Just after 8:00 a.m. on Monday, April 24, Margaret Menotti was writing a report for a client.
"I heard my phone ding, and I got a text from Bank of America saying there was suspicious fraud activity on my account," said Menotti, a freelance media relations professional who works from her home in Venice, Florida.
Immediately after that, she got a phone call from someone who said they worked in Bank of America's fraud department and they had seen suspicious activity on her account. The caller asked if she had made two Zelle transactions: a $109 payment for sporting event tickets and a one-cent transaction. Menotti doesn't use Zelle.
"I closed out what I was doing, got into my bank account and said, yeah, I didn't make these," Menotti said in an interview. "She said, don't worry about it, we're here to help you, we can immediately reverse these." The caller also asked Menotti if she knew someone named Doug Bland who lives in Denver. Menotti said no. Bland was trying to put through two Zelle transactions from Menotti's accounts, one from her savings account, the other from her checking account, the woman said.
"I said, well, that's not authorized, I don't know anybody by that name," Menotti said.
"Don't worry about it," the woman said. "We have fraud specialists here. Alejandro Lopez specializes for Bank of America in Zelle fraud."
The rep gave Menotti a claim number, which she wrote down, and started walking Menotti through the steps she needed to take to reverse the Zelle transactions. Menotti started noticing that the screens she was seeing did not exactly match what the rep was describing. The rep told Menotti she needed to use her mobile app, then they would be looking at the same things. She opened the Bank of America mobile app and walked into her husband's office (he's a project manager at Dell who also works remotely) and asked if it all seemed legit to him. He thought it seemed real. She went through the steps the rep told her to take.
Menotti then went back to online banking from her laptop and saw that $3,500 had been withdrawn from her account and sent to Alejandro Lopez. She hung up the phone.
"It was already too late," Menotti said. "I realized my mistake."
For several weeks after that, Menotti spent many hours making dozens of calls to Bank of America and Zelle, trying to get her money back.
Menotti's story is not uncommon. About 120 million consumers and small businesses used Zelle in 2023 to send 2.9 billion transactions totaling $806 billion, according to Early Warning, the bank consortium-owned company that operates Zelle. In 2024, the volume of Zelle transactions is expected to surpass $1 trillion. According to the Pew Research Center, 13% of people who have ever used PayPal, Venmo, Zelle or Cash App say they have sent someone money and later realized it was a scam, while 11% report they have had their account hacked. (Early Warning says 99.95% of the payments it processed in 2023 had no reports of fraud or scam.)
A report put out by Senator Elizabeth Warren in October 2022 stated that four banks reported 192,878 cases of scams — cases where customers reported being fraudulently induced into making payments on Zelle — involving over $213.8 million of payments in 2021 and the first half of 2022.
"In the vast majority of these cases, the banks did not repay the customers that were defrauded," the report said. "Overall the three banks that provided full data sets reported repaying customers in only 3,473 cases (representing 9.6% of scam claims) and repaid only $2.9 million (representing 11% of payments)."
Senator Richard Blumenthal (D.-Conn.), who
When consumers lose money due to Zelle scams, "Zelle and the big banks have said they couldn't help," Blumenthal said during the hearing. "What they mean is they wouldn't help, and their attitude has been, 'not our problem.' Well, to the banks of America, particularly the seven that own and operate Zelle, it is your problem. You own it just as you own Zelle and you have the expertise, the resources, and the obligation to make sure that you do better." (The seven banks that own the Zelle network are Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank and Wells Fargo. American Banker reached out to all for comment. Wells Fargo declined; only Bank of America responded with an interview by press time.)
In June 2023, Early Warning implemented a rule that requires its 2,100 member banks to refund customers that are victims of "qualifying" impersonation scams where crooks pose as a bank or government agency to trick customers into giving up money and/or account information. The company does not share what it takes for a scam case to qualify for the refund. "Each case is closely reviewed by the customer's financial institution," a spokeswoman said.
After listening to many customer stories, including those of Margaret Menotti and the consumers who testified at the Senate hearing, and talking to experts, a picture emerges of a problem that has outgrown large banks' capacity to handle the ensuing fraud investigation and customer service work, even if the overall rate of Zelle fraud is low.
"How many workers are hired per capita to address Zelle?" said John Buzzard, a fraud expert who until recently was lead fraud and security analyst at Javelin Strategy and Research. "You have to pounce quickly and have world-class authentication. I'm not sure that's a constant universally speaking but more of an aspiration."
Bank of America has 37 billion active digital users and at least half of them actively use Zelle, according to the bank.
"Zelle is our customers' number one choice for money movement," said Mark Monaco, head of global payment solutions for Bank of America. "They choose Zelle more often to access their accounts than they write checks or withdraw cash from ATMs or our financial centers. The adoption continues to grow."
Bank of America declined to say how many customer service reps are trained to handle Zelle fraud and scam cases. (Banks make a distinction between the two: if a fraudster takes over a customer's account and makes a Zelle transaction, banks call that fraud; if a customer is tricked into making a payment through Zelle, banks call that a scam.)
Trying to get a refund
When Margaret Menotti realized she had fallen for a scam, she immediately called Bank of America's fraud department and spoke with a bank fraud rep — a real one, this time — about what had just happened. The bank reversed the $109 transaction and she was told the claim number she had been given earlier by the woman claiming to be a Bank of America fraud specialist was not a bank claim number but a phone number.
Menotti dialed that number. A man picked up.
"I said, is this Alejandro? And he said, yes," Menotti recalled. "I said, I want to know why you scammed me out of $3,500. He hung up."
