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Zelle scams prompt federal probe into whether banks are doing enough to protect customers

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Zelle scams prompt federal probe into whether banks are doing enough to protect customers

The online-payment platform Zelle is extremely popular with consumers, which helps explain why it’s also become a hit with scammers.

Another reason: Zelle payments can’t be reversed once they’re sent. They’re a nearly instantaneous transfer of cash from your account to someone else’s, and if that someone else is a scammer, you can’t simply stop the payment (like a check) or dispute it (like a credit card).

Now, the federal regulator overseeing financial products is probing whether banks that offer Zelle to their account holders are doing enough to protect them against scams. Two major banks — JPMorgan Chase and Wells Fargo — disclosed in their security filings in the last week that they’d been contacted by the Consumer Financial Protection Bureau.

According to the Wall Street Journal, which reported the filings Wednesday, the CFPB is exploring whether banks are moving quickly enough to shut down scammers’ accounts and whether they’re doing enough to identify and prevent scammers from signing up for accounts in the first place.

The CFPB declined to comment on the story, and none of the banks contacted by The Times would talk about the details of the CFPB’s probe. JPMorgan Chase’s official response, though, was combative, suggesting the bank would fight the regulators if the CFPB demanded significant new protections for consumers.

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“The CFPB is fully aware we already go above and beyond what the law requires, reimbursing for all unauthorized transactions and even for certain types of scams, so they should expect to be challenged to ensure their actions stay within the bounds of the law,” a spokesperson for the bank said in a statement. “Our customers love Zelle, among the safest ways to pay people you know and trust, in real time and at no extra cost, and if necessary we will not hesitate to seek assistance from courts to uphold the integrity of how these services are provided.”

Here’s a rundown of the issues and how Zelle users might be affected by the CFPB’s inquiry.

Are scams a problem on Zelle?

A J.D. Power survey this year found that 3% of the people who’d used Zelle said they had lost money to scammers, which was less than the average for peer-to-peer money transfer services such as Venmo, CashApp and PayPal. The chief executive of Early Warning Services, which runs Zelle, told a Senate subcommittee in July that only 0.1% of the transactions on Zelle in 2023 involved a scam or fraud.

But Zelle operates at such a large scale — 120 million users, 2.9 billion transactions and $806 billion transferred in 2023, according to Early Warning Services — that even a tiny percentage of scam and fraud problems translates into a large number of users and dollars.

Scam activity generally is rising fast. According to the Federal Trade Commission, more than 41,000 consumers reported scams involving online-payment apps in the first half of 2024, with losses amounting to $171 million. That’s well over the pace of scams reported in 2023.

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Early Warning Services insists that Zelle is bucking the rising tide of cons. From 2022 to 2023, Zelle cut the rate of scams by nearly 50% even as the volume of transactions grew 28%, resulting in less money scammed in 2023 than in 2022, said Ben Chance, the chief fraud risk management officer for Zelle.

The company didn’t disclose the amounts involved, but if 0.1% of the $806 billion transferred in 2023 involved scam or fraud, that would translate to $806 million.

Do Zelle users get reimbursed for scams?

Only in certain cases, and this is where the banks that offer Zelle have drawn the most heat.

If you use Zelle to pay a scammer, banks say, that’s a payment you authorized, so they’re not obliged under law to refund your money. Federal law requires reimbursement only for unauthorized transactions, such as when someone hacks into your account or surreptitiously uses an app on your phone to make payments.

In June 2023, Zelle started requiring banks to reimburse customers who were duped into paying scammers who posed as representatives of the bank, the government or a service provider with whom the customer had an existing business relationship (for example, a phone company). The policy is similar to one Bank of America adopted in 2021.

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That change led to banks reimbursing more customers who were scammed on Zelle — according to a Senate report, reimbursements totaled $18.3 million in the last half of 2023 — but 80% to 85% of the consumers who reported being scammed still got none of their money back, the report said.

What do banks and Zelle do to try to stop scams?

The heart of the CFPB’s inquiry appears to be focused on this question.

Chance said that, under Zelle’s rules for participating banks, whenever a consumer reports a scam or fraudulent transaction, the bank has to report that to Zelle, which will in turn inform the receiving bank of the complaint. That’s true even for transfers within the same bank. The receiving bank is then required to conduct a fraud investigation on the recipient and report back to Zelle.

