New York Attorney General Letitia James has filed a lawsuit against the banks operating Zelle, claiming the payment platform led to over $1 billion in fraud losses from 2017 to 2023. The lawsuit alleges that Zelle's rushed design made it prone to fraud and that Early Warning Services (EWS) failed to implement adequate safeguards. It points out flaws in the registration process that allowed scammers to exploit the platform. Additionally, EWS allegedly did not handle fraud reports timely, nor did it adequately protect customers from scams, despite falsely representing the platform as safe.
New York Attorney General Letitia James is suing the banks behind Zelle over claims that their payment platform enabled "massive amounts of fraud" that caused customers to lose more than $1 billion between 2017 and 2023.
James alleges Zelle was rushed to market, resulting in a design that made the platform "an obvious conduit for fraudulent activity." Key features of the Zelle network made it uniquely susceptible to fraud.
The lawsuit claims EWS did not ensure banks reported customer complaints about fraud in a "timely" manner and falsely advertised the service as a "safe" money transfer tool.
Following government pressure, Zelle began paying back victims of imposter scams in 2023, addressing some of the issues concerning fraud prevention and reimbursement.
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