Many consumers are entering the New Year dealing with holiday hangovers, thanks to a flurry of scams and banking-related fraud.
Cyber crooks targeted checking accounts and bank accounts during the year-end rush in some cases by impersonating the so-called fraud department from banks and credit unions. Scammers hope to catch you off guard. Then, they weave a story on how quick action is needed to prevent crooks who had already supposedly hacked into your bank account, maybe by making a Zelle transfer, from draining out even more money.
“The scammers are perfecting their scripts,” said Mark Fetterhoff, senior advisor for the AARP Fraud Watch Network.
More and more, sophisticated phishing attempts ultimately try to trick consumers into using person-to-person payment apps to transfer money to the crooks. The apps include Cash App, PayPal, Venmo and Zelle.
In 2021, the Federal Trade Commission received nearly 70,000 complaints from consumers who sent money to fraudsters via payment apps or similar services totaling $130 million in losses, according to the Consumer Financial Protection Bureau, which trying to address payment fraud. Consumers can submit complaints at www.consumerfinance.gov/complaint.
I wrote about several types of scams in 2022, including how con artists impersonated a DTE Energy representative and drained $1,324.85 from the bank account of a Rochester Hills woman via a Zelle app and how con artists will impersonate Amazon to claim there’s fraudulent activity with your account.
And many times, scammers will pretend to be from your bank.
“If you get a notification whether it be a text message or a phone call or an email that something’s wrong with your bank account, you’re obviously on guard right away,” warned Fetterhoff.
People feel a sense of urgency if they think their savings are vanishing. Being on edge drives them to react more quickly than they might otherwise.
Unfortunately, scammers often spoof email addresses and phone numbers on caller ID to make it appear that it’s from your bank or a payment app, when it’s not.
Many times, Fetterhoff said, people are accustomed to being contacted by their banks anyway, perhaps signing up for alerts about big purchases or activity. People can be misled when scammers sound official, using bits of data about that they’ve obtained, including information now available after major data breaches.
The big problem: Consumers sadly discover that their bank isn’t going to reimburse them in many cases if they lost money to some scams.
Banks pressured to change system
Will things get better in 2023? One can hope that the pressure being put on banks and payment apps will trigger improvements in consumer protection. Right now, a great deal of the risk is shifted onto the consumer — who bankers say need to watch out.
While it’s nice to tell people to never give access to payment apps to strangers — kind of like telling people to lock their doors — I would argue more needs to be done to stop criminals and protect consumers from losing money.
U.S. Sen. Elizabeth Warren, D-Massachusetts, has been waging a war against the Zelle scams, calling for tougher regulation. Warren noted: “Not only is fraudulent activity growing on the platform, but the banks are not refunding the vast majority of defrauded consumers.”
Zelle says protecting consumers is a top priority. But consumers need to realize there are differences between how scams and fraud are defined. If you authorized a payment — such as 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 Services, a fintech company owned by seven of the country’s largest banks and the parent company of Zelle.
Early Warning also argues that “Zelle fraud and scams have materially declined over the last five years relative to the network’s growth.” Zelle use hit 1.8 billion transactions in 2021, totaling more than $490 billion. That’s up from 247 million transactions at its launch in 2017, according to an Early Warning 16-page report posted online Dec. 16.
Consumers who gets trapped, of course, only care about what happens next to their money.
Warnings help but more is needed
Too often, the narrative is that the consumer should have known better when crooks take advantage of the system. Do we just tell someone it’s your fault you stopped to pick up gas at night and were carjacked?
We are reaching a point when it comes to financial fraud and scams where it’s not enough to just educate consumers about how to avoid scams. Fix the damn finanical potholes.
The reality is that someone worked years, maybe decades, to save up that $3,000 or $30,000 that crooks managed to easily transfer into their own hands.
“Consumer education is not a panacea for regulation,” said Ed Mierzwinski, PIRG Education Fund’s senior director of federal consumer programs.
No doubt, consumers must avoid talking to someone who texts, emails or calls, even if they’re claiming to be from a well-known institution, like your bank or the Internal Revenue Service. Hang up, Mierzwinski said, and call a number on your bank card or number listed on a statement or earlier papework.
At the same time, he said, more regulations are needed to protect consumers from being exploited by fraudsters.