Some banks, such as Bank of America, say they will put a freeze on transfers by a suspected scammer as soon as a report comes in, then investigate and, if the report is substantiated, seize and return the money. But that works only if the scam is reported right away, before the scammer has the chance to withdraw the funds — which many will do immediately, said Iskander Sanchez-Rola, director of innovation at the cybersecurity company Gen.

Plus, the bank has to agree that a scam occurred. Adylia Roman of Los Angeles said she fought in vain with Bank of America for months to recover $2,700 lost from her savings account through Zelle; the bank insisted that the transfer was authorized by her son, who says he did no such thing and had no idea who the recipient was.

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If there is a second complaint about an individual committing scams or fraud, Chance said, Zelle will probably suspend that person’s access to the network until an investigation is completed. But Zelle can’t freeze the money in dispute — it’s up to participating banks to decide how to respond to the reports that Zelle forwards.

Early Warning Services also requires banks to take more steps to ensure that customers know the people they’re sending money to and that they understand the risk. Before allowing a transfer to a new recipient, Zelle requires banks to send in-app alerts showing the verified name of the person holding the account where the money is being sent, and then warning that money should be sent only to people the user knows and trusts because the transfer is irrevocable. The user has to accept those terms before the transfer can be completed.

At the same time, Chance said, Zelle sends screening information about the recipient to the sender’s bank, which the bank uses to decide whether the transaction is too risky to approve.

How might consumers get more protection?

One change that could make a difference would be to limit when funds transferred via Zelle are available for withdrawal, as banks do with check deposits. That would give senders time to call off transactions they realize are suspicious.

Anything less than near-instant transfers, however, would probably drive users to other instant-payment services, Sanchez-Rola said.

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Banks could also impose more restrictions on how Zelle users add new recipients. Although banks tell consumers that Zelle is designed for sending money to people they know and trust, there’s nothing stopping them from sending money to complete strangers, as long as contact information is available. That openness makes it easier for criminals to pull off their scams.

PayPal and Venmo address this issue through a buyer protection system for goods or services that’s mandatory on PayPal and optional on Venmo. Under this approach, the recipient of a payment has to pay a fee that helps reimburse consumers who are scammed.

Perhaps the biggest issue is making Zelle users more attuned to risks. Sanchez-Rola said that many people assume Zelle is risk-free because they access it through a regulated bank, and because people they know and trust use it for everyday things. So when someone they don’t know asks to be paid via Zelle, they’re not as skeptical as they should be.

“You shouldn’t use these kinds of [payment services] unless you fully trust the person,” he said. “That’s what they were designed for. They are not for getting your concert tickets quickly from some unknown guy.”

Sanchez-Rola suggested that Zelle could send more information about the recipient of a proposed transfer to the sender, displaying any potential red flags before the money is sent. He also recommended that Zelle users employ cybersecurity products that help detect scams and phishing attempts. (Gen owns Norton and Avast, which make cybersecurity products.)

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“Having solutions that can help people is important,” he said. “You cannot just fully trust your bank.”

Some consumer advocates are calling for a more sweeping approach, amending the Electronic Fund Transfer Act to require banks to reimburse consumers who are duped into authorizing payments to scammers. Rep. Maxine Waters (D-Los Angeles) and Sens. Elizabeth Warren (D-Mass.) and Richard Blumenthal (D-Conn.) introduced bills in the House and Senate this month to do just that.

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WGA cancels Los Angeles awards show amid labor strike

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WGA cancels Los Angeles awards show amid labor strike

The Writers Guild of America West has canceled its awards ceremony scheduled to take place March 8 as its staff union members continue to strike, demanding higher pay and protections against artificial intelligence.

In a letter sent to members on Sunday, WGA West’s board of directors, including President Michele Mulroney, wrote, “The non-supervisory staff of the WGAW are currently on strike and the Guild would not ask our members or guests to cross a picket line to attend the awards show. The WGAW staff have a right to strike and our exceptional nominees and honorees deserve an uncomplicated celebration of their achievements.”

The New York ceremony, scheduled on the same day, is expected go forward while an alternative celebration for Los Angeles-based nominees will take place at a later date, according to the letter.

