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> When U.S. consumers have their online bank accounts hijacked and plundered by hackers, U.S. financial institutions are legally obligated to reverse any unauth

> When U.S. consumers have their online bank accounts hijacked and plundered by hackers, U.S. financial institutions are legally obligated to reverse any unauthorized transactions as long as the victim reports the fraud in a timely manner. But new data released this week suggests that for some of the nation’s largest banks, reimbursing account takeover victims has become more the exception than the rule. I always knew that some of the pro arguments for centralized systems were suspect, but it's good to have some evidence for it now. Now I wonder how many other cases that are touted as arguments for centralized systems don't hold up to any scrutiny.

asdfasgasdgasdg 4y ago
The banks aren't going to make you whole when withdraw a thousand bucks from the ATM and send it to someone. These denied refunds follow the same principle. There are warnings all over every zelle implementation I've used saying that using zelle is like using cash, don't send it to someone you don't know, etc. But people still do it anyways. Btw crypto is worse on this in every way and there is no system that actually solves this problem. I wonder if it is even possible to solve.
- criddell 4y ago
  Is Zelle really like using cash? It seems closer to an electronic transfer than withdrawing dollar bills. With cash they have no way to know what I'm doing with the money but with a transfer, they know a little bit more and so they have more responsibilities (IMHO).
  - asdfasgasdgasdg 4y ago
    It is the intentional decision of zelle to be like using cash in terms of rollback guarantees. This is so that payees can accept it like cash. There's no way to balance the scales -- the payment system that can be rolled back has its own issues.
    - criddell 4y ago
      If they can't rollback the transaction, Zelle should reimburse customers itself.
      - SpicyLemonZest 4y ago
        We have other payment systems like credit cards which work that way. The inevitable consequences are that permissions to receive payments are tightly locked down, and the network charges fees to help cover the cost of fraudulent transactions.
        criddell 4y ago
        > the network charges fees to help cover the cost of fraudulent transactions I don't see a problem with that. If fraud is rare, the fee would be small. If fraud is not rare, then there's a problem they should fix. For every 100 Zelle transactions, how many are due to fraud or scams? Maybe three or four? Then the fee should be 3-4%.
    - brigade 4y ago
      That decision is as exactly as legally binding as the signs on trucks disavowing liability for falling debris. Banks might be trying to pretend Zelle isn't covered by Regulation E, but I haven't heard any good argument for why it doesn't apply, other than arguments similar to yours that they simply don't want it to.
      - asdfasgasdgasdg 4y ago
        People are welcome to challenge the banks in court. It will be no skin off my back if they win. But I guess the banks have good reason that believe that they can defend their practices successfully. If not it will be the end of Venmo, cash app, and zelle -- or at least the free transfer features of those apps.
        brigade 4y ago
- twblalock 4y ago
  For large transactions this is somewhat solved by escrow companies. In the end it all has to come down to trust. If all transactions were easy to reverse, we would see the opposite problem: scammers who pay people money and the. demand it back, claiming fraud.
  - asdfasgasdgasdg 4y ago
    Yep. Happens in the credit card world all the time. Porn is a good example of a business that has a lot of trouble functioning due to fraudulent chargebacks.
    - twblalock 4y ago
      That is in fact the real reason some credit card companies won't let you pay for porn. Amex was preventing it for years before it was a PR/wokeness issue. The scenario is, someone pays for porn, their spouse sees it on the bill and gets really angry, and the other person says it wasn't me, it must have been fraud! So they file a chargeback.
- livueta 4y ago
