Zelle faces a lawsuit by New York authorities, alleging insufficient security measures resulted in a billion dollars worth of consumer fraud.
Zelle, the popular electronic payment platform, is facing a lawsuit filed by New York Attorney General Letitia James on August 13, 2025. The lawsuit alleges that Zelle and its operator, Early Warning Services (EWS), have failed to implement critical safety and anti-fraud features, allowing scammers to exploit the platform and defraud users of over $1 billion between 2017 and 2023.
The lawsuit highlights systemic security lapses in Zelle’s design and operation that left consumers vulnerable to massive financial scams. The key safety shortcomings included the absence of adequate identity verification during registration and the lack of enforcement of anti-fraud rules among the partner banks, enabling scammers to take over legitimate user accounts and induce users to transfer funds to fraudsters.
The New York Attorney General's lawsuit alleges that EWS designed Zelle without sufficient safeguards such as robust user identity verification during the streamlined registration process, failure to adopt and enforce meaningful anti-fraud rules across banks using the Zelle platform, and delay in implementing "critical" security measures and rule changes that could have reduced fraud significantly.
The lawsuit seeks to require Zelle to strengthen anti-fraud protections, pay restitution, and damages to defrauded New Yorkers. The Consumer Financial Protection Bureau had previously filed a similar lawsuit in December 2024 but dropped it in March 2025 due to changes in federal administration, prompting the state lawsuit to continue this action.
Typical scams involving Zelle include hacking into users' accounts, unauthorized transfers, and impersonating banks, government offices, and utilities. For instance, one victim was told they would have their electricity shut off unless they paid $1,477 via Zelle to an account named "Coned Billing." Another victim lost $2,600 when they sent money via Zelle to buy a puppy, only to be scammed when the seller demanded more money.
Zelle has described the lawsuit as a "political stunt to generate press" and called for the Attorney General to focus on stopping criminal activity and adherence to the law. However, the lawsuit claims that Zelle's parent and the banks knew for years that the platform was vulnerable to fraud but resisted implementing basic safeguards.
The parent company of Zelle, Early Warning Services, is owned by seven large U.S. banks: Bank of America, Capital One, JPMorgan Chase, PNC, Truist, US Bank, and Wells Fargo. The seven banks that own Early Warning Services were not named as defendants in the lawsuit.
As the case is ongoing, with no final judgment or settlement publicly reported yet, it aims to hold Zelle accountable for failing to guard users against fraud through basic and long-overdue safety features.
| Aspect | Details | |----------------------------|------------------------------------------------------------------------------------------------| | Safety failures | Inadequate identity verification, no enforced anti-fraud rules, delayed security measure deployment | | Fraud impact | Over $1 billion stolen from users (2017-2023) | | Lawsuit filed | August 13, 2025 by NY Attorney General after CFPB dropped similar suit | | Lawsuit goals | Restitution, damages, court order to enforce anti-fraud safeguards | | Current status | Ongoing with no final resolution yet |
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