Complaints of scams and problems with quick-pay apps doubled in one year
SAN FRANCISCO (KGO) -- The nationwide scam targeting Bank of America and Zelle customers is drawing attention to those quick pay apps -- like Zelle. Now a consumer group says it found a sudden surge in complaints about those peer to peer payment apps.
A wave of bank imposter scams sweeping the country has put a spotlight on quick-pay apps -- some say they make it too easy for criminals to drain your bank account. The U.S. Public Interest Research Group has been sounding an alarm -- payments with these apps go through in an instant, and cannot be reversed. If anything goes wrong, consumers are on their own to try to get money back. And now scammers are taking advantage.
"We have seen a lot of scammers using robocalls, robotexts and sometimes these payment apps used to scam people. It's definitely a problem," Jenn Engstrom, of California Public Interest Research Group, or CALPIRG, said.
RELATED: Victim of the Bank of America, Zelle scam? Here are your rights
A study by the national organization U.S. Public Interest Research Group -- or PIRG -- found complaints about payment apps doubled during the one year period ending this past April.
A PIRG study counted 9,277 complaints about payment apps filed with the Consumer Financial Protection Bureau (CFPB) since 2017, when the agency began taking reports.
And more than half -- 5,200 of them -- were filed in the past year alone, more than doubling the total reports so far.
The report found roughly 4,200 of those complaints involved fraud, scams or unauthorized transactions.
7 On Your Side found 560 reports of unauthorized transactions using these apps just since September 1.
RELATED: Bank of America gives refunds to some victims of growing Zelle scam
"The peer-to-peer apps were originally marketed as a way for friends to split expenses,'' the PIRG report says. "However, the ease of opening peer-to-peer accounts, the ease of obtaining information about other users and a variety of ways to trick consumers have created new fraud risks to users. Consumers don't realize that the instantaneous transactions are not reversible, nor that they have fewer consumer protections when they use a payment app or service. So, complaints are way up."
"It's totally unacceptable to let this happen and we need to take action," Engstrom said.
The complaints to the CFPB named several banks and payment apps, including PayPal, which operates Venmo, Cash App, and Zelle, which is owned by seven large banks.
In the latest scam, imposters claiming to be from Bank of America, or other banks tell victims their accounts are being hacked, then persuade them to send money via Zelle to a safe account. They tell victims they will end up getting the money back. Instead it goes to the scammer.
RELATED: More victims of Bank of America, Zelle scams come forward; here's how to protect yourself
Many of those hackers targeted Bank of America customers, and used text messages that mimicked that bank's real fraud alerts to customers and spoofed caller ID that made it appear the real bank was contacting them. Thousands are believed to have fallen for the fraud, prompting Bank of America to warn customers it would never ask them to transfer money.
Federal law does protect consumers who are tricked into giving out their account information to a hacker through these apps. However, advocates say banks don't always refund the money.
"I thought my bank would take care of it, but no,'' scam victim Deborah Lagutaris of Oakland said.
RELATED: School nurse falls victim to scam targeting Bank of America and Zelle customers
"They said no, because you used Zelle,'' another victim, Donna Stoker of Georgia, recalled.
"'I'm sorry ma'm, there's nothing we can do,''' scam victim Crystal Vaka said, recalling the bank's response to her claim for a refund.
"It's always the advice that I'm sorry, there's nothing we can do," cybersecurity expert Bob Sullivan said. Sullivan has been tracking these scams for several years.
He notes that payment apps also don't offer the same protections as credit or debit cards for problems with a purchase -- even if a payment goes to scam.
RELATED: 'He knew what he was doing': San Francisco man loses half his savings in bank transfer scam
"There's virtually no consumer protections on these Zelle transactions. So people started using them, the way you might use a credit card to say, buy tickets for a concert they saw on Craigslist. And that's a terrible idea, because there's no way to get the money back," Sullivan said.
"The financial technology industry is pretty big and they're constantly coming out with new online banks and apps you can use to monitor your money but they need to be treated like credit," Engstrom added.
The American Bankers Association has launched a campaign to advertise how to spot a scam -- but did not respond when we asked about possible regulations for these payment apps.
Take a look at more stories and videos by Michael Finney and 7 On Your Side.
Have a question for Michael and the 7 On Your Side team? Fill out the form HERE!
7OYS's consumer hotline is a free consumer mediation service for those in the San Francisco Bay Area. We assist individuals with consumer-related issues; we cannot assist on cases between businesses, or cases involving family law, criminal matters, landlord/tenant disputes, labor issues, or medical issues. Please review our FAQ here. As a part of our process in assisting you, it is necessary that we contact the company / agency you are writing about. If you do not wish us to contact them, please let us know right away, as it will affect our ability to work on your case. Due to the high volume of emails we receive, please allow 3-5 business days for a response.
