Chase Tightens Zelle Rules Amid Fraud Fears
1min read JPMorgan Chase, one of the largest banks in the United States, has announced significant changes to the way its customers can use the popular payments service Zelle. The move comes in response to a growing concern over fraud and scams, which have cost customers of Chase, Bank of America, and Wells Fargo a combined total of $456 million in just one year.
The new restrictions, set to take effect next month, will block Zelle payments that appear to be connected to social media contacts and online marketplaces. Chase has stated that the Zelle service should be used for payments between friends, family, and others whom the sender trusts, and not for purchasing goods from recipients with whom they are unfamiliar.
In an effort to further protect customers, Chase may directly ask customers what payments are for and how they contacted the recipient. The bank will block transactions identified as potentially risky, and may also restrict a customer's use of Zelle or take other actions if they engage in risky behavior or provide false information about their payments.
Last year, the Senate's Permanent Subcommittee on Investigations found that customers at Chase, Wells Fargo, and Bank of America submitted claims to recover $456 million in 2022, citing fraud and scams on Zelle. The banks reimbursed a total of $341 million for these claims.
Zelle's parent company, Early Warning Services, which is owned by seven major US banks, including the three financial giants mentioned above, maintains that less than one-tenth of one percent of transactions are reported as fraud or scams.
In December, the Consumer Financial Protection Bureau (CFPB) sued Early Warning Services (EWS), Chase, Wells Fargo, and Bank of America, alleging that they failed to implement adequate safeguards against fraud on Zelle. EWS and the banks have denied the allegations, arguing that Zelle has strong anti-fraud measures in place.
The changes announced by JPMorgan Chase aim to better protect customers from fraud and scams, and to ensure that the Zelle service is used as intended. As the use of digital payments continues to grow, it is essential for financial institutions to remain vigilant and adapt their security measures to address emerging threats.
