Local TV Station Brings Attention to Zelle Fraud
In part 2 of this podcast, Lura seeks help from her community after losing funds for her business
When a scammer posing as a Bank of America employee steals the money for Lura’s new baking business, she is left feeling hopeless. But with a little encouragement from her sister, Lura seeks help from her local TV station and gets results, at the same time bringing needed attention to a growing problem of fraud in person-to-person payment apps.
[00:00:00] Bob: This week on The Perfect Scam.
[00:00:03] Iva: She's feeling, defeated, hopeless. She's feeling all of these things because this is a single black woman starting a business off the ground with very little backup funds, and has managed to scrape together enough to actually start her business, and now a bulk of that is gone. If you have that sick feeling inside that something's not right, follow your intuition. Nine chances out of 10, it's telling you something's wrong.
[00:00:43] Bob: Welcome back to The Perfect Scam, I’m your host Bob Sullivan. Last week we told you about Lura Daniels Ball and her lifelong dream to open Lura’s Kitchen and….right as she’s about to launch her cookie company, a criminal has drained her bank account using Zelle, draining the small business loan funds she needs to launch. With p2p apps like Zelle, the transactions are nearly instant, so when the money is gone, it’s gone. Banks have warnings about this on their websites, but it’s confusing for many consumers, who are used to the kinds of consumer protections they enjoy with credit cards. With p2p, you often can’t just call the bank, dispute a charge, and get your money back. That’s one of the reasons criminals have flocked to p2p apps. And that’s what happened to Lura. When she had $18,500 stolen from her account, she called her bank, Bank of America, thinking they’d allow her to dispute the transactions involved and get her money back, but after filing a claim, she received a letter rejecting her request. When we left her, she was on the phone with the bank, trying to understand why they wouldn’t cover her losses. That conversation doesn’t end well, but … it doesn’t end her quest. She pleads with the bank operator – isn’t there anything else that can be done? And he says….
[00:02:09] Lura: "Well the most I can do is re-, is take another claim." And I'm like, "Okay." "Well it's going to take up to 60 days for us to give you an answer." I'm like, “Oh my Gosh.” So I put in another claim...
[00:02:21] Bob: And, like last time, she has to wait. At this point, nearly three months have gone by since her money was stolen during the Thanksgiving holiday in 2021 and her cookie business was put on hold. But this is much more than a business to Lura. As we learned last week, Lura sees making cookies as her “baking ministry.” Everyone in her family, everyone at her church in Los Angeles knows about Lura’s homemade cookies, her unique recipes designed for each family member. Recently widowed, her siblings urged her to start Lura’s Kitchen to fulfill a lifelong dream. But now, she can’t pay vendors, she can’t fill orders, she can’t move forward with marketing. She’s just waiting for Bank of America to re-evaluate her fraud claim. And when the response comes this time … there’s a different explanation.
[00:03:16] Lura: I get a response in February saying, of 2022 saying that they denied my claim because the, device that I used was used in other transactions on my account. I'm like, duh, I use my cell phone for every transaction with Bank of America. It's the only device I have. So I called them back again and uh this time it takes me literally three hours to get someone on the phone. I was, I was livid, I was crazy. I went through five different people before I found the right person. And um, all she could do again, she wouldn't even open a new claim. She just said that she would continue that claim. And um, uh, uh, so, so basically, I couldn't do much of anything.
[00:04:08] Bob: Now, things seems hopeless. Lura’s $18,500 – most of it from a small business loan she took out to start her business – is all gone. Frankly, it is a really dark time. Iva, her older sister, remembers it really well.
[00:04:25] Iva: She's feeling defeated, hopeless. She's feeling all of these things because this is a single black woman starting a business off the ground with very little backup funds, you know, and has managed to, to, to scrape together enough to actually start her business, and now a bulk of that is gone.
[00:04:48] Bob: But Iva isn’t ready to give up yet.
[00:04:50] Iva: And so then I said, well you need to contact your city council representative. Uh you need to contact your Department of Aging to see if they have information on contact uh, uh organizations that handle this sort of stuff for seniors. And then we need to start going to the congress people, you know, The Better Business Bureau. We need to file a complaint against Bank of America, you know, I just started running down a bunch of things we needed to do.
[00:05:15] And, Iva has one more idea. She had done some online research and found plenty of other news stories about Zelle fraud…in some of them, the banks involved *do* give the stolen money back to the consumers. Many of these happy endings seem to have one thing in common…
[00:05:34] Lura: I was just so frustrated and was just really upset. And she said, "Did you..." she said, "Did you write to the television stations?" And I, I paused, and she said, "Did you wrote to the..." I said, "No, I didn't." I said, "Okay, okay, I'm going to do it tomorrow, I promise I'll do it tomorrow."
