Zelle says it's up to the police to stop scams

• Federal authorities are investigating how banks reimburse consumers who are scammed on Zelle.
• Lawmakers say the banks behind payment apps need to offer more protections.

Scams on payment apps like Zelle are getting so out of hand that federal authorities are starting to investigate.

This week, the Consumer Financial Protection Bureau launched an investigation into JP Morgan, Bank of America, and Wells Fargo — all part owners of Zelle — after Sen. Richard Blumenthal wrote a letter to the agency.

The Senate's Permanent Subcommittee on Investigations found that reimbursements from the three banks for transactions that Zelle users disputed fell from 62% in 2019 to 38% in 2023, Blumenthal said in the letter.

"PSI's investigation of the three banks indicates that they provide their respective employees with broad discretion to determine whether a disputed transaction is unauthorized, and, in turn, whether a consumer is entitled to reimbursement," the letter says.

Zelle's chief fraud risk manager, Ben Chance, meanwhile, told Fortune that the app is doing everything it can to minimize the risk of scams. He also told the outlet that the best way to prevent scams on money-sharing apps is better user education, sound policy and more funding for law enforcement.

"The real solution is to focus on the criminals who are perpetrating these crimes across phone, text message, email, digital marketplaces, and social media platforms…and of course, partnering with those platforms, along with financial services and law enforcement in the prosecution and removal of these criminal actors," Chance told the outlet.

But even for law enforcement, money lost in a scam can be difficult to recover. On August 2, Democrats in Congress introduced a bill that would give increased reimbursement protections to people who lose money to scams on peer-to-peer payment apps.

The Protecting Consumers from Payment Scams Act, proposed by Rep. Maxine Waters, Sen. Richard Blumenthal, and Sen. Elizabeth Warren, would increase financial institutions' responsibility for helping consumers resolve fraud disputes.

Consumers can be reimbursed for unauthorized transactions under existing federal law, like purchases on a stolen credit card. However, getting money back after sending it through Zelle or other payment apps is much more difficult.

If you accidentally send money to a scammer, the Federal Trade Commission recommends asking the company you send the money through if there's a way to recover the funds. If you lose the money through a money transfer app, the agency says to report the fraudulent transaction to the app's parent company.

"If you linked the app to a credit card or debit card, report the fraud to your credit card company or bank. Ask them to reverse the charge," the FTC says.

Zelle did not immediately return a request for comment from Business Insider on Saturday.