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Lieber: Lawsuit against Zelle no help to Texas man who loses $1,987 in online theft via Chase

By Dave Lieber, The Dallas Morning News
Published: January 22, 2025, 8:34am

Barry Johnson of Southlake, Texas, woke up one morning in November, went online and learned that he’d been mugged while he was sleeping.

Nobody came up to him and said “give me your money.” That’s the old-fashioned mugging. This was done through his bank, JPMorgan Chase and the Zelle money payment app.

The retired business executive told me that someone removed $1,987 from his checking account. He can’t get it back.

Because Zelle is involved, I’m not surprised. Federal regulators have sued Zelle’s owner, Early Warning Services, and its three owners — Chase, Bank of America and Wells Fargo — contending that the banks did not do enough to protect customers and didn’t handle fraud complaints in a meaningful way.

I remember a few years back, I started telling a spokesperson of one of the major banks about a reader’s problem. But before I could get the first sentence out, the bank rep asked, “Is this about Zelle?” It wasn’t, but his question indicated a larger problem.

Zelle is a major embarrassment to the big bank community. If you don’t know, it’s an app used to send money to a person or institution at no charge.

The lawsuit argues that Zelle has cost Americans $870 million in lost money due to theft. But the banks are adamant when they say that number is overblown.

The $870 million in losses includes people who said they were victims of fraud, but upon further examination the charges turned out to be legitimate.

Johnson, the Texas victim, is one of hundreds of thousands victims. He has fought Chase for weeks, but Chase refuses to help him get his money back.

That’s because Chase doesn’t believe his story. In a letter from Chase to Johnson, the bank explained that the I.P. address on his computer and its geographical location match his home address, not some criminal’s.

That’s important to know. Every time you use your banking app, it checks to make sure the contact is coming from your computer or smartphone at your precise address.

Because he can’t solve this, Johnson told me, “My blood pressure has gone up.”

Who to believe?

Do I believe Johnson, 79, is telling me the truth? Yes, I do.

Do I believe the bank’s claim that the transaction was made on his computer at his house? Yes, I do.

That’s the conundrum here. I’ve talked to the bankers and studied their responses. They deny the massive wrongdoing the government accuses them of.

Bill Halldin of Bank of America said that when an unauthorized transfer is made, the bank reimburses the customer for the loss. When customers lose money in a way that they authorized, either knowingly or not, they try to help get the money back. That’s a difficult task.

“In 2023, we paid more than $65 million to customers impacted by fraud and scams, even when funds could not be recovered,” he said.

Zelle spokesperson Jane Khodos told The Watchdog that “Zelle leads the fight against fraud and scam protection.”

She said that if the lawsuit filed by the U.S. Consumer Financial Protection Bureau shuts down Zelle, that will hurt small businesses because it “would take away a valuable, reliable and needed tool for America’s Main Street — the backbone of the U.S. economy.”

New lawsuit

What do we learn from the lawsuit’s allegations? In Chase’s case, according to the lawsuit, the bank allegedly had weak security measures, kept victims in the dark about money recipients and didn’t block risky transfers or individuals.

“As a result of its failures Chase consumers and other Zelle users lost hundreds of millions of dollars, the suit contends.

“Chase received hundreds of thousands of complaints about fraud related to Zelle,” it adds. Victims were told to report the matter to police (Johnson did) and even tried to get victims to confront the crooks (Johnson is waiting to learn the identity).

Chase spokesperson Brooklyn Bass said regulators are “overreaching” their authority.

“It’s a stunning demonstration of regulation by enforcement,” she said. “Rather than going after criminals, the Consumer Financial Protection Bureau is jeopardizing the value and free nature of Zelle, a trusted payments service beloved by our customers.”

Suzanne Lynch, a former banker and fraud investigator who teaches about financial crimes at Utica University, told me, “This is a huge, huge issue.”

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When it comes to reimbursing victims, she said, “It’s ultimately up to the bank, and this is where consumers are getting hammered.”

How did this happen?

Rohit Chopra, the bureau’s director, gives this take on how this problem became so “huge.”

Banks fell behind when digital payment systems like Venmo, CashApp and PayPal grew quickly.

“This competitive threat triggered fear in the boardrooms of big banks. In response they created Zelle,” Chopra said in a call with reporters.

But safeguards were not implemented and since they weren’t losing money themselves, “they dragged their feet on fixing the problems.”

“In case after case, banks routinely denied requests for help, turning a blind eye even when customers provided clear evidence that criminals had taken over their accounts and that the transactions were unauthorized.”

Does loyalty count?

Don’t think that because you’re a longtime customer of an institution you’ll get a break.

Johnson told me he paid off his mortgage through Chase. He has two checking accounts and one savings account. He also saves a certificate of deposit through Chase.

None of that matters. What matters is his I.P. address and his geographical location.

As he puts it, “Our fate is in the hands of technology rather than people.”


Dave Lieber is “The Watchdog” investigative columnist for The Dallas Morning News.

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