[00:05:50] Bob: So Lura wakes up the next day, dusts herself off, and decides to follow her sister’s advice. She writes to local TV stations. And things change. Fast.
[00:06:03] Lura: And so I, I wrote to Channel 7 and Channel 4, and the next morning Channel 7 had emailed me back and said that they wanted to take my case up, and they wanted me to send them all the information. By 5 o'clock that day they um, had called me back and said they needed my account number so that they could um, make sure that Bank of America knew that they were legit.
[00:06:27] Bob: So, Lura has to wait again. But, she doesn’t have to wait very long this time.
[00:06:32] Lura: By the next morning they were doing an interview with me, and by 10:30 in the morning, Bank of America had called me and said that they wanted to put my money back.
[00:06:43] Bob: Wow!
[00:06:45] Lura: And so, I emailed the producer and said that Bank of America called me and they're putting the money back. So by the time the story aired at the end of the day, they had a, a full, complete story, and by 1:30 the monies was back in my account.
[00:07:02] Bob: So you were months into this horrible ordeal. You're at your wit's end, about ready to give up and all the sudden, boom, you have the money back in your account.
[00:07:09] Lura Ball: All of the sudden.
[00:07:11] Bob: What did that feel like?
[00:07:12] Lura Ball: Uh, it was a whirlwind
[00:07:14] Bob: After months of listening to the sadness and frustration in her sister’s voice, Iva – her family nickname is ‘Shel’– finally gets to hear her sister Lura’s happy voice again
[00:07:26] Iva: She called, and she say, "Shel! They called me! I'm getting my money back! They're gonna put it in!" And then she called me back within an hour. "Shel! My money is in the bank." (chuckles) She was so surprised, I was astonished about the quickness of it all. You know, I figured they were going to haggle back and forth with Bank of America, but she did this, she did that. You know with the news station, but no, whatever the news people did, or said, put fire under B of A.
[00:08:01] Bob: And just like that, Lura’s Kitchen is back in business. Lura had her $18,500 back and she can start fulfilling orders again, restart her marketing campaign. But that doesn’t mean...Lura didn’t lose anything.
[00:08:18] Lura: I mean I was glad to get, I was really happy to get my money back. But I said, you know, all of these months, it just, you know, I mean I should be thankful, and I am thankful that I got the money back. But what about the irreparable, I mean there is damage that was done waiting all this time for Bank of America to give me my money back. And I'm just like, how do I regroup? It's not like you can pick up from that day the momentum going in because I'm in a different place now. And I've lost the, I've lost that ability to make sales, to create momentum to make sales. I lost the January selling period. I lost the February which is Black History Month selling period. I lost the Mother's Day, you know, selling period. You know, so it's like wow. Yeah, so it's, it's, it's, it emotionally the impact on the business, you know, how do you even measure that?
[00:09:16] Bob: Bank of America told us that it considers all Zelle fraud claims and requests for restitution – and says consumers who are rejected are welcome to appeals it decisions, as Lura did. I’ll read part of the statement they emailed to us.
[00:09:30] Bob: “We review and evaluate every claim based on the unique circumstances. Clients can always request an additional review if they disagree with the initial decision,” the statement says. In addition, the Bank warned consumers that, “Banks would not ask a customer to transfer funds between accounts or request sensitive account information. We alert clients during the transaction if they are sending money to a new recipient that they should only send to people they trust and never transfer money as a result of an unexpected call or text. We also send fraud alerts to clients and regularly update a comprehensive online Security Center with information about avoiding scams. “
[00:10:13] Bob: It’s important to note that Bank of America didn’t catch the criminal and recover the $18,500 stolen from Lura. The bank just chose to make her whole, out of its own money. So it’s fair to say the bank was a victim, too, and all of us are victims, because all consumers ultimately pay when there’s fraud. But here’s the thing: these fraud issues are happening with Zelle at many, many of financial institutions. Zelle is operated by a company named Early Warning, which is owned by a consortium of seven large banks, including Bank of America and Wells Fargo. Hundreds of banks let their consumers use Zelle. And millions of people use all the various p2p apps. And as I mentioned last week, the New York Times has reported that that 18 million people have experienced fraud via these instant payment systems like Zelle – so much fraud that Congress is now demanding answers. There are also a set of class-action lawsuits that have been filed against Bank of America, Wells Fargo, and Capitol One over their handling of Zelle fraud.