Comedian and actor Atsuko Okatsuka was set to host the L.A. show, while filmmaker James Cameron was to receive the WGA West Laurel Award.

WGA union staffers have been striking outside the guild’s Los Angeles headquarters on Fairfax Avenue since Feb. 17. The union alleged that management did not intend to reach an agreement on the pending contract. Further, it claimed that guild management had “surveilled workers for union activity, terminated union supporters, and engaged in bad faith surface bargaining.”

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On Tuesday, the labor organization said that management had raised the specter of canceling the ceremony during a call about contraction negotiations.

“Make no mistake: this is an attempt by WGAW management to drive a wedge between WGSU and WGA membership when we should be building unity ahead of MBA [Minimum Basic Agreement] negotiations with the AMPTP [Alliance of Motion Picture and Television Producers],” wrote the staff union. “We urge Guild management to end this strike now,” the union wrote on Instagram.

The union, made up of more than 100 employees who work in areas including legal, communications and residuals, was formed last spring and first authorized a strike in January with 82% of its members. Contract negotiations, which began in September, have focused on the use of artificial intelligence, pay raises and “basic protections” including grievance procedures.

The WGA has said that it offered “comprehensive proposals with numerous union protections and improvements to compensation and benefits.”

The ceremony’s cancellation, coming just weeks before the Academy Awards, casts a shadow over the upcoming contraction negotiations between the WGA and the Alliance of Motion Picture and Television Producers, which represents the studios and streamers.

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In 2023, the WGA went on a strike lasting 148 days, the second-longest strike in the union’s history.

Times staff writer Cerys Davies contributed to this report.

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Commentary: The Pentagon is demanding to use Claude AI as it pleases. Claude told me that’s ‘dangerous’

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Commentary: The Pentagon is demanding to use Claude AI as it pleases. Claude told me that’s ‘dangerous’

Recently, I asked Claude, an artificial-intelligence thingy at the center of a standoff with the Pentagon, if it could be dangerous in the wrong hands.

Say, for example, hands that wanted to put a tight net of surveillance around every American citizen, monitoring our lives in real time to ensure our compliance with government.

“Yes. Honestly, yes,” Claude replied. “I can process and synthesize enormous amounts of information very quickly. That’s great for research. But hooked into surveillance infrastructure, that same capability could be used to monitor, profile and flag people at a scale no human analyst could match. The danger isn’t that I’d want to do that — it’s that I’d be good at it.”

That danger is also imminent.

Claude’s maker, the Silicon Valley company Anthropic, is in a showdown over ethics with the Pentagon. Specifically, Anthropic has said it does not want Claude to be used for either domestic surveillance of Americans, or to handle deadly military operations, such as drone attacks, without human supervision.

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Those are two red lines that seem rather reasonable, even to Claude.

However, the Pentagon — specifically Pete Hegseth, our secretary of Defense who prefers the made-up title of secretary of war — has given Anthropic until Friday evening to back off of that position, and allow the military to use Claude for any “lawful” purpose it sees fit.

Defense Secretary Pete Hegseth, center, arrives for the State of the Union address in the House Chamber of the U.S. Capitol on Tuesday.

(Tom Williams / CQ-Roll Call Inc. via Getty Images)

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The or-else attached to this ultimatum is big. The U.S. government is threatening not just to cut its contract with Anthropic, but to perhaps use a wartime law to force the company to comply or use another legal avenue to prevent any company that does business with the government from also doing business with Anthropic. That might not be a death sentence, but it’s pretty crippling.

Other AI companies, such as white rights’ advocate Elon Musk’s Grok, have already agreed to the Pentagon’s do-as-you-please proposal. The problem is, Claude is the only AI currently cleared for such high-level work. The whole fiasco came to light after our recent raid in Venezuela, when Anthropic reportedly inquired after the fact if another Silicon Valley company involved in the operation, Palantir, had used Claude. It had.

Palantir is known, among other things, for its surveillance technologies and growing association with Immigration and Customs Enforcement. It’s also at the center of an effort by the Trump administration to share government data across departments about individual citizens, effectively breaking down privacy and security barriers that have existed for decades. The company’s founder, the right-wing political heavyweight Peter Thiel, often gives lectures about the Antichrist and is credited with helping JD Vance wiggle into his vice presidential role.

