Topline<\/p>\n
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.<\/p>\n
New York Attorney General Letitia James\u2019 office picked up the lawsuit after the Consumer Financial Protection Bureau dropped a similar one in March.<\/p>\n
Getty ImagesKey Facts<\/p>\n
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.<\/p>\n
The company developed an electronic payment app to compete with the growing dominance of PayPal and Venmo, but James\u2019 office claims they \u201crush[ed]\u201d the app to market with features that made it easy for fraudsters to take advantage of users.<\/p>\n
Zelle\u2019s \u201cquick registration process and lack of verification\u201d made it easy for fraudsters to sign up, and \u201climited information displayed to consumers who send money\u201d enabled them to trick users, the complaint alleges.<\/p>\n
James\u2019 office also claimed that the company was aware of rampant fraud on the app, but \u201cfailed to take meaningful action to stop it.\u201d<\/p>\n
The attorney general\u2019s office is seeking “restitution and damages\u201d for New Yorkers impacted and a court order mandating the company implement \u201canti-fraud measures necessary to protect its users.\u201d<\/p>\n
James\u2019s lawsuit mirrors a similar lawsuit brought by the Consumer Financial Protection Bureau in December, but the agency dropped the case after the Trump administration moved to shut down the agency\u2019s <\/a>work in February.<\/p>\n In a statement provided to Forbes, Eric Blankenship, a spokesperson for Zelle, called the lawsuit a \u201cpolitical stunt to generate press.\u201d<\/p>\n Contra<\/p>\n Zelle said the New York suit is \u201cnothing more than a copycat of the Consumer Financial Protection Bureau lawsuit that was dismissed in March\u201d and claimed that the attorney general\u2019s office did not conduct a full investigation into the company. \u201cHad 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 \u2013 which leads the industry,\u201d Blankenship said in a statement for the company.<\/p>\n How Does The Ag\u2019s Office Say Scammers Use Zelle?<\/p>\n The complaint filed by James\u2019s office identifies two common types of fraud seen on Zelle. The first is what they call \u201ctakeover fraud,\u201d which happens when a fraudster obtains improper access to an account (through hacking, obtaining security info, or taking over a mobile device with access to a banking app) and quickly transfers money out to an account they control. The other common type is \u201cinduced fraud\u201d\u2014when a scammer convinces a user to transfer money to an account under false pretenses. In one example given in the complaint, a scammer pretended to be a ConEdison employee notifying a victim of a fraudulent shutoff notice. The victim then transferred $1,476.89 to a Zelle account with the name \u201cConed Billing.\u201d They were later told by their bank that they \u201ccan\u2019t get me that money back,\u201d the complaint alleges.<\/p>\n Key Background<\/p>\n This is the second time James\u2019s office has announced legal action against a company that was previously facing a CFPB lawsuit before it was dropped since the start of President Donald Trump\u2019s second term. The CFPB was created by the Dodd-Frank Act in the aftermath of the 2008 financial crisis. Russell Vought, the Trump-appointed director of the Office of Management and Budget, took over as acting director of the bureau in February, reportedly halting work and dismissing ongoing lawsuits. The New York attorney general\u2019s office announced a suit<\/a> against Capital One in May, alleging the bank took advantage of customers who thought its 360 Savings accounts offered higher interest rates. The bank has denied these allegations. James\u2019s office also secured a settlement<\/a> with MoneyGram, with the payment company agreeing to pay a $250,000 fine in exchange to settle a lawsuit her office filed in 2022. The CFPB dropped a similar lawsuit against the company in April.<\/p>\n","protected":false},"excerpt":{"rendered":"Topline New York Attorney General Letitia James announced a lawsuit against the company that developed Zelle, the online…\n","protected":false},"author":2,"featured_media":65879,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[34761,27617,34760,2306,86,56,54,55,19359],"class_list":["post-65878","post","type-post","status-publish","format-standard","has-post-thumbnail","category-mobile","tag-cfpb","tag-lawsuits","tag-letitia-james","tag-mobile","tag-technology","tag-uk","tag-united-kingdom","tag-unitedkingdom","tag-zelle"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/65878","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=65878"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/65878\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/65879"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=65878"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=65878"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=65878"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}