New York sues Zelle over $1B in scams

[Isabella Torregiani]

(Tech Daily/Unsplash)

New York Attorney General Letitia James has filed a lawsuit against Early Warning Services, LLC, the company behind Zelle — a popular online payment app used by major banks for quick fund transfers. The suit alleges that lack of security protocols allowed fraudsters to steal $1 billion from consumers.

The lawsuit details​

The lawsuit targets a company owned by multiple major banks. (Wesley Tingey/Unsplash)

The suit targets Early Warning Services, owned by seven major banks including Bank of America, JPMorgan Chase, Wells Fargo and others. However, the banks themselves are not named defendants.

Security issues​

Zelle’s weak security allegedly let scammers exploit easy sign-ups. (Mika Baumeister/Unsplash)

Developed to rival PayPal and Venmo, Zelle’s app was “rush[ed]” to market with weak security features, according to James’ office. The complaint highlights Zelle’s “quick registration process and lack of verification” as a gateway for scammers, along with “limited information displayed to consumers who send money” that made deception easier.

Zelle pushes back​

The company denies any fault. (Hunters Race/Unsplash)

The company denies wrongdoing, calling the lawsuit a “copycat” of a similar Consumer Financial Protection Bureau (CFPB) case dismissed earlier this year. Zelle spokesperson Eric Blankenship stated, “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.”

Previous lawsuits​

This isn’t James’ first case after the CFPB dropped lawsuits under Trump. (MEGA)

This isn’t the first time Attorney General James has stepped in after the CFPB’s lawsuits were dropped under President Donald Trump’s administration. Under acting director Russell Vought, the bureau dismissed ongoing cases. James therefore sued Capital One for misleading claims about its 360 Savings accounts, which the bank denies. She also accepted a $250,000 settlement with MoneyGram. CFPB abandoned its own lawsuit against the company earlier this year. Now, she’s targeting Zelle to protect New Yorkers where federal efforts fell short. The attorney general’s office is seeking “restitution and damages” for New Yorkers affected. A court order is also requiring the company to adopt “anti-fraud measures necessary to protect its users.”

The post New York sues Zelle over $1B in scams appeared first on Knewz.

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