JPMorgan Chase is taking proactive measures against fraud on peer-to-peer payments by pre-emptively canceling Zelle payments associated with social media accounts.
An update to Zelle’s terms of service, slated to take effect on March 25, grants Chase the right to delay, block or cancel payments, specifically flagging social media as a high-risk area. Chase’s website clarifies that it will prohibit transfers identified as originating from social media interactions. Between June and December 2024, nearly half of Chase’s customers who filed Zelle or wire transfer fraud claims were scammed through schemes that originated on social platforms.
While Chase has not provided an official reason for the change, it may be responding to proposed legislation that would hold banks accountable for fraudulent transactions on P2P apps. Last August, Democrats introduced a bill aimed to help consumers recover funds lost to fraud on Zelle, Venmo, and similar platforms. Additionally, in December, the Consumer Financial Protection Board filed a lawsuit alleging that Chase, Wells Fargo, and Bank of America had failed to address criminal activity that contributed to scams on Zelle. Collectively, these banks handled 73% of all Zelle payments in 2023.
JPMorgan’s initial reaction to the CFPB suit was to emphasize its commitment to refunding customers for unauthorized transactions, including those involving scams. It also addressed a lawsuit of its own, though it was never filed.
While the shift in political control following last November’s elections has eased some legal issues, P2P fraud remains a major concern for the banks that own Zelle. According to the CFPB, customers of Chase, Wells Fargo and Bank of America have lost more than $870 million to criminals exploiting Zelle for fraudulent activity.
A Prime Target for Fraud
Zelle was launched in 2017 as a response to PayPal’s P2P app, Venmo. As early as 2018, published reports indicated that the platform was especially vulnerable to fraud.
While the speed of transactions was a key selling point, it also meant that once a payment was sent, it was nearly impossible to reverse. Criminals quickly realized they could exploit this by tricking users into sending money under false pretenses, knowing it would be virtually impossible to recover.
Fraud issues aside, it has been a banner year for Zelle. The service processed over $1 trillion in total payment value last year, the highest amount ever sent on a P2P payments platform in a single year.
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