Scammers defraud consumers using Venmo, Zelle, and PayPal apps, causing financial losses

The customers frequently perceive their money in the bank as being secure, but they’re increasingly losing significant money in advanced banking-related and payment app deceits.

1 in 5 targets reported losing over $5,000 due to financial exploitation involving divisions of peer-to-peer payment apps, such as Zelle, PayPal and Venmo, according to a recent survey issued Thursday by AARP.

The promptness of such P2P payment dealings makes them appealing for effortlessly dividing expenses with friends. Nonetheless, that same promptness is proving to be a bonanza for those engaging in fraud. What’s more troublesome for consumers: The acquisitions are mostly not reversible.

A neighbor, friend, or family member who has gone through some kind of commotion involving a payment app or their bank accounts isn’t too hard to find.

Earlier this year, I wrote a segment about how Andy Cohen, the buzz-generating executive producer of the “Real Housewives” franchise, unveiled that that cyber-crooks made off with his money using three wire transfers out two of his bank accounts. He did not specify how much money was lost but implied it was significant. Scammers engineered the scheme by initially impersonating someone from his bank’s fraud department.

In late January, a Troy resident reported losing $4,500 from his credit union account after being hit by scammers, according to a report created to the Troy police.

The man claimed he was contacted by a suspect posing as a representative of Navy Federal Credit Union.

Earlier, someone had contacted him about another issue, delivery problems with a package. Nonetheless, the man told police he contacted the U.S. Postal Service and was informed the delivery issue was fraud, according to Sgt. Ben Hancock, of the Troy Police Department.

After that, he heard from someone impersonating his credit union. The call seemed real and like it could be related to the earlier scam involving the delivery. He ended up buying gift cards to solve some issue that was raised by the person impersonating the credit union.

The reason given and the amount requested weren’t disclosed in the police report.

Later, as part of that same scam, the Troy man was deceived into handing over his bank information. Once the man became suspicious, he contacted his credit union directly. The credit union informed him that $4,500 had been withdrawn from his savings account, according to the Troy police report.

The victim reported the deceit, Hancock stated, and the credit union will try to recover the money.

Hancock stated police have noticed a rise in this kind of deceit, which frequently incorporates using computers or mobile phones to assist the scam.

“The best guidance we can provide is to never provide gift cards as any form of payment and to never provide your banking information,” Hancock stated.

Various consumers don’t get their money back

The big issue for consumers is that many times they’re out of luck when it comes to retrieving their money back after being the victim of cyber-crooks who gain access to their cash through deceit involving peer-to-peer apps.

I’ve written numerous times in recent years about these complex money app deceits that rob significant savings from consumers. While don’t-click-on-links alerts to consumers are vital, more oversight is needed to plug the gaps that make stealing money far too convenient for scammers.

Florence Johnson, the national director of AARP’s BankSafe program, stated regulators have to consider the notion of shared responsibility — and cost — when it comes to reimbursing consumers who lose money on some complex P2P-related deceits.

The deceit can begin on social media. Or criminals post counterfeit websites on the internet and make sure those sites appear at the top when you seek out a customer service number or other contact. Rather than contacting a legitimate outfit, you’re unexpectedly dealing with a scammer. Or some telecommunications companies don’t correctly block calls coming from known scammers.

Many corporations, as well as the money apps, need to be held accountable, Johnson stated, for cracking down on fraud in their world.

“It’s really going to take the entire industry to halt this and stop it. And there has to be an incentive for them to get involved.” Johnson stated.

Scammers, Johnson stated, frequently try to intimidate consumers into acting quickly, such as pretending to be from a utility and threatening to shut off their heat in the winter. Or they exploit your trust, like confidence in a romantic relationship that developed online or a natural reaction to a text that appears to be from your bank or credit union.

Not many years ago, scammers would instruct a victim to go to the bank to withdraw money to put on a gift card. Or trusting relatives would take them to the bank to take advantage of them.

In 2019, AARP released a new BankSafe training module for bank and credit union employees to avoid financial exploitation at physical branches. The aim is to allow tellers and other front-line employees to better understand a possible issue and take direct action when they suspect a case of financial exploitation.

In some circumstances, the bank employee takes the customer to another room where the two can talk about whether the customer feels threatened.

Johnson stated over $300 million has been protected as a result of BankSafe training programs.

Now, sophisticated crime organizations are able to access your cash using peer-to-peer payment apps and they don’t require you to appear at a bank branch to withdraw money.

“No one protection is a silver bullet,” Johnson said.

But she insists that more employee training and consumer education can address some problems involving P2P platforms, too.

Consumers want more protection for their money

AARP surveyed more than 2,000 adults ages 18 or older in June and July of 2023 to better understand what consumers are facing when it comes to financial exploitation involving peer-to-peer payment platforms.

The report noted that consumers want payment platforms to offer more protection from financial exploitation, including reimbursements, alerts to potential problems, temporary holds on suspicious digital transactions, and employee training. Consumers who are 50 and older are even more likely than adults 49 and under to want these services.

How current banking regulations don’t always fix the problem

Peer-to-peer payment apps are guarded under federal law from “unauthorized transfers,” which would be prompted by someone who does not have authorization to do so. The consumer isn’t the one making the transfer and gets no benefit from this transfer.

Typically, many deceits would be assumed to be unauthorized. Yet banks become far more challenging for consumers to deal with when they have been tricked into giving access to an account, such as providing codes that are texted during the deceit or other key account information.

The AARP report indicates that peer-to-peer payment platforms are not liable for what’s known as “authorized fraud.” That is when perpetrators deceive consumers into transferring money.

The AARP report suggests that government regulators and P2P providers work together to “more distinctly define the distinctions between these types of fraud and broaden reimbursements for authorized fraud.”

In late June, Zelle increased protection to some fraudulently induced transfers by necessitating 2,100 bank and credit union participants to reimburse consumers for “qualifying imposter scams,” according to a statement from a spokesperson for Early Warning Services, the network provider of Zelle. Specifics on what’s covered as an “impostor scam” were not made public.

“The reimbursement policy pertains to certain imposter scams like when a criminal could be posing as an institution you already do business with, such as your bank, mobile phone or utility provider,” the spokesperson for Early Warning Services said. Qualifying criteria applies.

The change ensures consistency across the network and goes further than legal requirements, according to the spokesperson.

In November, the Consumer Financial Protection Bureau stated its intention to supervise the largest payment platforms that are not under the administration of traditional banks to make sure these digital wallets and payment apps follow relevant federal consumer financial protection laws.

“The CFPB is working to prevent further harm by ensuring that financial institutions are living up to their obligations to the law and to their customers. Payment networks and financial institutions should do everything they can to ensure the networks aren’t facilitating fraud — including kicking fraudsters off their services, investing in the appropriate technology, and coordinating closely to ensure that problems are resolved quickly,” the spokesperson stated.

On Feb. 1, the Senate Banking, Housing and Urban Affairs Committee held a hearing on “Exploring Scams and Fraud in the Banking System and Their Impact on Consumers.”

Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center, provided testimony stating that “consumers are plagued by issues with unauthorized dealings as well as fraudulently induced transactions over peer-to-peer payment applications, bank-to-bank wire transfers, check alterations and forgeries, and Electronic Benefits Transfer card skimming,”

Alerts to consumers, she stated, are inadequate, given the increasing complexity of deceit schemes.

If you observe an unauthorized transfer on your peer-to-peer account, you should contact the company and challenge the authorized transfer, according to Lauren Saunders, associate manager for the National Consumer Law Center.

Leave a Reply

Your email address will not be published. Required fields are marked *