from lawmakers. Financial firms that use Zelle reportedly started reversing transfers in June 2023 for customers who were tricked into sending money to scammers posing as representatives of a government agency, bank or service provider.

Customers Complain About Zelle Scams, Lack of Fraud Protection

Zelle customers have posted on Reddit and other online forums—and filed official complaints with the Consumer Financial Protection Bureau (CFPB)—about scams and fraud on the platform. In many cases, victims were not provided with refunds and were told by Zelle and their bank’s fraud department that they could not cancel or reverse the payment.

Below is a sample of complaints posted online [sic throughout]:

I was called from XXXX 's phone number asking if I authorized a Zelle transfer. I said No. The caller said they were with XXXX and I had to transfer to a XXXX agent via zelle to reverse the fraudulent charge. I sent them {$1000.00}. Zelle won't refund me any money even though I was tricked into providing the funds. This call occurred on XX/XX/29 and I reported it to XXXX the same day.”
— 09/30/2022 CFPB complaint, ConsumerFinance.gov

On XX/XX/2022 I sent {$220.00} to a seller through Zelle for sports tickets. After sending the money, the seller stopped responding and did not send the tickets. I have tried contacting them, I have reached out to the bank to see if there is a way to do a charge back to my account, and I have contacted Zelle.. They advised that I could request my money back from the person I sent it to, but also told me it is highly unlikely that I will get it back. There has got to be some way to reclaim money send directly from a checking account when it is obtained fraudulently.”
— 09/22/2022, CFPB complaint, ConsumerFinance.gov

Zelle XXXX with XXXX. I was scammed by a fake company known as XXXX XXXX XXXX. They asked for payment through Zelle, and then disappeared. XXXX and Zelle could not refund me my {$300.00} because Zelle has some non-refundable policy.”
— 09/13/2022, CFPB complaint, ConsumerFinance.gov

I recently got scammed by a person attempting to rent me an apartment. No red flags until we asked to see the apartment after I had already sent over the deposit because the tenant was out of the state. I blindly agreed to it, since ya know the times that we are in, and trying to be understanding. Anyways, it turns on the tenant, and the realtor was someone else. The realtor even used a real realtor email address with an actual company (smart move on their end). The scammer has been using another womans name, which I contacted. The same scammer not only uses her name, but also scammed her out of $5000 through Zelle. Zelle is aware and that scam happened way before mine did. They still have a Zelle account, and continue to use this poor womans email and bank account. Zelle wont do anything. She out five grand, and I'm out 2 grand. Im very frustrated and I don't know what to do. I know I should just settle for not getting my money back, but I need that two grand back.”
— Exciting-Being-1502, Reddit.com

I recently thought I was buying a used telescope off of Cloudynights.com, a user contacted me about a used one he decided to get rid of. We agreed on zelle and he sent me his ID. I sent the money but he never responded back. He then got banned on Cloudynights and I contacted chase about this being a scam that I sent money to a fraudulent vendor but they only filed a dispute and said they couldn't do anything about it and told me to contact zelle, who will obviously not do anything about i.”
— Live_Outside721, Reddit.com

I found woman on a local Facebook group that was selling concert tickets to a popular show. Her facebook history seemed legit as she had family pictures and posts dating back years and I found her in a group for my town. After talking for a little while I ended up sending her about $1200 total; $600 using Zelle through Chase and $600 using Zelle through 5/3. It's now been 24 hours since the money transfer and she has ghosted me. After messaging her multiple times I decided to make a police report, let both banks know of the scam, and reported it to the FTC. Is there anything else I can do? or any chance I can recoup my money? The banks won't tell me / don't know where the money is going or what will happen.”
— Reddit user, Reddit.com

Is This a Lawsuit? What Is Arbitration?

You are not signing up for a lawsuit, but rather a process known as mass arbitration. This is a relatively new legal technique that, like a class action lawsuit, allows a large group of people to take action and seek compensation from a company over an alleged wrongdoing. Here is a quick explanation of mass arbitration from our blog:

“[M]ass arbitration occurs when hundreds or thousands of consumers file individual arbitration claims against the same company over the same issue at the same time. The aim of a mass arbitration proceeding is to grant relief on a large scale (similar to a class action lawsuit) for those who sign up.”

Some companies’ customer agreements may contain a class action waiver and/or an arbitration clause requiring consumers to resolve disputes via arbitration, a form of alternative dispute resolution that takes place outside of court before a neutral arbitrator, as opposed to a judge or jury. It’s for this reason that attorneys working with ClassAction.org have decided to handle these matters as mass arbitrations rather than class action lawsuits.

How Much Does This Cost?

It costs nothing to sign up, and you’ll only need to pay if the attorneys win money on your behalf. Their payment will come as a percentage of your award.

If they don’t win your claim, you don’t pay.

What Could I Get?

There are no guarantees as to how much money you could get or whether your claim will be successful, but it’s possible that fraud victims could get back money for their losses.

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