[00:11:18] Bob: Meanwhile, after the TV channel ran Lura’s story, she got another unexpected connection. Another Zelle victim reached out to her, looking for help.
[00:11:28] Lura: There's a woman that has emailed me last week saying that the same thing happened to her, and I started to respond, and then I stopped, 'cause I said I don't know if this is a scam or what, 'cause she came through my email. But she said that she got scammed for the exact same amount.
[00:11:49] Bob: That happens to me all the time. I’ve been writing stories about Zelle fraud since 2018 and I can tell you… Each time I tell a story like Lura’s, with a happy ending like hers, I get emails from other Zelle victims desperate for help getting their money back. I try to help as many as I can. And so does Ed Mierzwinski. He’s a director at a consumer advocacy organization called the Public Interest Research Group. It published a report last year about P2P fraud and he’s calling for changes.
[00:12:23] Ed Mierzwinski: Well I think these P2P apps began to arise five or seven years ago, and the, the problems started occurring almost from the get go, and uh the, the fact is there have been a number of stories, including some by you, there have been a number of stories in the big media outlets, over the years, and nothing has changed. Zelle and PayPal, Venmo, there are complaints about all of these companies, but the, the fact is they've been written about, but there are problems. The problems have been written about for a long time and not much has been done to solve the problem. The banks are still disregarding their responsibilities in my view.
[00:13:11] Bob: The surge in fraud related to apps like Zelle is really frustrating, he says.
[00:13:16] Ed Mierzwinski: I have been a consumer advocate because things like this make me mad and I try to do something about them, and we published the report, one of the earliest reports on problems with P2P apps, the report came out last summer. It's called Virtual Wallets, and it's on the PIRG.org website. You can check it out, but we've also had meetings and complained to the Consumer Bureau and had meetings and complained to the OCC. The controller himself is aware of these problems. That's another bank regulator.
[00:13:52] Bob: A big part of the problem is that P2P apps are new, and banking regulations still haven’t really caught up with the times. When credit or debit card fraud happens, consumers are pretty clear about their rights. Even if your online bank account is hacked… a consumer’s right to dispute a fraudulent transaction and get their money back is spelled out pretty clearly in banking rules…in particular, a rule known as Regulation E or Reg E, which covers electronic banking. It says clearly consumers don’t have to pay for unauthorized transactions. But Does Reg E cover Zelle transactions? All of the time or just some of the time? That’s still being argued about. Early Warning has told me that if a Zelle account is hacked – that’s what Lura says happened to her -- that transaction is unauthorized and consumers should receive “refunds” of stolen money. That doesn’t always happen, however. The New York Times recently reported on a series of cases involving transactions that were clearly unauthorized – in one case an iPhone was stolen from a victim at gunpoint, and used by the criminal to steal $9,000 through P2P apps -- but banks initially declined disputes. That, too, happened to Lura. But in other cases, the circumstances around Zelle crimes aren’t quite so clear.
[00:15:15] Ed Mierzwinski: There is a tiny part of Regulation E that causes a problem, and that says that if a consumer initiates a transaction, uh whether it is with a scammer or with his or her friend, if this consumer initiates the transaction, then any problem is not an unauthorized charge. Scammers take advantage of consumers who don't know the law, uh and they presume their bank is going to protect them and make them whole. But the bank is relying on this teeny section of the Regulation E that implements the Electronic Funds Transfer Act.
[00:16:04] Bob: The most common Zelle fraud happening right now is similar to what happened to Lura, though with some important distinctions. Many consumers are getting calls from criminals pretending to be bank security officials…who then persuade victims that they need to immediately move money out of their accounts to protect the cash from a hacker. But when following those instructions, thinking they are doing the right thing, the victims are actually moving the money into accounts controlled by the criminal. In that scenario, banks often argue the consumer has initiated the transaction, so it is an “authorized” transaction, and the banks aren’t liable to cover the losses. Ed disagrees with that interpretation.
[00:16:50] Ed Mierzwinski: The fact is, we think banks have a bigger responsibility under the current law than they're letting on, and so far the regulators have not taken action other than to send out some new uh frequently asked question/answers trying to clarify the law, trying to define more narrowly, the circumstances where you are protected, but the banks are ignoring that, and in particular, they're telling consumers sorry, you sent the money, it's gone, we can't get it back.
