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Payments app Zelle begins refunds for imposter scams after Washington pressure

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Payments app Zelle begins refunds for imposter scams after Washington pressure


Nov 13 (Reuters) – Banks on the payment app Zelle have begun refunding victims of imposter scams to address consumer protection concerns raised by U.S. lawmakers and the federal consumer watchdog, in a major policy change.

The 2,100 financial firms on Zelle, a peer-to-peer network owned by seven banks including JPMorgan Chase (JPM.N) and Bank of America (BAC.N), began reversing transfers as of June 30 for customers duped into sending money to scammers claiming to be from a government agency, bank or existing service provider, said Early Warning Services (EWS), the banks’ company that owns Zelle.

That’s “well above existing legal and regulatory requirements,” Ben Chance, chief fraud risk officer at EWS, told Reuters.

Federal rules require banks to reimburse customers for payments made without their authorization, such as by hackers, but not when customers themselves make the transfer.

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While Zelle disclosed Aug. 30 that it had introduced a new reimbursement benefit for “specific scam types,” it has not previously provided details on its new imposter scam refund policy due to worries doing so might encourage criminals to make false scam claims, a spokesperson said.

The new policy marks a major shift from last year when bankers, including JPMorgan CEO Jamie Dimon, told lawmakers worried about rising scams that it was unreasonable to require banks to refund transfers that customers were tricked into approving.

Following its launch in 2017, Zelle grew to become one of the largest U.S. peer-to-peer payments networks by total payments. A March 2022 New York Times report that scams were flourishing on Zelle caught the attention of lawmakers frequently critical of big banks, including Senator Elizabeth Warren.

She and other lawmakers started an investigation, estimating that Zelle users had lost $440 million to all types of fraud in 2021 alone. During a Senate hearing last year, Warren told Dimon and other bank CEOs that they had created a “perfect weapon” for criminals but had not stood by their customers. More than 100 million people, all with U.S. bank accounts, have access to Zelle, according to EWS.

Impersonator fraud was the most-reported scam in 2022 across all payment methods in the U.S., accounting for $2.6 billion in losses, according to the Federal Trade Commission.

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Banks worry that covering the cost of authorized transactions will encourage more fraud and put them on the hook for potentially billions of dollars. Instead of requiring lenders to reimburse customers, EWS has implemented a mechanism that allows banks to claw back funds from the recipient’s account and return them to the sender, said Chance.

Lenders on Zelle are also now required to implement a tool that flags transfers with risky attributes, such as a payment to an account that has never transacted on the Zelle network, said Chance. He said Zelle has seen “a step-change reduction” in fraud and scam rates this year but declined to provide details.

“We have had a strong set of controls since the launch of the network, and as part of our journey we have continued to evolve those controls… to keep pace with what we see is going on in the marketplace,” he said.

Chance said EWS has been engaging with policymakers on the need for a “holistic approach” to combating scams, including advocating for more dedicated law enforcement resources.

Under pressure from Warren and other lawmakers, the Consumer Financial Protection Bureau (CFPB) considered compelling lenders to reimburse scams, but Zelle’s changes have so far satisfied the agency, said a person familiar with the matter.

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A CFPB spokesperson declined to comment on Zelle or potential rule changes, but said the agency is working to protect customers “including by ensuring that financial institutions are living up to their investigation and error-resolution obligations.”

JPMorgan, Bank of America and Zelle’s five other owner banks declined to comment.

“Zelle’s platform changes are long overdue,” said Warren in a statement to Reuters. “The CFPB is standing with consumers, and I urge the agency to keep the pressure on Zelle to protect consumers from bad actors.”

MARKET PRESSURE

Zelle has long argued its fraud and scam rates are low.

It processed $629 billion worth of payments in 2022, according to the network, with 99.9% of transfers made without a fraud or scam report.

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It competes with other peer-to-peer payment platforms like PayPal (PYPL.O) and Venmo that review situations case-by-case and have a purchase-protection program for eligible transactions that covers scams. Experts note that it is difficult to compare fraud and scam rates across platforms because classifications vary.

Zelle’s u-turn shows how banks are feeling competitive pressure to step up the “market standard of care”, said Trace Fooshee, a strategic advisor at Datos Insights.

Still, regulations mandating imposter fraud protections would be better for customers since lenders’ policies may be unclear or they may not follow them as promised, said Carla Sanchez-Adams, a senior attorney at the National Consumer Law Center.

“The one thing that I think is problematic is that the consumer really wouldn’t know that they have that option, and if they do know, and if the bank fails to reimburse them, there is no private remedy,” she said, noting Zelle’s policy change was nevertheless a “good first step.”

Payment fraud is expected to come up again when bank CEOs appear before the Senate next month, according to industry experts. This time, they believe they have a good story to tell.

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“The banks through Zelle – without regulation, without legislation – have actually proactively gone and said, we’re going to make sure that we are… trying to address any kind of consumer issue or harm,” said Lindsey Johnson, CEO of the Consumer Bankers Association.

Reporting by Hannah Lang in Washington; additional reporting by Chris Prentice in New York; Editing by Michelle Price and Rod Nickel

Our Standards: The Thomson Reuters Trust Principles.

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Hannah Lang covers financial technology and cryptocurrency, including the businesses that drive the industry and policy developments that govern the sector. Hannah previously worked at American Banker where she covered bank regulation and the Federal Reserve. She graduated from the University of Maryland, College Park and lives in Washington, DC.



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Westbrook, Washington ejected in chippy Game 3

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Westbrook, Washington ejected in chippy Game 3


DALLAS — A couple of heated confrontations during the fourth quarter of the Dallas Mavericks’ 101-90 Game 3 win over the LA Clippers on Friday night resulted in a pair of ejections and a boost to P.J. Washington’s local popularity.

