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Local credit union warns of payment app fraud

Mark Parker

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Nearly 18 million Americans were defrauded by payment apps in 2020. Photos provided.

Nearly 18 million people suffered “widespread fraud” on mobile payment applications in 2020, according to a letter sent by three U.S. senators in late April to Zelle’s network operator.

Locally, Dunedin-based credit union Achieva saw its members lose $100,000 on Zelle in June.

U.S. Sen. Elizabeth Warren of Massachusetts, Robert Menedez of New Jersey and Jack Reed of Rhode Island sent the letter to Zelle’s operator, Early Warning Services (EWS). Bank of America, Capital One, Chase, PNC Bank, Truist, U.S. Bank and Wells Fargo own EWS. According to Achieva, users sent $490 billion through the payment app last year – in addition to the billions sent through other popular peer-to-peer services like CashApp and Venmo.

“Zelle’s biggest draw – the immediacy of its transfers – also makes scams more effective and a ‘favorite of fraudsters,’” stated the letter. “As consumers have no option to cancel a transaction even moments after authorizing it.”

Stephan Gonzalez, vice president of technology risk at Achieva, said fraud is rising throughout all popular payment applications. The scams may vary from platform to platform, but he said the increase is due to the success rate.

Gonzalez noted that in recent years, officials dedicated a significant amount of time and resources to stopping other forms of cyber-attacks and digital resources.

“You’ve seen a lot of high-visibility, cross-agency collaboration, and there’s a lot of arrests,” he said. “But with these types of scams and fraud activity, basically, it’s high-reward and low-risk to getting caught, and it’s been very successful.”

Gonzalez said there are “ups and downs” regarding how much money members lose every month. He added that Achieva could retrieve money in some cases, but it is typically difficult due to how the applications operate. He said the credit union’s safety controls continue to evolve, and it is enhancing educational efforts to spread awareness of the problem.

Stephan Gonzalez, vice president of technology risk at Achieva, said his members lost $100,000 on Zelle in June.

According to a recent report by the Wall Street Journal, the Consumer Financial Protection Bureau plans to release new guidance that pushes banks to refund customers who lost their money through fraud on the platforms. However, bank and payment industry representatives warn that would increase the cost of using the services and cause transactions to take longer.

Using the sale of puppies as an example, Gonzalez said scammers will often advertise pictures of something for sale but request payment before delivery. Sometimes they impersonate a legitimate business. Once a person hits the “send” button on the application, the platform instantaneously transfers the money out of the user’s financial institution, and the buyer never hears back from the seller.

Something else Achieva’s officials see an increase in, said Gonzalez, is people posing as a financial institution trying to recover a customer’s money. The scammers hope to receive sensitive login information and would then go into the victim’s account and transfer money to themselves.

Gonzalez believes that platforms and institutions “are doing a lot” to try and prevent fraud.

“They’re putting a lot of security controls on the back end,” he said. “They’re providing education to individuals because that’s the biggest one. Educate the customer or member to know and recognize when they’re getting scammed.”

Gonzalez noted that in addition to entering usernames and passwords, many banks and credit unions also use two-factor authentication, such as a temporary code sent through text message to a person’s phone. He also said institutions could send alerts when someone accesses or transfers money from an account.

“But what we’ve seen is a lot of people either don’t turn it on, or they do, and they send it to their personal email,” said Gonzalez. “Which they don’t check on a regular basis.”

Gonzalez said he views alerts like an emergency, comparing it to police receiving 911 calls through an email account they ignored until later that night. He added that people need to take some responsibility for their financial security, calling it a team effort.

In addition to setting up alerts to go directly to mobile devices – and paying attention to them – Gonzalez stressed that people should never share login information. He said if someone calls or messages stating they are from customer support, call the number on the back of your bank card or from an organization’s website.

He said users should also treat payment apps like they were using cash for purchases. While it might sound redundant, he said it is imperative to treat money transferred over the platforms as gone once you hit the “send” button.

“So, only transfer to people that you know, that you have validated or you are in business with,” said Gonzalez. “Just be more vigilant, as these people are very convincing.

“There are some very good con artists out there.”

 

 

 

 

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