Last week, on the heels of a Cash App settlement, Reuters and the Wall Street Journal reported that some major U.S. banks are being investigated for how customer funds were handled through Zelle payments.
“The Consumer Financial Protection Bureau is investigating major U.S. banks for their handling of customer funds on the peer-to-peer payments platform Zelle Network,” according to Reuters, the Wall Street Journal and USA TODAY.
“The probe focuses on JPMorgan (JPM.N), Bank of America (BAC.N), and Wells Fargo (WFC.N), among other large banks, the report said, citing people familiar with the matter.”
Is there a fee for using Zelle?
Many people pay roommates for bills they split using Zelle, some people pay rent with it and those who prefer no fees when transferring money to their bank from a peer-to-peer payment app prefer it.
Here’s what to know about Zelle, how it works, who owns it and which banks are involved in the Consumer Financial Protection Bureau’s investigation.
Like with anything, there are some down sides to using Zelle. One major disadvantage is that Zelle doesn't allow you to cancel a payment once it's been sent to another Zelle user. This is because there's essentially no "middle man" with Zelle like there is with Venmo. Since the money is deposited directly into another bank account, once you've sent it, you can't get it back.
Is Zelle safe?
While the investigation under way may answer questions around the safety of Zelle, here's what we know.
Zelle can be accessed by hundreds of thousands of users, according to its website and offers tips for safety. Here's how people most often get scammed through Zelle, according to LifeLock:
- Phishing attempts: “Scammers initiate contact pretending to be a trusted institution (like a bank or Zelle itself). This could be via email, text messages, social media, or phone calls. They manipulate individuals into providing sensitive information such as usernames, passwords, or one-time codes.”
- Account takeover: “Once scammers have the necessary information, they access the victim's account without their consent. For Zelle, this would generally involve the unauthorized transfer of funds to an account controlled by the scammer. Since Zelle is designed for instant money transfers, the stolen funds may be immediately accessible, making recovery by the victim more difficult.”
- Mule accounts: “Scammers might transfer stolen funds to money mules — individuals who, wittingly or unwittingly, transfer illegal funds on behalf of others. These transfers can conceal the money trail, making it harder for authorities to track the stolen funds.”
Can I use Zelle without a bank account?
Zelle is a peer-to-peer payment service that circumnavigates the need to deposit sent money into your bank account. So you need one of several specific-institution bank accounts.
Zelle links to your bank account and deposits any money sent directly to the bank account it was sent to. It’s possible for Zelle to operate this way because it's owned by several banks.
“Whether you’re using the Zelle app or using Zelle directly through your bank or credit union’s banking app,” the company’s website says.
“The only information you’ll need to share is an email address or U.S. mobile number tied to a bank account in the U.S.”
Here are some banks non-bank financial tech apps that aren’t compatible with Zelle, according to NerdWallet:
- Alliant Credit Union
- American Express
- Barclays
- Connexus Credit Union
- LendingClub Bank
- Marcus by Goldman Sachs
- Pentagon Federal Credit Union
- SoFi
- Synchrony Bank
- Chime
- Current
- Greenwood
How to file a claim:Am I eligible for the Cash App settlement? Here's who qualifies
Which bank owns Zelle?
Zelle isn’t directly owned by one bank, but owned by a company made up of several U.S. banks.
“Zelle is owned by Early Warning Services, a financial tech firm and consumer reporting agency that is co-owned by seven of the largest U.S. banks: Bank of America, Capital One, Chase, PNC, Truist, U.S. Bank and Wells Fargo,” NerdWallet says.
Is Zelle under investigation?
Yes, government agencies are questioning the handling of Zelle customer disputes and the Consumer Financial Protection Bureau is investigating.
“JPMorgan last week had disclosed in a filing that it was responding to the CFPB's inquiries regarding Zelle and was considering whether to sue a U.S. consumer watchdog over the agency's inquiries,” Reuters reported on August 9.
“Wells Fargo also has previously disclosed in public filings that government authorities have been probing the handling of customer disputes via Zelle… Banks have argued that covering the cost of scams will encourage more fraud and potentially cost billions of dollars.”
