Zelle is an electronic person-to-person payment service offered by major U.S. banks as an alternative to nonbank P2P services, like PayPal or Venmo. Zelle is convenient, safe, secure and usually free if you have a bank checking or savings account.
Those benefits combined with Zelle’s near-instant and irreversible transactions make the service popular not only with consumers, but also scammers, who’ve reportedly used Zelle to steal thousands of dollars from consumers’ bank accounts.
How Does Zelle Work?
Zelle is easy to use. To send funds, all you need to do is log in to your bank’s online banking service or mobile app, access the integrated Zelle features, and then enter the amount you want to transfer and the recipient’s U.S. phone number or email address.
Recipients who are enrolled in Zelle typically receive the funds within minutes. Recipients who aren’t enrolled receive a notification that explains how to collect the funds.
More than 1,000 banks have incorporated Zelle into their online or app-based services. If your bank doesn’t have Zelle, you can use the service by downloading the Zelle app and enrolling with a debit card.
How Do Scammers Use Zelle?
A typical Zelle scam starts with an unexpected call, email or text message that appears to be from your bank or utility company.
The bank message says your bank is trying to confirm that you made a Zelle transaction for a specified amount. The utility company message states that your utility hasn’t received your payment and will turn off your power within a short time unless you immediately send a payment via Zelle.
Phone number “spoofing” may make these fraudulent calls appear to be legitimate on your phone’s caller ID.
When you contact the phone number provided to dispute the transaction, your call will seem to be connected to your bank or utility company. You’ll then be told to make a Zelle transfer, supposedly “to return the funds to your account.” This transaction – authorized by you – will in fact transfer your funds to the scammer. If your bank requires an authorization code to complete a transaction, the scammer will ask you for that code.
Zelle may also be used in other types of scams, such as fake romances, cryptocurrency cons, suspiciously cheap concert tickets or even supposed sales of purebred puppies.
How Do You Protect Yourself From Zelle Scammers?
The most effective way to protect yourself from Zelle scams is to never use the service to send money to people you don’t know.
“Consumers can and should continue to use Zelle, but be careful that they are sending the money to the right person,” says Erik M. Baskin, founder and financial planner at Baskin Financial Planning in Cheyenne, Wyoming.
If someone contacts you and asks you to send funds to them with Zelle right away, don’t respond. Instead, call your bank on what you know to be a legitimate phone number and ask a bank representative to review recent activity on your account.
Be suspicious of requests from people you don’t know, especially if the situation is presented as “urgent” with a short deadline and frightening consequences. Never share your two-factor authentication passcode with anyone.
Alex Rezzo, founder and financial planner at Andante Financial, an investment advisory firm in Los Angeles, advises his clients to use the recipient’s email address instead of a phone number when they send funds with Zelle.
“Typos are easier to spot within an email address than within digits in a phone number,” Rezzo says.
Another tip is to transfer $1 and confirm verbally that your intended recipient received the payment before you send a large amount. This practice, Rezzo says, “is a good backstop against opportunities for error.”
What Do You Do If You’ve Been Zelle Scammed?
If you’ve been scammed with Zelle, you should contact your bank and report the loss of funds as soon as possible.
Some banks reportedly have refused to offer refunds because the federal law protecting consumers from the theft of their funds applies only to “unauthorized” transactions.
In December 2021, the Consumer Financial Protection Bureau issued guidance to clarify that fraudulent P2P transactions are considered unauthorized because they were initiated by someone other than the consumer and the consumer received no benefit.
The CFPB also stated that banks cannot consider consumer negligence as a factor or claim that consumers waived their protections in their bank account agreement.
If you’ve been scammed with Zelle and your bank refuses to return your funds, you can file a complaint with the CFPB, which forwards consumers’ complaints to financial institutions to respond.
Baskin says, “Zelle remains one of the most efficient ways to send money today. It just needs to be used in a responsible manner with caution.”