{"id":144043,"date":"2025-08-14T03:15:15","date_gmt":"2025-08-14T03:15:15","guid":{"rendered":"https:\/\/www.europesays.com\/us\/144043\/"},"modified":"2025-08-14T03:15:15","modified_gmt":"2025-08-14T03:15:15","slug":"ny-attorney-general-sues-zelle-over-security-failures-linked-to-1b-in-fraud","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/144043\/","title":{"rendered":"NY attorney general sues Zelle over security failures linked to $1B in fraud"},"content":{"rendered":"

New York Attorney General Letitia James<\/a> has targeted<\/a> some of the nation\u2019s largest banks, accusing them of letting consumers fall victim to fraud. Her office filed a lawsuit<\/a> against Early Warning Services, the company behind the popular payment app Zelle<\/a>, citing the absence of key security features.<\/p>\n

Attorney general targets Zelle over alleged fraud<\/p>\n

James said the lawsuit follows an investigation by the attorney general\u2019s office that found scammers stole more than $1 billion from users between 2017 and 2023 through the platform.<\/p>\n

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\u201cNo one should be left to fend for themselves after falling victim to a scam,\u201d said James. \u201cI look forward to getting justice for the New Yorkers who suffered because of Zelle\u2019s security failures.\u201d<\/p>\n

Rise of payment apps disrupts traditional banking<\/p>\n

The court documents say apps like Venmo<\/a>, PayPal and Cash App\u2019s popularity led banks to face a threat to their long-standing control over how Americans move money. Traditionally, consumers relied on their banks for nearly all non-cash transfers, using checks, online payments or in-person transactions. However, these third-party apps offered speed and convenience that traditional banking just couldn\u2019t match.<\/p>\n

To compete, several major banks created Early Warning Services and launched Zelle in 2017. JPMorgan Chase, Capital One, Bank of America and Wells Fargo own EWS. Zelle markets itself<\/a> as a quick way to move money between people you know and trust, no matter where they bank. Once a payment is sent to someone already enrolled, it cannot be canceled. The money typically lands in their account within minutes.<\/p>\n

The company advises users to confirm their contact details before sending funds, to avoid offers that seem too good to be true and to note that Zelle does not provide purchase protection for authorized transactions. Instead of sharing sensitive account details, payments can be made using just an email address or a U.S. mobile number tied to a bank account.<\/p>\n

The app promised instant transfers with no fees and minimal setup, often embedded directly in users\u2019 bank apps. Zelle\u2019s marketing highlighted safety, telling users their money was \u201cbacked by banks\u201d and could be sent \u201cstraight from your banking app.\u201d<\/p>\n

James argues Zelle\u2019s simplicity created major vulnerabilities. Signing up required only an email or phone number, verification was minimal, and funds were available immediately. Fraudsters quickly exploited the system, using fake accounts, phishing schemes and takeover scams to drain accounts before victims could react.<\/p>\n

A Zelle spokesperson refuted the claims in a statement to Straight Arrow News, calling it a publicity move and a repeat of the earlier CFPB lawsuit.<\/p>\n

\u201cThe Attorney General wants to hand criminals a blueprint for guaranteed payouts with no consequences, opening the floodgates to more scams, not less. That\u2019s bad policy and puts consumers at greater risk,\u201d said a Zelle spokesperson. \u201cThis is nothing more than a copycat of the Consumer Financial Protection Bureau lawsuit that was dismissed in March. Despite the Attorney General\u2019s assertions, they did not conduct an investigation of Zelle.\u201d<\/p>\n

They said if the attorney general investigated the platform, they would have found over 99.95% of Zelle transactions happen without any fraud reports \u2014 a rate they say is among the best in the industry.<\/p>\n

Delayed action allowed alleged fraud to spread<\/p>\n

By 2019, fraud had become widespread. Although Early Warning had proposed basic anti-fraud measures that year, James\u2019 office said the company delayed meaningful implementation and failed to enforce even the limited rules that existed. Over the next four years, millions of users lost hundreds of millions of dollars, while Early Warning and its bank owners profited from Zelle\u2019s growth.<\/p>\n

It wasn\u2019t until 2023, after federal oversight and more than a billion dollars in reported consumer losses, that Zelle adopted safeguards. The measures cut fraud dramatically, but they could not undo the losses consumers had already suffered.<\/p>\n

In 2024, the Consumer Financial Protection Bureau sued Zelle, but the case was dropped after a change in the presidential administration. With her lawsuit, James is seeking restitution for affected New Yorkers and a court order requiring Zelle to implement anti-fraud measures to protect all users.<\/p>\n

Consumer Reports said<\/a> the CFPB\u2019s decision to drop its lawsuit against the banks behind Zelle signals a reduced focus on consumer protection. The group warned this could limit relief for fraud victims.<\/p>\n

\t\t\t\t\tCole Lauterbach (Managing Editor), \t\t\t\t<\/p>\n

\t\t\t\t\tLawrence Banton (Digital Producer), \t\t\t\t<\/p>\n

\t\t\t\t\tand Zachary Hill (Video Editor)
\n\t\t\t\t\t\t\tcontributed to this report.<\/p>\n","protected":false},"excerpt":{"rendered":"New York Attorney General Letitia James has targeted some of the nation\u2019s largest banks, accusing them of letting…\n","protected":false},"author":3,"featured_media":144044,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5122],"tags":[5229,21866,64,48894,23273,23274,1998,24980,405,24978,403,23271,10814,5226,5225,5228,5227,23275,10816,30142,1439,67,586,132,5230,68,2969,23276,13241],"class_list":{"0":"post-144043","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-new-york","8":"tag-america","9":"tag-bank-of-america","10":"tag-business","11":"tag-cash-app","12":"tag-distro","13":"tag-imds","14":"tag-jpmorgan","15":"tag-letitia-james","16":"tag-new-york","17":"tag-new-york-attorney-general","18":"tag-new-york-city","19":"tag-news-update","20":"tag-newsbreak","21":"tag-newyork","22":"tag-newyorkcity","23":"tag-ny","24":"tag-nyc","25":"tag-oovvuu","26":"tag-smartnews","27":"tag-text-first","28":"tag-u-s","29":"tag-united-states","30":"tag-united-states-of-america","31":"tag-unitedstates","32":"tag-unitedstatesofamerica","33":"tag-us","34":"tag-usa","35":"tag-ve","36":"tag-wells-fargo"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115024948620476592","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/144043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=144043"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/144043\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/144044"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=144043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=144043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=144043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}