Can You Dispute A Zelle Payment? Understanding Zelle Chargebacks

While Zelle’s popularity has skyrocketed to place it up with the top peer-to-peer payment providers for businesses, it doesn’t come without its flaws. One of the key pros of the platform is that it is free to use; however, this freedom also comes with a downside—a complete lack of financial protection, often making it exceedingly difficult to chargeback or dispute a Zelle payment.

Merchants and consumers alike should understand what, if any, recourse they have when using the service. Whether it’s fraud, scam, or an honest mistake, can you get your money back if something goes wrong?

We’re digging into how Zelle manages disputes and general payment security. In this guide, you’ll discover how you can improve payment security for both your business and your customers.

Can You Dispute a Zelle Payment?

As mentioned, Zelle has a clear policy regarding payment disputes and chargebacks: they simply do not involve themselves in it. Zelle’s user agreement is explicit: they provide no buyer or seller protections for payments authorized through their service. This means that the use of Zelle is entirely at your own risk.

Applications such as use part of the transaction fee to fund buyer and seller protection services. Since Zelle is a free service, it doesn’t keep funds available for financial protection or a recourse service in its platform offering.

With the exception of situations under Regulation E (which we’ll cover in more detail shortly), merchants and sellers must handle any dispute regarding payment over Zelle outside the platform. The first course of action would be to settle it between parties—either the merchant contacting the customer or vice versa.

In many cases, effective customer service can help quickly resolve the issue, avoiding reputational damage. Merchants can offer a direct refund or send the customer a new product if it is damaged or lost.

However, not all merchants or customers are the most responsive. If one party seems to be dragging their feet, reaching out to your issuing bank is the only recourse left. Given the stipulations of Zelle’s service, there is no guarantee that the bank will or must do anything—but it doesn’t hurt to try. Customers have the option of turning to the Consumer Financial Protection Bureau (CFPB) for assistance. However, it is a lengthy appeals process with—again—no hard guarantee of success.

Earlier, we mentioned Regulation E as a possible avenue of recourse. Regulation E is part of the Electronic Fund Transfer Act of 1978, which defines the rights, responsibilities, and liabilities of those involved in electronic fund transfers. This includes situations where financial institutions have permission to add or remove money from a user’s account. Peer-to-peer (P2P) transfer services and their business platform counterparts generally fall under this law.

However, Regulation E is relatively restricted in scope. The regulation explicitly governs situations involving payment fraud—defined by the regulation as “unauthorized” transactions. This means a merchant or customer can only file a Regulation E claim in instances when someone else authorizes a transaction under the merchant’s/customer’s name.

Simple payment disputes do not fall within this purview—and thanks to Zelle’s rules, are not automatically eligible for recourse.

The bounds of the Electronic Fund Transfer Act and Regulation E may seem like settled law, but changes are in the air as of late.

Lawmakers are increasingly pressuring the CFPB to enhance fraud and scam protection—specifically to hold banks accountable for mobile and digital payment networks like Zelle. Additionally, these lawmakers are also pushing to loosen fraud refund restrictions for consumers. Thus, many concerned banks attempting to get ahead of regulatory repercussions are considering new policies to grant Zelle users more rights in terms of payment dispute requests.

Make sure you stay up to date with any regulatory or bank policy changes that may come down the pipeline in the near future—and amend your own procedures as necessary to protect your business.

Proactive Measures for Businesses

As a Zelle for Business user, you may find it hard to imagine running your business without financial protection—especially considering the increasing number of financial scams and fraud.^[1]KPMG. “Rising Financial Crime Risks in Digital Payments”. Accessed Jan. 17, 2024. Although Zelle offers no protection plan as such, there are ways to protect yourself against any potential payment dispute:

• Provide Clear Product Descriptions. Crafting detailed product descriptions, paired with realistic photos or videos, can help reduce customer chargebacks due to discrepancies between the product received and its online description.
• Send Detailed Invoices. Send your customers an invoice detailing the product or service description, the amount due, and terms and conditions. Let customers return the signed invoice to you as confirmation of the agreement.
• Advertise Simple Return Policies. Make your return policies clear on both the invoice and on your website.
• Stay on Top of Communication. Communicate clearly with customers throughout the purchase journey. Send them order confirmations after receiving payment and keep them up to date with the progress of their order dispatch.
• Manage Shipping Expectations. Always provide customers with clear shipping details, such as shipping carrier name, confirmation, tracking numbers, expected delivery time, a link to track their shipment, and contact information for inquiring about their package.
• Confirm Every Delivery. Ensure that recipients sign for goods received and that they’re received in good order.
• Keep Communication Trails. If something goes awry, you’ll want a clear paper trail to resolve the dispute quickly. Make sure you always maintain thorough records of interactions with your customers throughout the ordering and delivery process.
• Be Accessible. Making it easy for customers to contact your business ensures they talk to you when an issue arises. Ensure your team is easily accessible via multiple channels, including email, chat, text, and phone calls.
• Verify Customer Identities. Before initiating a Zelle payment, verify customer identity and confirm their contact details to avoid a later dispute. Request more stringent measures, such as verifying their billing address by contacting them directly if needed.

Find a Payment Processor For Your Unique Business Needs

It’s no secret that Zelle doesn’t offer protection for its customers, whether they’re individuals or businesses. Business owners need to ask whether it’s worth skipping payment fees and making themselves a high scam and fraud target. Do you want to second-guess every new customer and their intentions? Think about leaving payment processing and security to the professionals so you can do what you do best—run your business.

PaymentCloud provides a secure and convenient payment solution for business owners, offering chargeback prevention management tools that analyze business vulnerabilities, automatically detect disputes, and employ prevention strategies. In addition, our fraud prevention tools include automated fraud detection and consumer data tracking to flag suspicious activity. We also offer competitive processing fees and guarantee one-on-one support with a dedicated account manager every step of the way. Boost your sales and safety, regardless of the industry you’re in—chat with us today!