[00:17:29] Ed Mierzwinski: What the banks are relying on in the description of the regulation is that the regulation says, if you push the button to send the money to someone else, scammer or not, if you push the button, then you have initiated the transaction. We disagree with the banks that that's always the case. We believe that scammers deceive consumers into initiating the transaction. And you see many complaints that are, and in fact, I've got some complaints open in front of me, from the Consumer Financial Protection Bureau database, and the bank clearly was informed by the consumer about the problem, but the, uh again, the initiation of the transaction is if it's by the consumer the bank is saying in all circumstances, even if the consumer was scammed, the banks are saying that if the consumer sends the money, the consumer lost the money. That's not how the law is supposed to work.
[00:18:45] Bob: Ed says he’s a bit surprised regulators haven’t stepped in yet.
[00:18:50] Ed Mierzwinski: The CFPB was designed to protect consumers from unfair practices by banks, credit bureaus, payday lenders, debt collectors and, and other financial players. So they've got to do something. I've been putting pressure on them, so have all the other consumer groups that I know. We talk all the time with them, with all the agencies, and um, they're well aware of this problem and I'm surprised nothing has been done yet about Zelle, which is owned by some of the biggest banks in the country.
[00:19:28] Bob: Regulators might take a more active interest now that Congress is involved. A group of U.S. senators, including Elizabeth Warren, sent a demand letter to Zelle in April saying the app had become a ‘a favorite of fraudsters.’ Here’s more from the letter:
[00:19:44] Bob: “We seek to understand the extent to which Zelle allows fraud to flourish and the steps your company is taking to increase consumer protection and help users recover lost funds,” it said. The senators also want the banks to better explain why some consumers are getting Zelle fraud “refunds” and some aren’t. Meanwhile, if you are a victim of Zelle fraud, Ed says do this.
[00:20:10] Ed Mierzwinski: Consumers at a minimum should contact their state attorney general, they should contact the Better Business Bureau, they should contact their local or national consumer reporters, and they should write a complaint to the CFPB.gov. Right at the top of that homepage it says, here's how to file a complaint. It's very easy, and file your complaint immediately with the CFPB. And I think you should file a complaint to keep it on the record, um, and to prove that you acted in good faith, and immediately contacted your bank. Keep records of when you call the bank, if you text with the bank, the actual bank, not with the scammer or uh you know, take screenshots of your texts. Save all the paper information that you have, and try to keep a record and make sure again, as I said, make sure you're talking with the bank, not with the bad guy.
[00:21:18] Bob: For now, it’s critical for everyone to understand how Zelle works and what your rights are … and what they aren’t.
[00:21:25] Ed Mierzwinski: The transactions are instantaneous, and you can't get your money back, and only use them with your friends. Only use them with your friends if you use them at all, but many consumers are using them to pay bills and that's where the trouble lies.
[00:21:42] Bob: The trouble also comes when criminals tell victims they are calling from the bank or, more recently, from a police department or another official-sounding institution.
[00:21:51] Ed Mierzwinski: When somebody calls you from your bank, you should say, "Nice to talk with you, what's your name. I'm going to call you back. I'm going to look up the bank's telephone number on the back of my credit card or debit card, and I'm going to call that number and ask to be transferred to you." That's the way you should do it. You should not presume that somebody that calls you on the phone and says, "I'm from the bank, I'm from the bank's security department, and let me prove it to you. I'm going to read to you the last four digits of your Social Security number, or the last four digits of your credit card number. These numbers are widely available to any scammer, um, to anyone uh even someone that picks up your discarded ATM slip can get the last four-digits of your account number. Um, and so that's how they, they socially engineer, and they convince you, it's urgent. You've got to, you've got to do this. You've got to take your money and do this with your money.
[00:22:59] Bob: With any phone call like that, hang up, and call the bank or the police department back using a number you know is correct. And if you are a victim and the bank denies your claim, as Bank of America suggested in its comment to us about Lura’s story, don’t be afraid to keep asking! And yes, that can be frustrating. But persistence can pay off.
[00:23:20] LURA: You can establish that you mean business, and you know, and, and that you want to get your money back. Um, and make sure that you have somebody that, that can support you, because you're going to feel like you're going crazy at some point.
[00:23:33] It does help to have a sister like Iva to lean on.
[00:23:38] Bob: So what have you learned from this?
[00:23:41] Iva Spight: Well, I learned that more, more information should be given to the general public, especially our seniors who are so trusting, um, you know and innocently ignorant to all of these scams out here. You know, and so I've made it my mission to make sure that my district person, my city councilperson makes this a part of the information that they're disseminating to, to the communities about these frauds because you know, we're not rich people. You know, I live in a very mixed community. You know we have the very poor and then we have the very wealthy, you know, and so for someone that's really, really stretched in terms of income, it could be devastating like it was for my sister. And even if you have the resources, no one should be robbed of their hard-earned money. So that's, so that's my mission is to just, as many people as I can, to let them know these frauds are out here.
