Due to a flurry of scams and banking-related fraud, many consumers are entering the New Year with holiday hangovers.
During the year-end rush, cybercriminals targeted checking and bank accounts in some cases by impersonating the so-called fraud department of banks and credit unions. Scammers want you to be caught off guard. Then they spin a tale about how quick action is required to prevent crooks who have already allegedly hacked into your bank account, possibly through a Zelle transfer, from draining even more money.
“The con artists are honing their scripts,” said Mark Fetterhoff, senior advisor for the AARP Fraud Watch Network.
Sophisticated phishing attempts are increasingly attempting to trick consumers into using person-to-person payment apps to transfer money to the crooks. Cash App, PayPal, Venmo, and Zelle are among the apps available.
According to the Consumer Financial Protection Bureau, which is attempting to combat payment fraud, the Federal Trade Commission received nearly 70,000 complaints in 2021 from consumers who sent money to fraudsters via payment apps or similar services, totaling $130 million in losses. Consumers can file complaints by visiting www.consumerfinance.gov/complaint.
In 2022, I wrote about several types of scams, such as how con artists impersonated a DTE Energy representative and drained $1,324.85 from a Rochester Hills woman’s bank account using a Zelle app, and how con artists will impersonate Amazon to claim there is fraudulent activity with your account.
Scammers will frequently pose as employees of your bank.
“If you get a notification that something is wrong with your bank account, whether it’s a text message, a phone call, or an email, you’re obviously on guard right away,” Fetterhoff warned.
When people believe their savings are dwindling, they develop a sense of urgency. Being on edge causes them to react faster than they would otherwise.
Unfortunately, scammers frequently spoof email addresses and phone numbers on caller ID to appear to be from your bank or a payment app when they are not.
According to Fetterhoff, many people are accustomed to being contacted by their banks in any case, having signed up for alerts about large purchases or activity. People can be misled when scammers sound official and use data they’ve obtained, including information now available as a result of major data breaches.
The major issue: Consumers are often disappointed to learn that their bank will not reimburse them if they have lost money due to scams.
Banks are under pressure to change their systems.
Will things improve in 2023? One can hope that the pressure being applied to banks and payment apps will result in improved consumer protection. Right now, a large portion of the risk has been shifted onto the consumer, who bankers warn should be cautious.
While it’s nice to tell people to never give strangers access to payment apps — similar to telling people to lock their doors — I’d argue that more needs to be done to deter criminals and protect consumers from losing money.
Senator Elizabeth Warren, D-Massachusetts, has waged a war against Zelle scams, calling for stricter regulation. “Not only is fraudulent activity on the platform increasing, but the banks are not refunding the vast majority of defrauded consumers,” Warren said.
Consumer protection, according to Zelle, is a top priority. However, consumers should be aware that there are differences in how scams and fraud are defined. According to Early Warning Services, a fintech company owned by seven of the country’s largest banks and the parent company of Zelle, if you authorised a payment — for example, if you paid for a puppy that you never received as part of a pet scam — you may not be able to get your money back.
According to Early Warning, “Zelle fraud and scams have materially declined over the last five years relative to network growth.” In 2021, Zelle will have processed 1.8 billion transactions worth more than $490 billion. According to an Early Warning 16-page report published online on December 16, this is up from 247 million transactions at its launch in 2017.
Consumers who become trapped, of course, are only concerned with what happens to their money.
Warnings are useful, but more is required.
When crooks take advantage of the system, too often the narrative is that the consumer should have known better. Do we just tell someone it’s their fault they stopped for gas late at night and were carjacked?
When it comes to financial fraud and scams, it is no longer enough to simply educate consumers on how to avoid scams. Repair the dang financial potholes.
The truth is that someone worked for years, if not decades, to save up the $3,000 or $30,000 that crooks were able to easily transfer into their own hands.
“Consumer education is not a panacea for regulation,” said Ed Mierzwinski, senior director of federal consumer programmes at the PIRG Education Fund.
Without a doubt, consumers should avoid speaking with anyone who texts, emails, or calls them, even if they claim to be from a well-known institution such as your bank or the Internal Revenue Service. Hang up and call a number on your bank card or one listed on a statement or earlier paperwork, Mierzwinski advised.
Simultaneously, he stated that more regulations are required to protect consumers from being exploited by fraudsters.
