Payment apps make it easy to split a check or send money to a friend in seconds. That same convenience, though, can become a liability the moment a scammer enters the picture. This blog covers how banks address these situations and what options victims have available.
Why banks deny fraud claims tied to payment apps
A report from the Federal Trade Commission shows that individuals lost over $12.5 billion to fraud in 2024. That figure represents a 25% increase from the previous year, and criminals frequently use bank transfers as their primary method to collect these stolen funds.
Financial institutions, however, address payment app scams differently than they do stolen debit cards. Banks typically classify these transfers as authorized transactions because the user logged into the app, entered their credentials and initiated the payment. This policy remains in effect even when a fraudster has coerced or deceived the victim into completing the process.
What federal law says about consumer rights
Congress enacted the Electronic Fund Transfer Act (EFTA) and its rule, Regulation E, to protect consumers from unauthorized electronic transfers. Under these regulations, banks must take the following steps when a consumer reports fraud:
- hey must investigate the claim, often within 10 business days
- They may need to issue a temporary credit to the account while the review is ongoing
- They cannot place more liability on the consumer than what the law allows
The Consumer Financial Protection Bureau’s guidance on Regulation E also makes it clear that private network rules do not override federal rights. Even if an app claims that all transfers are “final,” the bank still has a duty to review disputed charges.
Timing, however, also plays a key role. Victims must report the fraud within 60 days of receiving the statement showing the unauthorized transfer. If they wait longer than that, they could become responsible for any additional losses.
When legal guidance may make a difference
A denied fraud claim does not always mean the process is over. In some cases, the bank may not have followed proper steps or it may have labeled the transfer as authorized when it was not. An attorney can help determine whether the bank met its duties under federal law and whether the review was fair and thorough.
Chicago residents dealing with payment app fraud may also benefit from filing a complaint with the Consumer Financial Protection Bureau or the Federal Trade Commission. These agencies track patterns and may take action against banks that fail to protect consumers.