Zelle Fraud Scam

Authored By: Rose Samuel on 2/23/2021

What is Zelle?

Zelle is a United States-based digital payment network, similar to services like Venmo or CashApp. Zelle has collaborated with banks and credit unions across the U.S. to allow peer-to-peer (P2P) money transfers, through their online banking, making it easier to move money without handling cash. Although Members First does not support the Zelle P2P platform through online banking, we do encourage you to be careful with your money in all circumstances.

What are the risks of using Zelle?

  • Once the transfer is initiated out of your account, the funds move so quickly that it cannot be canceled.
  • This high speed makes Zelle desirable to fraudsters.
  • Zelle does not offer protection against unfulfilled purchases like PayPal.

How does the Zelle Fraud Scam work?

Fraudsters use a scam to defeat the 2-step authentication, which Zelle introduced to help curb the fraud.

  • You receive a text alert – appearing to be from your financial institution– warning of a suspicious debit card transaction.
  • Once a response is sent, the fraudster calls you – spoofing the financial institution’s phone number – and claim to be from their fraud department.
  • To verify your identity, the fraudster will then ask for your online banking login credentials and explain that you will be receiving a passcode via text or email that you must provide them with.
  • Upon entering your account, the fraudster then changes your login credentials and initiates Zelle transfers out of your account.
  • Fraudster will then notify you of one more text message with details on the suspicious transaction that you will need to “Confirm” the reversal of. Send $200.00 Zelle payment to Boris Badenoc? Reply YES to send, NO to cancel.

What really just happened was a fraudster impersonated your financial institution to access your online banking and initiate Zelle transfers out of your account. By doing this, it triggered the 2-factor authentication of a passcode being texted or emailed to you to verify the new access. Once the transfers were set up, one more message was sent through Zelle’s authentication process to authorize the transfer, but it was disguised by the fraudster as a “Reversal Confirmation”.

What to do if you receive a text or call requesting your personal information?

  • Contact your Financial Institution immediately to verify the recipient of the message you received.
  • Avoid setting up 2-step authentication passcodes via email due to the risk of email hacks. We recommend you always set this up directly through your online banking portal.
  • Place a password on your account and ensure it is notated of the possible breach.

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