New York Attorney General Letitia James filed a lawsuit against Early Warning Services (EWS), the operator of Zelle, owned by major banks including JPMorgan Chase, Bank of America, Capital One and Wells Fargo.
Zelle, launched in 2017, has about 151 million users as of 2024 and is one of the leading electronic money-transfer services competing with apps like Venmo and Cash App.
The big picture: The lawsuit claims that Zelle enabled extensive fraud due to inadequate safety and fraud prevention measures.
- EWS allegedly knew that the platform had vulnerabilities that allowed scammers to impersonate businesses and government entities but failed to address them properly.
- Over $1 billion was reportedly stolen through scams facilitated by Zelle, taking advantage of the fast and weak registration process for accounts.
- Scammers pretended to be entities such as utility companies to trick victims into transferring money.
- Victims often could not recover stolen funds because Zelle payments are irreversible once processed.
Go deeper: Banks like JPMorgan Chase reportedly refused reimbursements to customers who lost money through these scams.
- The lawsuit claims EWS and its banking partners did not effectively remove fraudsters from the network, despite prior complaints.
- There was no requirement forcing banks to reimburse scam losses, and key anti-fraud protections were only introduced years after warnings, with efforts beginning in 2023.
What they’re saying: Zelle responded by calling the lawsuit a “political stunt” and a copycat of the earlier CFPB action, defending the platform’s safety record and highlighting that 99.95% of transactions are fraud-free.
- The company also said it was unfair to blame them for criminal activity without proper investigation.