[00:24:47] Bob: Iva also thinks voicemail can be an excellent fraud-fighting tool.
[00:24:51] Iva Spight: Well, my first thing is, whenever you get a call from a business, a bank that you may do business with, let it go to voicemail. Let it go to voicemail, because they have spoofing out here now, and they can have any phone number that will appear on your phone, but it's actually not really the business that's calling. So if you let it go to voicemail, you then can check your voicemail. If they leave a message from the business, you have the power to call the business back with the number you have. Which would prevent them from spoofing you. And then you can enquire from the business if anyone from that staff has then contacted you. That's one way. Another way is don't ever give out your personal information over the phone. Not your password, not your driver's license, not your home address, not even the spelling of your name. Because people could take that information do a search on you, and then create all kinds of accounts in your name elsewhere. If you have that sick feeling inside that something's not right, follow your intuition. Because nine chances out of 10, it's telling you something's wrong.
[00:26:16] Bob: You've got to listen to the little voice.
[00:26:17] Iva Spight: And so listen to yourself. Trust your own instincts.
[00:26:22] Bob: Lura is glad she’s back on track with her cookie business– especially because sales from the company benefit charities that are very important to her and her husband.
[00:26:33] Bob: I saw on your website that you; you donate money to the USC Film School from the proceeds of the sales, right?
[00:26:39] Lura Ball: That, uh they have been one of the beneficiaries. He's from Detroit, uh as he was born in Detroit, so Detroit is one of our cities, and my sister lives in Detroit. But Detroit is one of our target cities. Houston, Texas, is one of our target cities. My brother who I love dearly that we lost year is from Texas, um, and then um, Washington DC, Oakland, and Los Angeles. So, we have done food cards for uh for folks in, in Detroit and also, gift cards for students and book grants for students in Detroit. And we've done scholarships, music scholarships in Oakland for my high school alma mater, um, in the name of my teacher, um, who uh was responsible really for all of my musical development and also for playing my, my um, audition at USC. And then we’ve done um, I've done some um, uh, some donations and scholarships uh for students here in Los Angeles. And you know, they're small, they're not huge, but we believe that whatever you do, whatever you are, um, it makes a difference no matter how small.
[00:27:41] Bob: Okay, and I have one, one last important question for you. Can I get you to sing for me?
[00:27:47] Lura Ball: Oh Gosh. Okay, what do you want to hear?
[00:27:20] Bob: What do you want to sing? Diana Ross is your favorite, is that what I heard?
[00:27:55] Lura Ball: Yeah, she's, she's one of my favorites. Let me see. "Reach out and touch, somebody's hand. Make this world a better place. If you can. Reach out and touch. Somebody's hand. Make this world a better place if you can. Just try. If you see a man on the street and he's down remember a, someone has lost their way. If you da-da-da, doo-doo-doo.
[00:28:37] Bob: Reach out and touch…that’s what Lura’s doing with her cookies. And, OK…. One last thing. You didn’t think I would do a story about cookies without…well, being really curious about the cookies, did you?
[00:28:52] BOB: I have to tell you uh, moments before I got on this call with you, I ordered um, some Tea Cake Cookies and some no nonsense Chocolate Cookie Mix from you.
[00:29:00] Lura Ball: Oh, that was you? Okay.
[00:29:01] Bob: That was me.
[00:29:02] Lura Ball: (laughter)
[00:29:05] Bob: So I'm very excited about the uh, tea cakes, I have to tell you.
[00:29:08] Lura Ball: Oh, okay. Okay.
[00:29:09] Bob: Well I am looking forward to getting your cookies and making them, and, and then figuring out how to work off all the weight I gain from all the cookies I eat.
[00:29:17] Lura Ball: Well like I tell everybody, you can freeze the dough, and have them sparingly.
[00:29:26] Bob: Aha. Good idea.
[00:29:38] Bob: If you have been targeted by a scam or fraud, you are not alone. Call the AARP Fraud Watch Network Helpline at 877-908-3360. Their trained fraud specialists can provide you with free support and guidance on what to do next. Thank you to our team of scambusters; Executive Producer, Julie Getz; Researcher, Haley Nelson; Associate Producer, Annalea Embree; and of course, our Audio Engineer, Julio Gonzalez. Be sure to find us on Apple Podcasts, Spotify, or wherever you listen to podcasts. For AARP's The Perfect Scam, I'm Bob Sullivan.
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The Perfect ScamSM is a project of the AARP Fraud Watch Network, which equips consumers like you with the knowledge to give you power over scams.
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