You’ve finally found a great place to rent. The landlord asks you to secure the property with a quick payment. You whip out your phone and open your Zelle app. What could go wrong? Unfortunately, plenty.
Zelle has a huge problem with fraud and scams—it’s even the subject of a Senate investigation. According to CNN, hundreds of millions of dollars worth of fraud is occurring on the popular peer-to-peer payment service, and banks aren’t reimbursing 90 percent of the victims.
This includes numerous renters who believed they were paying a legitimate landlord, notes Jonas Bordo, CEO, and co-founder of Dwellsy. He says irreversible payment tools like Zelle and Venmo have always played into the hands of fraudsters, and current market conditions are only exacerbating the problem.
“The rental market is incredibly tight right now, and in the last year, median asking rent in the U.S. has risen 27 percent,” says Bordo. “In other words, not only are rentals hard to find, they’re really expensive. Prospective renters are desperate, and when they come across a good deal—or think they do—many are willing to send a payment ASAP to reserve the property.”
The Fake Landlord Scam
This scenario is the basis for what’s known as “the fake landlord scam.”
Essentially, a scammer poses as a landlord, often stealing a legitimate listing and reposting it with a lower rent price and the criminal’s own contact information. When an unsuspecting renter reaches out, the scammer pressures them to send payment immediately—typically first and last month’s rent and/or security deposit—to reserve the property before another renter nabs it.
“Increasingly, fake landlords are encouraging renters to ‘Just send me the payment on Zelle or Venmo, because this place might be gone tomorrow!’” says Bordo. “As soon as the transfer is made, the scammer disappears without a trace—and the renter is left with not only an empty wallet, but no place to live.”
According to a 2022 Dwellsy survey, 44 percent of respondents said that they or someone they knew had lost money due to rental fraud, with the average renter losing $2,890. Bordo says services like Zelle are partially responsible for this widespread fraud for four main reasons:
Transferring money via Zelle is quick and easy. If you’ve used a service like Zelle or Venmo, you know how simple it is to send a payment. Open the app, type in a few pieces of information, hit “send”—and you’re done.
“When you’re sending thousands of dollars to a landlord you’ve never met before, paying via Zelle is too convenient,” warns Bordo. “Especially if you’re consumed by the urgency to lock down that great rental deal before someone else does, you’re likely to transfer the money in the heat of the moment—before warning bells have a chance to go off in your brain.”
No Consumer Protection
It seems safe. Since major banks own Zelle—and since you may even be accessing the service through your banking app or website—it’s easy to assume that your bank has your back. Of course, they’ll help you recover your money if you’re defrauded, just like they would if your credit card information were stolen. Right?
“Not so,” warns Bordo. “Zelle’s and Venmo’s terms and conditions are very clear on that point. They will not help you get your money back. In the recent Senate hearings, we learned that four banks reported 192,878 cases in which a customer claimed to have been fraudulently tricked into sending a payment. The banks reimbursed only around 3,500 of those clients. Ergo: The odds are not in your favor.”
It’s anonymous. You have no idea who is behind an alleged landlord’s Zelle username. Sure, it may actually be a business consultant who wants to sublet her fantastic apartment while she’s working in Europe for a year. Or…it could be a criminal who’s catfishing you with pictures of sexy real estate.
“In general, people are emotionally invested in finding a new place to live,” points out Bordo. “Scammers count on that! They’re banking on the fact that when you see the perfect listing at an even better price, you’ll throw caution to the wind and trust someone you ordinarily might not: i.e., a stranger from the Internet. And these scammers feel totally safe doing it, because they know you have little to no chance of ever tracking them down.”
It’s irreversible. Money sent via Zelle and Venmo is traveling down a one-way road. There is no “undo” button or “reverse payment” option. The only way to recover your cash is with the cooperation of the person who received it.
“If you accidentally send your friend $100 instead of the $10 he spotted you for lunch, no problem—he’ll send it right back,” says Bordo. “But the scammer who conned you out of a $2,000 ‘security deposit’? You’ll never hear from them again.”
“When you’re searching for a new rental, protect yourself by paying only via credit card or check,” advises Bordo. “These ‘old-fashioned’ options allow you to stop a payment or reverse a charge. Also, no matter how urgent a landlord makes it seem, never, ever send them money without seeing the property, inside and out, in person. It’s better to lose out on a potential rental than lose thousands of dollars to a thief!
“Once you’ve moved into the property and have established that the landlord is legit, then you can use Zelle and Venmo to your heart’s content,” he adds.