New York Sues Zelle Over $1 Billion in Consumer Fraud Losses
New York Attorney General Letitia James filed a lawsuit against Zelle, claiming the electronic payment platform’s failure to adopt key security measures allowed fraudsters to steal more than $1 billion from consumers. The case was filed in Manhattan state court following the U.S. Consumer Financial Protection Bureau’s decision in March to drop a similar case.
James alleged that Zelle’s parent, Early Warning Services, owned by seven major U.S. banks, knew about the platform’s vulnerabilities for years but resisted implementing safeguards. She said fraudsters exploited the platform through scams such as fake utility bills, nonexistent goods, and impersonating banks, leaving victims without support even after money was stolen.
Zelle responded that fraud occurs when users are tricked into sending money and that over 99.95% of transactions are completed without reported fraud. The company called the lawsuit a “political stunt” and warned that holding it liable could raise consumer fees.
The lawsuit seeks stronger anti-fraud protections and restitution for affected New Yorkers. Previous actions by James include suits against Capital One and settlements with MoneyGram over similar consumer protections issues.