New York Sues Zelle--What To Know About Alleged $1 Billion Scams Over The App

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Topline

New York Attorney General Letitia James announced a lawsuit against the company that developed Zelle, the online payment app used by several major banks that allows users to quickly transfer funds to one another, alleging that fraudsters stole a total of $1 billion from consumers because developers failed to implement security features.

Key Facts

The lawsuit was brought against Early Warning Services, LLC, a company owned by seven major banks: Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist Bank, Wells Fargo, and U.S. Bank, who were not named as defendants in the lawsuit.

The company developed an electronic payment app to compete with the growing dominance of PayPal and Venmo, but James’ office claims they “rush[ed]” the app to market with features that made it easy for fraudsters to take advantage of users.

Zelle’s “quick registration process and lack of verification” made it easy for fraudsters to sign up, and “limited information displayed to consumers who send money” enabled them to trick users, the complaint alleges.

https://www.msn.com/en-us/money/news/new-york-sues-zelle-what-to-know-about-alleged-1-billion-scams-over-the-app/ar-AA1Ktse0

New York Attorney General James sues Zelle parent company, alleging it enabled fraud

New York Attorney General Letitia James sued the operator of the Zelle payments network on Wednesday, alleging it enabled fraud by allowing scammers to steal over $1 billion from users between 2017 and 2023.

James' office said in a press release that its investigation found that Early Warning Services, the owner and designer of the peer-to-peer money transfer company, designed Zelle "without critical safety features." The release noted that the lawsuit against EWS follows a similar one dropped by the Consumer Financial Protection Bureau 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' office said in the release.

The lawsuit alleges that Zelle became a "hub for fraudulent activity" because the registration process lacked verification steps and that EWS and its partner banks knew "for years" that fraud was spreading and did not take actionable steps to resolve it, according to the press release.

https://www.msn.com/en-us/money/companies/new-york-attorney-general-james-sues-zelle-parent-company-alleging-it-enabled-fraud/ar-AA1KsxK5