The lawsuit alleges that Zelle became a “hub for fraudulent activity” because its registration process omitted key verification steps yet failed to take meaningful action to curb the growth of unlawful transactions.
New York Attorney General Letitia James has filed a lawsuit against the operator of Zelle, claiming that the payment network enabled fraud by letting scammers steal more than $1 billion from users between 2017 and 2023.
In a press release, James’s office said that it has concluded an investigation into Early Warning Services, the owner and designer of Zelle, and found that the application was built “without critical safety features.”
The attorney general’s office also noted that James’s lawsuit is similar to another that was filed by the federal Consumer Financial Protection Bureau, which was quietly dropped by the Trump administration in March.
“EWS knew from the beginning that key features of the Zelle network made it uniquely susceptible to fraud, and yet it failed to adopt basic safeguards to address these glaring flaws or enforce any meaningful anti-fraud rules on its partner banks,” James said in the press release.
The lawsuit alleges that Zelle became a “hub for fraudulent activity” because its registration process omitted key verification steps yet failed to take meaningful action to curb the growth of unlawful transactions.
“Beginning in 2017, the year Zelle launched, anyone with a U.S. bank account could enroll in Zelle and send or receive near-instant money transfers through linked email addresses or U.S.-based mobile phone numbers,” James’s office said. “Scammers could sign up through a quick registration process that lacked important verification steps, allowing them to utilize misleading email addresses such as those associated with trusted businesses or government entities. Zelle’s emphasis on immediate and irreversible transfers means that by the time consumers realize they have been targeted by fraudsters, their money is often already gone.”
James also claimed that, between 2017 and 2023, Early Warning Services maintained a policy of letting its partner banks report fraud long after it occurred, making it easier for scammers to continue using the same fraudulent credentials to steal from other consumers.
“No one should be left to fend for themselves after falling victim to a scam,” James said. “I look forward to getting justice for New Yorkers who suffered because of Zelle’s security features.”
Zelle has since sought to cast the lawsuit as a “political stunt to generate press,” calling it a “copycat” of the Consumer Financial Protection Bureau’s claim.
“Despite the Attorney General’s assertions, they did not conduct an investigation of Zelle,” a spokesperson for the company said. “Had they conducted an investigation, they would have learned that more than 99.95 percent of all Zelle transactions are completed without any report of scam or fraud—which leads the industry.”
Sources
Attorney General James Sues Company Behind Zelle for Enabling Widespread Fraud
New York Attorney General James sues Zelle parent company, alleging it enabled fraud
Join the conversation!