New York Sues Zelle Parent Company, Alleging It Enabled Fraud

New York Attorney General Letitia James has sued Zelle's parent company, Early Warning Services, alleging it knowingly enabled over $1 billion in fraud from 2017 to 2023 by failing to implement basic safeguards. CNBC reports: '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.

James is seeking restitution and damages, in addition to a court order mandating that Zelle puts anti-fraud measures in place. 'No one should be left to fend for themselves after falling victim to a scam,' James said in the release. 'I look forward to getting justice for the New Yorkers who suffered because of Zelle's security failures.' A Zelle spokesperson called the lawsuit a 'political stunt to generate press' and a 'copycat' of the CFPB lawsuit, which was dropped in March.

'Despite the Attorney General's assertions, they did not conduct an investigation of Zelle,' the spokesperson said. 'Had they conducted an investigation, they would have learned that more than 99.95 percent of all Zelle transactions are completed without any report of scam or fraud -- which leads the industry.'

Read more of this story at Slashdot.