Mierzwinski noted that PIRG has long advocated for improved toy safety, even when some in the industry blamed parents for not watching their children play or failing to teach a child how to use a toy properly. “What if the product was designed incorrectly?” Mierzwinski explained.
He claims that the peer-to-peer apps are designed to make quick payments, making it far too easy for scammers to take advantage of the system.
When it comes to credit card or debit card fraud, consumers have limited liability, and Mierzwinski believes more consumer protections are needed in the peer-to-peer space as well.
More clarity could be on the way. Banking insiders told the Wall Street Journal that America’s largest banks are discussing new refund rules that could go into effect this year. The effort appears to be an attempt to address cases in which scammers pose as representatives from the bank’s customer support department and persuade a Zelle customer to send money to what appears to be the customer’s own bank account. The scammer associated the individual’s phone number with a fraudulent account.
Simply hang up.
Banks have focused heavily on warning customers to be cautious. Stop the con before it begins. Use a person-to-person payment app to send money to strangers or to resolve any alleged fraud.
“As the popularity of peer-to-peer payments grows, so does the risk of scammers targeting consumers.” “In an email, an American Bankers Association spokesperson told the Detroit Free Press.
She claims that the banking industry has increased anti-fraud efforts, such as increased behind-the-scenes security controls and warnings to only send money to people you know.
“Scammers impersonating your bank may call to alert you about’suspicious activity’ on your account,” the American Bankers Association warns.
According to the alert, the scammers may direct you to send money to yourself via a payment app or to the recipient “bank’s address” in order to reverse a transaction. However, that is how the crooks get their hands on your money.
“Your bank will never tell you to send money to anyone, including yourself,” says the American Bankers Association. “Criminals try to trick you into thinking you’re sending money to yourself when, in fact, you’re sending money to the impostor.”
Those impersonating a bank or retailer may request confirmation of your bank account username and password, credit or debit card account numbers, or Social Security number. That is also not acceptable. The criminal could use your information to open a Zelle or other peer-to-peer account and gain access to funds in your bank account.
According to the Troy Police Department, in early December, a Troy resident reported that someone she didn’t know opened a Chime bank account in her name and transferred $4,700 from her checking account to Chime.
The banking industry is currently promoting the “Banks Never Ask That” campaign. A bank will not request your password, PIN, or log in information. “Whether it’s a scammer impersonating your bank or a genuine call, stay safe by hanging up and dialling the number on the back of your bank card instead.”
Consumers are not as well protected as they believe.
Many consumers are unaware that when they use a peer-to-peer app, they do not have the same protections as when they use a credit card. If you were duped into sending money into someone else’s account, such as when someone impersonated a customer service department, you may have better luck getting a refund at one bank than another.
Consumers may face difficulties if it is claimed that they authorised the transfer of money, even if they were duped into doing so. Then, a scam is frequently treated as a “authorised” transaction, in which the consumer is frequently not protected.
Consumers should not be solely responsible for detecting fraud or bearing the burden of loss caused by fraud, according to Carla Sanchez-Adams, staff attorney at the National Consumer Law Center, especially when they are victims of sophisticated fraudsters. She believes that financial institutions should do more to detect red flags early in the fraud process in order to avoid financial loss. If an account has been open for ten years and has never had a string of quick transfers out of it via a payment app, shouldn’t the bank slow down and stop that?
She believes that banks that receive fraudulent payments should do more to prevent fraudsters from opening accounts and using the products they provide, such as access to a payment app, to steal money.
These banks on the other end of the transaction are receiving large sums of money as part of these fraudulent transfers, and she believes they should be held more accountable and face greater liability. She believes that Congress should take action to protect consumers who are victims of payment scams, and that the Consumer Financial Protection Bureau should clarify the responsibilities that banks currently have to correct incorrect transfers.
Consumers who become victims should contact their bank as soon as they suspect trouble or notice the fraud and dispute it. Fill out a complaint form and send it to the Consumer Financial Protection Bureau. According to Sanchez-Adams, consumers may want to contact an attorney if the transaction was unauthorised and the bank does not reimburse the account.
“The issue is that many people are startled and react instinctively when they receive a phone call. ‘Wait, that’s just fishy,’ they always say after the fact. ‘What have I done?’ “She stated.
