‘Huge, Unreimbursed Losses’: Capital One Failed to Disclose Risks of Using Zelle, Class Action Claims
by Erin Shaak
Mensah v. Capital One, N.A.
Filed: June 1, 2022 ◆§ 1:22-cv-21681
A class action alleges Capital One misrepresented the security of the Zelle money transfer service by failing to disclose that fraud victims have no recourse.
A proposed class action alleges Capital One, N.A. has misrepresented the security of the Zelle money transfer service by failing to disclose that users who fall victim to fraud have essentially no recourse.
The 18-page lawsuit says that Capital One touts Zelle as a fast, safe and secure way to send money without warning customers that there is a significant “catch” to using the service—namely, that accountholders could incur “huge, unreimbursed losses” as a result of fraud.
Per the case, Zelle users are not told upon signing up for the service that the network “has a massive fraud problem,” and that it is Capital One’s “secret” policy to not reimburse accountholders for losses stemming from fraudulent transactions, even when those losses are timely reported to the bank.
“The unique, misrepresented, and undisclosed architecture of the Zelle payment system means—again, unlike other payment options commonly used by American consumers—that virtually any money transferred for any reason via Zelle is gone forever, without recourse, reimbursement or protection,” the complaint states.
The lawsuit argues that Capital One accountholders would have never signed up to use Zelle had they been made aware of the “extreme risks” of losing massive amounts of unreimbursed funds due to fraud.
The complaint states that Zelle, formed in 2017 by the seven largest banks in the U.S. and currently the most widely used money transfer service in the country, has become a breeding ground for fraudsters. Per the suit, a New York Times investigation uncovered a “widespread scourge” of fraud on the Zelle network, due in large part to the immediacy of the money transfers thereon and users’ inability to recoup their losses.
Indeed, the lawsuit claims that a fact little known to Zelle users is that the service is unlike “virtually every other payment method commonly used by American consumers” in that it does not come with fraud protection.
Per the case, Capital One was well aware of the risks that come along with using Zelle but failed to warn accountholders, and instead represented Zelle as a fast, safe and secure way to transfer money.
The plaintiff, a Miami-Dade County resident, says he would have never signed up to use Zelle had Capital One warned him of the possibility that he would become a victim of fraud, and that the bank would refuse to reimburse him for his losses. According to the case, the plaintiff transferred $2,000 through Zelle from his personal account to a fraudster, believing he was paying his landlord for a deposit on a rental apartment. Although the fraudster gave the plaintiff a tour of an apartment, leading the man to sign a “lease,” the plaintiff received later that day an email from a different person about the same property, description and rental application, but listed on a different website, the lawsuit says.
Upon realizing that he had fallen victim to fraud, the plaintiff immediately contacted Capital One, who ultimately refused to reimburse the man, the case says.
The lawsuit looks to represent anyone with a Capital One account who signed up for the Zelle service and incurred unreimbursed losses due to fraud.
After its initial filing on May 2, 2022 in Miami-Dade County Circuit Court, the lawsuit was removed to Florida’s Southern District Court on June 1.
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