Mierzwinski noted that PIRG has pushed for improved safety for toys for years when some in the industry blamed parents for not watching their children play or not teaching a child to use a toy properly. “What if the product was designed wrong?” Mierzwinski said.
He maintains that the peer-to-peer apps are designed so that it’s easy for payments to be made quickly, making it way too easy for scammers to take advantage of that system.
Consumers have limited liabilities when it comes to credit card or debit card fraud, and Mierzwinski said more consumer protections are needed in the peer-to-peer space, too.
More clarity might be ahead. Banking insiders leaked information to the Wall Street Journal that America’s biggest banks are discussing new refund rules that could kick in this year. The effort appears to try to address cases where scammers pretend to be from the bank’s customer support department and then persuade a Zelle customer to send money to what appears to be the customer’s own bank account. The scammer linked the person’s phone number to a fraudulent account.
Just hang up
The big focus by banks has been to tell the consumer to be on guard. Stop the scam before it starts. Don’t use a person-to-person payment app to send money to strangers — or to fix any supposed fraud.
“As the popularity of P2P payments soars, so does the threat that scammers will target consumers,” a spokesperson for the American Bankers Association told the Detroit Free Press in an email.
The banking industry, she said, has ramped up antifraud efforts, including 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,” according to an alert from the American Bankers Association.
The scammers, according to the alert, might direct you to send money to yourself via a payment app or send it to the “bank’s address” to somehow reverse a transaction. Yet, that’s how the crooks get access to your cash.
“Your bank will never tell you to send money to anyone, not even yourself,” according to the American Bankers Assocation. “Criminals try to make you believe you’re sending money to yourself, but you’re actually sending money to the impostor.”
Those impersonating a bank or retailer might ask you to confirm your bank account username and password, credit or debit card account numbers or your Social Security number. Don’t do that either. The criminal could use that information to create a Zelle account or other peer-to-peer account with your information and gain access to money in your bank account.
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 out of her checking account to Chime, according to the Troy Police Department.
The banking industry is running a “Banks Never Ask That” campaign. A bank isn’t going to ask you for your password, PIN or log in information. Tips include: “Whether it’s a scammer impersonating your bank or a real call, stay safe by ending unexpected calls and dialing the number on the back of your bank card instead.”
Consumers don’t have as much protection as they think
What many consumers don’t realize is that they don’t have the same protections when they use a peer-to-peer app as when they use a credit card. You might have more luck at one bank than another getting a refund if you were tricked into sending money into someone else’s account, such as when someone is impersonating a customer service department.
Consumers can run into roadblocks when it’s argued that they authorized the transfer of money, even if they were tricked into doing so. Then, a scam is often treated as anm “authorized” transaction where the consumer often won’t end up being protected.
Carla Sanchez-Adams, staff attorney at the National Consumer Law Center, said consumers shouldn’t be solely responsible for spotting fraud, or bearing the burden of the loss due to fraud, especially when they are victimized by sophisticated fraudsters. Financial institutions, she said, need to do more to spot red flags upfront during the fraud process to prevent the loss of money. If an account has been in existence for 10 years and has never had a string of quick transfers out of it via a payment app, she asked, shouldn’t the bank slow down the process and put a stop to that?
Banks receiving fraudulent payments should do more to prevent fraudsters from opening accounts and using the products they offer, such as access to a payment app, to steal money, she said.
These banks on the other end of the transaction are receiving huge transfers of money as part of these fraudulent transfers, and need to be held more accountable and face more liability, she said. Congress should act to offer more protection to consumers who are victims of payment scams, she said, and the Consumer Financial Protection Bureau should clarify the responsibilities that banks currently have to correct incorrect transfers.
Consumers who end up victims should reach out to their bank immediately when they suspect trouble or spot the fraud and dispute it. File a complaint at the Consumer Financial Protection Bureau. Sanchez-Adams said it’s also possible that consumers could want to contact an attorney if the transaction was unauthorized and the bank doesn’t reimburse the account.
“The problem is a lot of people get freaked out and respond right away, gut reaction, when they get the call. It’s always after the fact that ‘Wait, that’s just fishy. What did I do?’ ” she said.
Contact Susan Tompor: [email protected]. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.
