NY vs Zelle: State sues payment app and accuses it of being a scam haven that bilked $1B from users

Independent

2 days ago

Zelle is being sued by New York 's attorney general over a lack of critical safety features that have allowed scammers to steal more than $1 billion from users.
Attorney General Letitia James filed the lawsuit against Early Warning Services, a technology company owned by the country's largest banks, claiming they failed to protect Zelle users from fraud by not including necessary safety features. An investigation led by James' office found that between 2017 and 2023, scammers were able to steal over $1 billion from Zelle users.
The lawsuit claims that Early Warning Signs, Zelle's parent company, knew from the start that features of the payment platform made it susceptible to fraud, but declined to adopt any safeguards.
The filing comes months after the federal Consumer Financial Protection Bureau dropped a similar case in March, as the Trump Administration gutted the agency. In a statement, James, a Democrat and longtime critic of President Donald Trump, noted the original suit was abandoned following a 'change in the federal administration.'
"No one should be left to fend for themselves after falling victim to a scam," James said. "I look forward to getting justice for the New Yorkers who suffered because of Zelle's security failures.'
James' case also argues that Zelle, which allows users to send and receive near-instant money transfers, failed to include adequate verification processes in its platform.
Her office said fraudsters were able to gain access to people's accounts or trick people into sending money to phony accounts posing as businesses.
In one instance, a Zelle user got a call from someone posing as an employee of the utility company Con Edison, who told him his electricity would be turned off if he didn't send money through Zelle. The victim transferred about $1,500 to a Zelle account named 'Coned Billing' before realizing it was likely a scam. He was then told by his bank that he could not get his money back, James' office said.
James' also claimed that Zelle's advertisements misleadingly promised safe and secure money transfers when the banks backing the platform rejected basic, anti-fraud safeguards. Early Warning Services is owned and controlled by several of the country's largest banks, including, JPMorgan Chase, Bank of America, Capital One, and Wells Fargo.
In a statement, Zelle called James' lawsuit "a political stunt to generate press, not progress."
"The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims," the statement said.