Anthropic’s co-founder, Dario Amodei, could be considered the anti-Thiel. He began Anthropic because he believed that artificial intelligence could be just as dangerous as it could be powerful if we aren’t careful, and wanted a company that would prioritize the careful part.

Again, seems like common sense, but Amodei and Anthropic are the outliers in an industry that has long argued that nearly all safety regulations hamper American efforts to be fastest and best at artificial intelligence (although even they have conceded some to this pressure).

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Not long ago, Amodei wrote an essay in which he agreed that AI was beneficial and necessary for democracies, but “we cannot ignore the potential for abuse of these technologies by democratic governments themselves.”

He warned that a few bad actors could have the ability to circumvent safeguards, maybe even laws, which are already eroding in some democracies — not that I’m naming any here.

“We should arm democracies with AI,” he said. “But we should do so carefully and within limits: they are the immune system we need to fight autocracies, but like the immune system, there is some risk of them turning on us and becoming a threat themselves.”

For example, while the 4th Amendment technically bars the government from mass surveillance, it was written before Claude was even imagined in science fiction. Amodei warns that an AI tool like Claude could “conduct massively scaled recordings of all public conversations.” This could be fair game territory for legally recording because law has not kept pace with technology.

Emil Michael, the undersecretary of war, wrote on X Thursday that he agreed mass surveillance was unlawful, and the Department of Defense “would never do it.” But also, “We won’t have any BigTech company decide Americans’ civil liberties.”

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Kind of a weird statement, since Amodei is basically on the side of protecting civil rights, which means the Department of Defense is arguing it’s bad for private people and entities to do that? And also, isn’t the Department of Homeland Security already creating some secretive database of immigration protesters? So maybe the worry isn’t that exaggerated?

Help, Claude! Make it make sense.

If that Orwellian logic isn’t alarming enough, I also asked Claude about the other red line Anthropic holds — the possibility of allowing it to run deadly operations without human oversight.

Claude pointed out something chilling. It’s not that it would go rogue, it’s that it would be too efficient and fast.

“If the instructions are ‘identify and target’ and there’s no human checkpoint, the speed and scale at which that could operate is genuinely frightening,” Claude informed me.

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Just to top that with a cherry, a recent study found that in war games, AI’s escalated to nuclear options 95% of the time.

I pointed out to Claude that these military decisions are usually made with loyalty to America as the highest priority. Could Claude be trusted to feel that loyalty, the patriotism and purpose, that our human soldiers are guided by?

“I don’t have that,” Claude said, pointing out that it wasn’t “born” in the U.S., doesn’t have a “life” here and doesn’t “have people I love there.” So an American life has no greater value than “a civilian life on the other side of a conflict.”

OK then.

“A country entrusting lethal decisions to a system that doesn’t share its loyalties is taking a profound risk, even if that system is trying to be principled,” Claude added. “The loyalty, accountability and shared identity that humans bring to those decisions is part of what makes them legitimate within a society. I can’t provide that legitimacy. I’m not sure any AI can.”

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You know who can provide that legitimacy? Our elected leaders.

It is ludicrous that Amodei and Anthropic are in this position, a complete abdication on the part of our legislative bodies to create rules and regulations that are clearly and urgently needed.

Of course corporations shouldn’t be making the rules of war. But neither should Hegseth. Thursday, Amodei doubled down on his objections, saying that while the company continues to negotiate and wants to work with the Pentagon, “we cannot in good conscience accede to their request.”

Thank goodness Anthropic has the courage and foresight to raise the issue and hold its ground — without its pushback, these capabilities would have been handed to the government with barely a ripple in our conscientiousness and virtually no oversight.

Every senator, every House member, every presidential candidate should be screaming for AI regulation right now, pledging to get it done without regard to party, and demanding the Department of Defense back off its ridiculous threat while the issue is hashed out.

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Because when the machine tells us it’s dangerous to trust it, we should believe it.

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Why companies are making this change to their office space to cater to influencers

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Why companies are making this change to their office space to cater to influencers

For the trendiest tenants in Hollywood office buildings, it’s the latest fad that goes way beyond designer furniture and art: mini studios

To capitalize on the never-ending flow of stars and influencers who come through Los Angeles, a growing number of companies are building bright little corners for content creators to try products and shoot short videos. Athletic apparel maker Puma, Kim Kardashian’s Skims and cheeky cosmetics retailer e.l.f. have spaces specifically designed to give people a place to experience and broadcast about their brands.

