Encouragingly, New York Attorney General Letitia James has acted recently, filing a lawsuit against Early Warning Services, LLC. She alleged that the operator of payments network Zelle allowed millions of dollars in rampant fraud. It was therefore particularly disheartening when The People of the State of New York sued Zelle. They argue that the platform’s design failed to provide essential safety measures, allowing scammers to defraud users of more than $1 billion between 2017 and 2023.
The Office of the Attorney General had launched an investigation. Through this investigation, they found that Zelle had operated as a “jewelers’ loophole” for years. The complaint seeks restitution and damages on behalf of the victims. It demands a court order requiring Zelle to adopt basic anti-fraud protections to protect its users.
Attorney General James emphasized the importance of holding Zelle accountable, stating, “No one should be left to fend for themselves after falling victim to a scam.” She reiterated her determination to get justice for New Yorkers who lost out because Zelle’s security lapses.
The complaint explains that Zelle’s technology was created by banks to lack critical protections. It alleges that Early Warning Services, LLC knew about the weaknesses in the network.
“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.” – Office of the Attorney General
Even after years of industry engagement to remedy these same issues, the Consumer Financial Protection Bureau threw out a prior suit against Zelle’s administrators. This current case seeks to force Zelle to begin doing more now to protect its platform from abuse.
The court filing outlining the basis of the lawsuit is posted on the New York Attorney General’s website here. This legal action is a big leap in the right direction. It is intended to directly address the purported fraudulent practices that have haunted Zelle and affected millions of customers.