  > Btw crypto is worse on this in every way In a technical sense you're correct; in both cases the transactions are effectively irreversible. That said, I think there is an important difference: Everyone (well, kinda) knows that a crypto transaction is irreversible; that's basically the point. Because of this, it is expected and normal to layer on extra systems to cope with the risk of not having an authority to dispute stuff to. Consider darknet markets: they use escrow and reputation systems to protect both parties. But everyone (well, kinda, in the same sense as the above) also knows traditional financial institutions are "safe" and that transactions are reversible. That false sense of security means other security/resolution methods aren't considered, so when the centralized authority has a bad day the end user is out of luck. But isn't an escrow system just another centralized authority? Sure, but at least I can choose what escrow system I want to interact with. The banking cartel behind Zelle doesn't afford me the same degree of choice, and using small credit unions isn't a panacea either because they farm out everything complicated to one or another of the payment cartels. Quality of escrow system is an important discriminator when choosing a DNM; I wish I could assess various traditional financial institutions' likeliness to rip me off as effectively. If centralized financial institutions want to act like crypto in terms of irreversibility, fine, but I think the scale of the problem described in TFA indicates that some "are you suuuuuuuuuuuuure you want to send money to Joe Blow" popups in the app aren't enough to overcome that aegis of "this is a safe institution" floating around in the public consciousness. I see it as more a problem of false advertising than anything else, really. Copy from the landing page of their site: > Zelle® works between U.S.-based banks. Which means, even if you bank somewhere different than your friends and family do,1 you can still use Zelle® to safely send and receive money straight from your banking app. > safely Obviously it's not a legal doc or anything, but I'd argue the service is both explicitly and implicitly casting itself as akin to a bank-provided service like a credit card, not something as wild west as cash.
vore 4y ago
Even if the bank is not offering recourse, there is at least a mechanism for recourse. Decentralized banking just has no recourse at all, so it really just seems strictly worse here.
- datadata 4y ago
  I would argue that a system claiming to have recourse that doesn't actually work (taking this article for its word), is slightly worse than a system without recourse that explicitly states there is not recourse. People will be much more reckless and thus likely to be victims of fraud if they are told fraud is reversible.
- notch656a 4y ago
  Having crypto w/ absolutely no recourse has allowed me to save money on buying silver vs say a credit card and faster clearing than wire or ACH. Recourse means the seller has to bear a risk you may find a way to yank the money back, and at least with precious metals "yuh pay extra for dat." As a seller, or a buyer dealing with someone I trust, recourse is a serious hazard I want to avoid. For this reason I demand cash or crypto when selling items.
vsareto 4y ago
This only seems like it started in 2021. Up until then, those arguments were sound. It's worth reconsideration if this is now the trend, but can you really defend the position that you thought those arguments were suspect because you knew banks were going to stop fraud corrections? While simultaneously preferring systems that never had it at all?
- kelthuzad 4y ago
  I doubt that it only started in 2021, unless you have evidence for it. >but can you really defend the position that you thought those arguments were suspect because you knew banks were going to stop fraud corrections? I knew those arguments were suspect, because the very same thing that makes such an intervention possible is the very same thing that makes it unreliable: a central authority, that first and foremost acts in its own best interest and is prone to corruption, abuse of power and what have you. > While simultaneously preferring systems that never had it at all? You can still build such a system on top of a decentralized system and put your trust in random 3rd parties, if for whatever reason that happens to float your boat.