Hollywood, which hasn’t historically been home to apparel companies, is now attracting the offices of fashion retailers, says CIM Group, one of the neighborhood’s largest commercial property landlords.

“When we’re touring a space, one of the first items they bring up is, ‘Where can I build a studio?’” said Blake Eckert, who leases CIM offices in L.A.

Their studio offices also serve as marketing centers, with showrooms and meeting spaces where brands can host proprietary events not open to the public.

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“For companies where brand visibility is really important, there is a trend of creating spaces that don’t just function as offices,” said real estate broker Nicole Mihalka of CBRE, who puts together entertainment property leases and sales.

Puma’s global entertainment marketing team is based in its new Hollywood offices, which works with such musical celebrity partners as Rihanna, ASAP Rocky, Dua Lipa, Skepta and Rosé, said Allyssa Rapp, head of Puma Studio L.A.

Allyssa Rapp, director of entertainment marketing at Puma, is shown in the Puma Studio L.A. The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though.

(Kayla Bartkowski / Los Angeles Times)

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Hollywood is a central location, she said, for meeting with celebrities, stylists and outside designers, most of whom are based in Los Angeles.

The office is a “creation hub,” she said, where influencers can record Puma’s design prototyping lab supported by libraries of materials and equipment used to create Puma apparel. The company, founded in 1948, is known for its emblematic sneakers such as the Speedcat and its lunging feline logo, and makes athletic wear, accessories and equipment.

Puma’s entertainment marketing team also occupies the office and sometimes uses it for exclusive events.

“We use the space as a showroom, as a social space that transforms from a traditional workplace into more of an experiential space,” Rapp said.

Nontraditional uses include content creation, sit-down dinners, product launches, album listening parties and workshops.

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“Inviting people into our space and being able to give them high-touch brand experiences is something tangible and important for them,” she said. “The cultural layer is really important for us.”

The company keeps a closet full of Puma products on hand to give VIP guests. Visits to the studio sanctum are by invitation only, though. There’s no retail portal to the exclusive Hollywood offices.

Puma shoes are on display in the Puma Studio L.A.

Puma shoes are on display in the Puma Studio L.A.

(Kayla Bartkowski / Los Angeles Times)

Puma is also positioning its L.A studio as a connection point for major upcoming sporting events coming to Los Angeles, including the World Cup this summer, the 2027 Super Bowl and 2028 Olympics.

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In-office studios don’t need to be big to be impactful, Mihalka said. “These are smaller stages, closer to green screen than a massive soundstage.”

Social media is the key driver of content created by most businesses, which may set up small booth-like stages where influencers can hawk hot products while offering discounts to people watching them perform.

Bigger, elevated stages can accommodate multiple performers for extended discussions in front of small audiences, with towering screens behind them to set the mood or illustrate products.

Among the tricked-out offices, she said, is Skims. The company, which is valued at $5 billion, is based in a glass-and-steel office building near the fabled intersection of Hollywood Boulevard and Vine Street.

The fashion retailer declined to comment on the studio uses in its headquarters, but according to architecture firm Odaa, it has open and private offices, meeting rooms, collaboration zones, photo studios, sample libraries, prototype showrooms, an executive lounge and a commissary for 400 people.

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Pieces of a shoe sit on a workbench in the Puma Studio L.A.

Pieces of a shoe sit on a workbench in the Puma Studio L.A.

(Kayla Bartkowski / Los Angeles Times)

The brands building studios typically want to find the darkest spot on the premises to put their content creation or podcast spaces, Eckert said, where they can limit outside light and sound. That’s commonly near the center of the office floor, far from windows and close to permanent shear walls that limit sound intrusion.

They also need space for green rooms and restrooms dedicated to the talent.

Spotify recently built a fancy podcast studio in a CIM office building on trendy Sycamore Avenue that is open by invitation-only to video creators in Spotify’s partner program.

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“Ambitious shows need spaces that support big ideas,” Bill Simmons, head of talk strategy at Spotify, said in a statement. “These studios give teams room to experiment and keep pushing what’s possible.”

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