Washington, the power forward acquired by the Mavericks at the trade deadline, was ejected along with Clippers guard Russell Westbrook with 6:10 remaining.

That confrontation began with Westbrook fouling Mavs superstar Luka Doncic by grabbing his right arm from behind and yanking on it, pulling Doncic backward. When Doncic approached Westbrook to object, Westbrook shoved him with his left arm. Washington and Westbrook then exchanged shoves before other players, coaches, officials and security prevented the skirmish from escalating.

“Always got to protect 77 at all costs,” Washington told ESPN. “So I mean obviously it was a hard foul and then he pushed him afterwards, so I was right there and I just had to step into it.”

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Westbrook, who finished with 1 point on 0-of-7 shooting in 19 minutes, was called for two technical fouls and ejected from a playoff game for the first time in his career. He exited the American Airlines Center without speaking to the media.

“You got to keep your composure,” Clippers coach Tyronn Lue said. “It gets chippy in the playoffs and everyone wants to play well and do well, but you got to keep up composure no matter how the calls go. So we got to be better than that down the stretch when it comes to that.”

Washington, who had 10 points, 5 rebounds and 3 steals in the win, was also ejected after being whistled for his second technical foul. His first came after a confrontation with Clippers guard Terance Mann with 10:24 remaining in the fourth quarter.

In that instance, Washington struck an instantly iconic pose in the midst of players pushing and shoving, crossing his arms and staring at the Clippers bench.

“[Mann] was mad that I was looking at their bench, so I decided to look at it again,” Washington told ESPN. “Just coming in and trying to set a tone.”

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As Washington posed in exaggerated fashion, Doncic stood next to him and smiled with delight. Washington kept a stone face.

“I wanted to get my flicks right for after the game,” Washington said with a grin, referring to the moment as a photo opportunity.

Doncic, who had 22 points, 10 rebounds and 9 assists despite describing his right knee as “really stiff” after injuring it late in the first quarter, expressed appreciation for Washington’s willingness to serve as an enforcer.

“Amazing,” Doncic said. “The things he does, he’s a team player. He helps all of us. I’m just really happy we’ve got him on our team.”

Westbrook was also called for a flagrant 1 foul for hitting Dallas wing Josh Green in the head during a fast-break dunk attempt with 8:37 remaining in the second quarter. He had a post-whistle brush of Doncic reviewed in the final minute of the first half, but the officials determined that incident didn’t merit any punishment.

“I’m used to that,” Doncic said of being subjected to extra physicality. “I just try to stay calm and keep playing basketball.”

After the Mavs called themselves out for a lack of physicality in their Game 1 loss, they have held the Clippers to 93 and 90 points in the past two games to take a 2-1 series lead. Dallas coach Jason Kidd considers the friction that emerged in the fourth quarter to be typical for a physical series.

“We’re all competing for each inch to try to win,” Kidd said. “This series is going to be more mental as it goes on, just because of the physicality. It’s very physical, but the mental aspect of this series, we have to be sharp and we have to understand what’s taking place. I thought the guys did a great job of protecting one another.”

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ESPN’s Ohm Youngmisuk contributed to this report.



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Instant grade for the Patriots picking WR Ja’Lynn Polk in the NFL Draft

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Instant grade for the Patriots picking WR Ja’Lynn Polk in the NFL Draft


After addressing the quarterback position with their first pick in the 2024 NFL Draft, the New England Patriots went wide receiver with their second. Following a minor trade down the boar, the team selected Washington wide receiver Ja’Lynn Polk at No. 37 overall.

Polk adds youth an developmental talent to a wide receiver corps in need of upgrades.

2-37 WR Ja’Lynn Polk (Washington)

Bernd Buchmasser: The Patriots did not pick a traditional X to address their biggest open spot with their receiver group, but rather another hybrid inside/outside receiver. That being said, Polk has the potential to develop into an all-around weapon capable of attacking all three levels of a defense. It may not be a flashy pick, but one that could have positive contributions from early on in his rookie season. | C+

Brian Hines: New England adds a weapon in Polk, who played for wide receiver coach Tyler Hughes in Washington last year. While his athletic profile may limit his ceiling, Polk’s toughness, versatility and hands will allow him to play a valuable role in their passing attack. | B+

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With Polk now added to the mix, the Patriots’ wide receiver group stands at 10 deep. The rookie joins Kendrick Bourne, DeMario Douglas, K.J. Osborn, JuJu Smith-Schuster, Tyquan Thornton, Jalen Reagor, Kayshon Boutte, T.J. Luther and Kawaan Baker.

How would you grade the selection, though? Please let us know below!



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Washington Commanders celebrate big wins following 2024 NFL Draft

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Washington Commanders celebrate big wins following 2024 NFL Draft


The Washington Commanders are having a big week with selecting LSU quarterback Jayden Daniels as the No. 2 pick in the 2024 NFL Draft and retiring the jersey of the legendary cornerback Darrell Green.

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Green played his entire NFL career with the team, winning two Super Bowls and earning All-Pro honors four times. The Hall of Famer was joined by his family and loved ones at his surprise recognition.

“I’m very humbled by this presentation. It was something I expected.”

FOX 5 spoke with Green, and shared how he was completely surprised and gave a special thank you to Washington, D.C.

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Green says he is excited to see Daniels on the field and how he helps the team this upcoming season. 

Daniels told the Associated Press Wednesday, “Whoever calls my phone, whoever gives the card to the Commissioner that says my name, I’m blessed to go and they’re gonna get my all.”

Fans are excited about the selection and ready to see some new young talent heading to the Commanders roster. 



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