Zelle and Peer-to-Peer Payment Scams: How to Protect Your Money

In many ways, cash-sharing apps and peer-to-peer money transfer services have streamlined our financial affairs with a fast and convenient way to send and receive funds. Unfortunately, fraudsters also appreciate the speed and efficiency of tools such as Zelle, PayPal, Venmo, and Cash App, and are quick to exploit the fact that these services are often free to use, and transactions generally cannot be reversed. Moreover, innovations in AI and machine learning have given criminals access to cheap and effective new tools for deceiving potential victims. To safeguard your money and take back control, arm yourself with knowledge of their tactics along with basic precautions to head off an instant payment scam.

Common Digital Payment Schemes 

The compromised account ploy:

If you get a message regarding suspicious activity on an account, proceed with caution and remain skeptical until you are certain it is not an attempt to steal your money or sensitive financial information. Because one of the most successful tricks fraudsters use to bilk victims out of large sums of cash is to convince them that their account has been compromised. Often, these scams begin with an urgent text that your account has been compromised, or it is about to be suspended or charged for something you didn’t buy.

In one scenario, you might get a text asking you to verify that you have initiated a large Zelle transfer from your account. If you respond “No,” you would likely get a call from someone who claims to be a representative of your financial institution. A spoofed (fake) number that displays on the caller ID helps the fraudster avoid detection. The caller then tells you that someone is trying to take money out of your account, and the way to resolve the issue is to resend the funds to yourself. What follows is a series of instructions that the caller asserts are a standard part of the recovery process. In reality, if you comply, you will effectively send the money straight to the caller, who has no plans to return the money. And once the transaction is complete, it may be impossible to get this money back since the financial institution may not be able to recover the funds.
 
Other ploys scammers may use to carry out a P2P scam: 

While raising the alarm about a compromised account has often proven a useful ruse for scammers seeking quick cash, there are numerous ways criminals may profit from an instant money transfer scam. Some of these include a request for payment on an item or service that is never delivered, a fake lottery that requires advance payment of a service fee in order to collect a reward, and the “accidental” money transfer in which someone claims to have mistakenly sent you money intended for another person. In certain situations, a demand for immediate payment is accompanied by a threat, such as an arrest warrant for missed jury duty or service disruption from nonpayment of a utility bill. Crooks may also impersonate a colleague, friend, or loved ones, and feign to be in a predicament with a desperate need for cash.

Tips to prevent falling victim to a P2P Payment Scam:

Stick to individuals and businesses you know and trust when transferring funds through peer-to-peer payment services.

If you have any doubts about whether a business transaction may be legitimate, don’t use a service like Zelle or Venmo for payment. P2P money transfer services were primarily designed for personal use, which would include transactions between friends, family members, and acquaintances. If you complete a money transfer and then discover that the recipient is a scammer, there is a high probability that you won’t get this money back since the bank or credit union may be unable to recover the funds. 

Recent accounts of social media scams involving fake ads for cars, property rentals and other items have reported that scammers often request payment by a P2P service or wire transfer. When dealing with new businesses and individuals you haven’t met, it’s far safer to use a credit card, which has stronger consumer protection. 

Don’t get distressed by an urgent request or demand   — it’s a major red flag of a scam.

Fraudsters rely on a reaction of alarm and panic to get you to act quickly, before logic sets in and you can think critically. You can save yourself a great deal of stress and avoid getting taken by remembering that if you’re told you must take immediate action, you’re probably dealing with a scam.

Approach unsolicited communications with caution — don’t get thrown off by the caller ID or an authentic-looking email address. 

Even if you think you know the source of an unsolicited message or phone call, tread carefully until you can be certain. Keep in mind that scammers often use spoofed (fake) phone numbers and email addresses to appear as though they are a trusted entity like a government agency, a business, or a financial institution. Avoid responding directly to an unsolicited call or message, at least until you can verify that it is legitimate. 

Never provide passwords, a PIN, a verification access code, or account numbers via phone, text, email, or social media. If you are contacted about suspected fraud on your account, call the organization at a phone number you know to be legitimate. Get the number yourself to ensure that it can be trusted by checking the back of your credit or debit card, your statement, or the organization’s official website. And if do answer a phone call and it seems suspicious in any way, hang up immediately.

Do not click on links or attachments in unsolicited texts, emails, or social media messages, even if they appear to come from a legitimate source.

Be aware that fraudulent links and attachments are commonly used to get a potential victim to divulge sensitive financial details. They often direct users to an interface which contains a prompt to provide private account information or passwords. A link or attachment from an attacker may also contain malware which can steal personal data, record keystrokes, damage your system, or cause other harm.

Stay alert to the use of AI technology in money transfer scams and confirm any request for funds, even if it appears to be from a friend, loved one, or a colleague.

If you get an unexpected message or phone call from someone you know who claims to need fast cash for an emergency, keep your guard up until you can verify their identity. Be aware that advances in artificial intelligence (AI) and machine learning enable fraudsters to create personalized and plausible-seeming messages and to replicate a person’s voice or appearance with voice cloning tools and digitally manipulated (deepfake) videos. Any behavior or request that doesn’t fit the person’s usual pattern of behavior should be met with suspicion. Before you part with any cash or sensitive payment details, contact that person at a phone number you know to be legitimate to verify the request.

What to do if you are the victim of a P2P payment scam:

Contact your financial institution immediately so they can investigate. If your login credentials were exposed, change them right away. Also report the incident to the Federal Trade Commission (FTC) on their site. Depending on the situation, you may also wish to place a fraud alert and credit freeze with the three major credit reporting agencies, which will restrict access to your credit report so that no one can open a new account while it is in place. In addition, consider filing a police report, to protect against further incidents or identity theft.

Please note the following important change to the Zelle® app: 

Now that more than 2,200 banks and credit unions across the U.S. offer Zelle through their mobile app or online banking site, the standalone Zelle® app for new users has been discontinued as of January 8, 2025. Existing users will no longer be able to send or receive money using the Zelle® app after March 31, 2025. To continue using Zelle®, all users must enroll through their financial institution. You can find instructions for using Zelle with your account at The Police Credit Union here.

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