When she recalls the call she thought was from Bank of America, Menotti says the background music was the same as the bank's and there was a message about this being a recorded line that was the same as the bank's.
"It's embarrassing to have fallen for it, but it really sounded like them," she said.
She called the bank again. Bank fraud specialists told Menotti to file a claim with Zelle. They told her that both Zelle transactions went to another Bank of America customer.
She called Zelle's customer complaint number, but got a recording saying she had to call her bank.
In an interview, an Early Warning representative said that Zelle customers who call about scams are redirected to their bank, which has their account data and history, while Early Warning does not store any customer data.
Menotti went back to Bank of America and filed a formal claim to get her money back. She was told it could take 45 business days to process. Two days later it was denied. She called the bank to ask why. In the meantime, she had read about federal
For bankers and network providers, it’s a given that moving to a real-time payment system like Zelle will lead to an increase in fraud attempts. Here's a look at the ways they're fighting back.
When she asked why the claim was denied, she was told, "'You authorized it." Menotti said she did not authorize it; she thought she was speaking to someone at the bank and therefore Reg E applied. She was again told the claim was not approved.
She went to her local bank branch and spoke with the branch manager. He said it was a corporate decision he couldn't override.
She moved her money to a different bank and reported the episode to the Consumer Financial Protection Bureau and the Florida Attorney General. She also wrote to Warren's office and a few journalists.
She didn't hear anything from Bank of America for two weeks, but on May 14, one working day after American Banker reached out to the bank to ask about her case and about 10 days after a journalist from a different publication called the bank with similar questions, a woman named Ashley from the bank's claims department called Menotti to say that Bank of America's leadership team had decided that she would be reimbursed for the $3,500 Zelle fraud that night or the next day. Ashley said the fraud team had called the number associated with the Zelle transaction, the voice did not sound like Menotti's and the person said it was for rent payments. (Menotti and her husband own their home and they don't own any rental property.)
The next day, Menotti saw a credit for $2.63 to her savings account and correspondence from Bank of America saying that was her refund because that was all that they could recover. When she went grocery shopping that day, her debit card and her husband's debit card were declined. She called the bank again, spoke with more than eight people and was told her checking account was closed in error, that Bank of America would send her a check for the amounts in the accounts and that she could not use her debit cards anymore. The rep told Menotti that when she opened the account 40 years ago, she agreed to the terms that the account could be closed at any time.
After demanding to speak with somebody with full visibility to this case, Menotti eventually reached a woman at the bank named Jessica who confirmed that the accounts were closed in error.
While they were talking, Menotti saw a credit come into her savings account for $1,797.37. Jessica told Menotti she would work with an investigator to process the remaining $1,700 to her checking account and transferred her to a representative to reactivate her debit cards.
"I was transferred three times, nobody seemed able to handle this," Menotti said. She was told that it could take 24 to 48 hours for the $1,700 to appear in her checking account.
A different representative told Menotti the bank was reopening Menotti's and her husband's cards, but that she experienced another glitch and couldn't do it. The bank would be sending her new cards.
"What a nightmare this has been," Menotti said. "I am convinced that without pressure from somebody like [American Banker], Bank of America would ignore requests like this. My sense is that they just keep rejecting claims and don't aggressively investigate them until a customer makes a big fuss."
A Bank of America spokesman said the decision to reimburse Menotti was made after considering additional information during a review. He declined to say what that additional information was. He also pointed out that the bank will never ask a client to send money to anyone, and that when sending money using Zelle, clients sometimes receive messages alerting them to red flags that indicate a scam. Clients also receive alerts they are required to review and approve before the transaction can be sent.
Menotti said she never received a message about Zelle and scams before sending either of the transactions, but that she did immediately call customer service when she realized she had been tricked.
The bank spokesman further said that if a customer has questions after they receive calls or texts that appear to be from their bank, they should call the customer service number on their debit or credit card or review their transactions online to confirm any questionable inquiries.
Stopping a scam
In hindsight, there's one thing Menotti wishes she had done differently.
"I think you're so panicked when you think money's coming out of your account," she said. "But once I walked into my husband's office and said, do you think this is legit, I should have just hung up."
Ben Chance, chief fraud and risk management officer at Zelle, backs this up.
"There's an endless barrage of email, text, phone calls, social media messaging that's doing this type of impersonation or otherwise attempting to scam consumers," he said.
The first thing customers should do if they receive a text or phone call that appears to be from their bank is not answer, Chance said.
"The safest course of action is to not respond to that, to pull up their wallet, look at the number on the back of their debit card and contact the bank directly," he said.
Zelle also reminds users to only send payments to people they know and to be on the lookout for scams. It provides "risk insights" to the banks on its network that flag transactions that seem fishy. Zelle representatives were not able to comment on whether a risk insight flagged the transactions on Menotti's account.
Congress is watching this space closely. In January of this year, Senators Elizabeth Warren, Sherrod Brown and Jack Reed wrote a letter to CFPB Director Rohit Chopra, urging him to come up with rules regarding what counts as an authorized or an unauthorized transfer under Regulation E. People interviewed for this article said that when Early Warning created its rule requiring banks to reimburse victims of impersonation scams last June, the CFPB held off on setting its own rule. If consumer complaints keep coming in, the CFPB may reverse this position.
Menotti eventually got her $3,500 back and she is pleased with that.
"I am disappointed with the terrible customer service and passing the buck back to consumers when federal Regulation E is supposed to protect them," she said.