asdfasgasdgasdg 4y ago

The banks aren't going to make you whole when withdraw a thousand bucks from the ATM and send it to someone. These denied refunds follow the same principle. There are warnings all over every zelle implementation I've used saying that using zelle is like using cash, don't send it to someone you don't know, etc. But people still do it anyways. Btw crypto is worse on this in every way and there is no system that actually solves this problem. I wonder if it is even possible to solve.

criddell 4y ago
Is Zelle really like using cash? It seems closer to an electronic transfer than withdrawing dollar bills. With cash they have no way to know what I'm doing with the money but with a transfer, they know a little bit more and so they have more responsibilities (IMHO).
- asdfasgasdgasdg 4y ago
  It is the intentional decision of zelle to be like using cash in terms of rollback guarantees. This is so that payees can accept it like cash. There's no way to balance the scales -- the payment system that can be rolled back has its own issues.
  - criddell 4y ago
    If they can't rollback the transaction, Zelle should reimburse customers itself.
    - SpicyLemonZest 4y ago
      We have other payment systems like credit cards which work that way. The inevitable consequences are that permissions to receive payments are tightly locked down, and the network charges fees to help cover the cost of fraudulent transactions.
      - criddell 4y ago
        > the network charges fees to help cover the cost of fraudulent transactions I don't see a problem with that. If fraud is rare, the fee would be small. If fraud is not rare, then there's a problem they should fix. For every 100 Zelle transactions, how many are due to fraud or scams? Maybe three or four? Then the fee should be 3-4%.
  - brigade 4y ago
    That decision is as exactly as legally binding as the signs on trucks disavowing liability for falling debris. Banks might be trying to pretend Zelle isn't covered by Regulation E, but I haven't heard any good argument for why it doesn't apply, other than arguments similar to yours that they simply don't want it to.
    - asdfasgasdgasdg 4y ago
      People are welcome to challenge the banks in court. It will be no skin off my back if they win. But I guess the banks have good reason that believe that they can defend their practices successfully. If not it will be the end of Venmo, cash app, and zelle -- or at least the free transfer features of those apps.
      - brigade 4y ago
twblalock 4y ago
For large transactions this is somewhat solved by escrow companies. In the end it all has to come down to trust. If all transactions were easy to reverse, we would see the opposite problem: scammers who pay people money and the. demand it back, claiming fraud.
- asdfasgasdgasdg 4y ago
  Yep. Happens in the credit card world all the time. Porn is a good example of a business that has a lot of trouble functioning due to fraudulent chargebacks.
  - twblalock 4y ago
    That is in fact the real reason some credit card companies won't let you pay for porn. Amex was preventing it for years before it was a PR/wokeness issue. The scenario is, someone pays for porn, their spouse sees it on the bill and gets really angry, and the other person says it wasn't me, it must have been fraud! So they file a chargeback.
livueta 4y ago
> Btw crypto is worse on this in every way In a technical sense you're correct; in both cases the transactions are effectively irreversible. That said, I think there is an important difference: Everyone (well, kinda) knows that a crypto transaction is irreversible; that's basically the point. Because of this, it is expected and normal to layer on extra systems to cope with the risk of not having an authority to dispute stuff to. Consider darknet markets: they use escrow and reputation systems to protect both parties. But everyone (well, kinda, in the same sense as the above) also knows traditional financial institutions are "safe" and that transactions are reversible. That false sense of security means other security/resolution methods aren't considered, so when the centralized authority has a bad day the end user is out of luck. But isn't an escrow system just another centralized authority? Sure, but at least I can choose what escrow system I want to interact with. The banking cartel behind Zelle doesn't afford me the same degree of choice, and using small credit unions isn't a panacea either because they farm out everything complicated to one or another of the payment cartels. Quality of escrow system is an important discriminator when choosing a DNM; I wish I could assess various traditional financial institutions' likeliness to rip me off as effectively. If centralized financial institutions want to act like crypto in terms of irreversibility, fine, but I think the scale of the problem described in TFA indicates that some "are you suuuuuuuuuuuuure you want to send money to Joe Blow" popups in the app aren't enough to overcome that aegis of "this is a safe institution" floating around in the public consciousness. I see it as more a problem of false advertising than anything else, really. Copy from the landing page of their site: > Zelle® works between U.S.-based banks. Which means, even if you bank somewhere different than your friends and family do,1 you can still use Zelle® to safely send and receive money straight from your banking app. > safely Obviously it's not a legal doc or anything, but I'd argue the service is both explicitly and implicitly casting itself as akin to a bank-provided service like a credit card, not something as wild west as cash.

vore 4y ago

Even if the bank is not offering recourse, there is at least a mechanism for recourse. Decentralized banking just has no recourse at all, so it really just seems strictly worse here.

datadata 4y ago
I would argue that a system claiming to have recourse that doesn't actually work (taking this article for its word), is slightly worse than a system without recourse that explicitly states there is not recourse. People will be much more reckless and thus likely to be victims of fraud if they are told fraud is reversible.
notch656a 4y ago
Having crypto w/ absolutely no recourse has allowed me to save money on buying silver vs say a credit card and faster clearing than wire or ACH. Recourse means the seller has to bear a risk you may find a way to yank the money back, and at least with precious metals "yuh pay extra for dat." As a seller, or a buyer dealing with someone I trust, recourse is a serious hazard I want to avoid. For this reason I demand cash or crypto when selling items.

vsareto 4y ago

This only seems like it started in 2021. Up until then, those arguments were sound. It's worth reconsideration if this is now the trend, but can you really defend the position that you thought those arguments were suspect because you knew banks were going to stop fraud corrections? While simultaneously preferring systems that never had it at all?

kelthuzad 4y ago
I doubt that it only started in 2021, unless you have evidence for it. >but can you really defend the position that you thought those arguments were suspect because you knew banks were going to stop fraud corrections? I knew those arguments were suspect, because the very same thing that makes such an intervention possible is the very same thing that makes it unreliable: a central authority, that first and foremost acts in its own best interest and is prone to corruption, abuse of power and what have you. > While simultaneously preferring systems that never had it at all? You can still build such a system on top of a decentralized system and put your trust in random 3rd parties, if for whatever reason that happens to float your boat.