Complaints against mobile payment apps like Zelle, Venmo surge 300% as consumers fall victim to more money scams
Complaints against some digital payment services and apps like Venmo, Cash App or Zelle are skyrocketing, according to a troubling new report.
Nonprofit U.S. Public Interest Research Group [PIRG] says top issues include scams, trouble using accounts and poor customer service. The group analyzed more than 9,200 complaints filed with the Consumer Financial Protection Bureau from 2017 to April of 2021.
The report found more than 2,700 complaints were made from January to April of this year — compared to just over 600 in the same period last year.
Roughly four out of five Americans use mobile payment apps.
One of them is Luke Krafka, a professional cellist from Long Island, New York. Krafka often plays in concerts with a changing cast of musicians, who are usually paid in cash — and he says mobile payment apps have made that task a lot easier.
"Paypal, Venmo, cash app, yeah. There's no paper involved, there's no checks involved, there's no waiting," he told CBS News Consumer Investigative Correspondent Anna Werner, "You get paid right away, goes to your bank account."
In October 2019, a new customer reached out to hire him for a wedding.
"It was gearing up to be a normal, you know, wedding. And I had reached out to my friends that are good for the gig," he said.
The client told him he would send a check of roughly $1,000 for Krafka and another $950 to pay for the client's "sound man" — who he asked Krafka to then pay through a mobile payment app.
"I said, 'look, if you send me the money, that's no problem, that's fine,'" Krafka recalled.
Mobile payment apps allow users to pay others immediately, through bank accounts or credit cards connected to the app.
Their simplicity is usually a good thing, but not always, as Krafka found out after depositing the wedding client's check for $1,960.
"I checked the following day, and the full amount was in my bank account," he said.
Then as requested, he sent the client's "sound man" $950 through the payment app Zelle.
"I believe it was the following day that check bounced," he said. "And when that happened, then I slowly started to put all of this together."
The people who supposedly hired him stopped answering his calls — and he was out the $950.
"I said look I think I've been scammed," Krafka said.
PIRG's report looked at over 9,000 complaints to federal regulators about digital wallets and payment apps, including PayPal, Venmo, CashApp and Zelle.
They found the ones filed between January and April of this year were up more than 300% from the same period last year — with many losing money to scams or fraud.
"If it's a scammer, it is not coming back," said Ed Mierzwinski, who oversees PIRG's Federal Consumer Program.
Unlike with credit or even debit cards, app transactions are instantaneous, Mierzwinski said.
"There are no rules that protect you very well at all when your money goes out of your account and into somebody else's account," he said.
It is especially difficult when the scammed user initiated the transaction.
Krafka said he reached out to his bank to get the money back, but was told they couldn't help him.
"I was surprised that there was no recourse and that once it's done, it's done and there's nothing you can do," the professional musician said.
Zelle would not comment on Krafka's case, but said its top priority is "protecting consumers from scams and fraud." The company provides a comprehensive list of recommendations on its website for consumers to protect themselves.
Cash App has a help center for consumers online and on their mobile app as well as a 7-day customer service phone number, and encourages people, "If you believe you have fallen victim to a scam, you should contact Cash App Support through the app or website immediately." They also provide articles on recognizing and avoiding scams on their site.
Venmo and Paypal urge consumers who think they've fallen victim to a scam to "contact Customer Support directly." They provide resources for what to look out for and how to report it on their website.
"We also recommend that customers contact spoof@paypal.com to share information on suspected spam. Our dedicated security team will review the information and take action as needed," the company site reads.
All of the app companies told CBS News they work to stop bad actors and have processes in place to help flag scams. They also warn consumers to be vigilant, and only send money to people they know — not to strangers.