New York has launched a lawsuit against the parent company of the e-payment platform Zelle, alleging that it failed to implement adequate protective measures to safeguard consumers from fraud.
Attorney General Letitia James has accused Early Warning Services, which is the largest bank-owned financial technology firm in the U.S., of hastily rolling out Zelle to compete with other payment services like Venmo and PayPal.
She asserts that this rushed approach resulted in limited security protocols, making the network a prime target for fraud.
Despite initial efforts to enhance security back in 2019, the company reportedly incurred losses exceeding $1 billion by not implementing further protections until 2023, according to the complaint filed.
James remarked, “No one should bear the burden alone after becoming a victim of fraud. We are determined to achieve justice for New Yorkers harmed by Zelle’s security shortcomings.”
The lawsuit seeks to compel Zelle to enact specific safeguards and to provide explanations and compensation to New York consumers who experience losses.
This legal action follows a similar lawsuit filed by the Consumer Financial Protection Bureau against the company in March.
Zelle has rebuffed these allegations, labeling the lawsuit as “a political stunt that facilitates headlines rather than meaningful change.” They assert that over 99.95% of transactions on the platform are claimed to be completed without incidents of fraud.
The company further contends, “The Attorney General is essentially offering criminals a playbook for guaranteed payments without accountability. This is poor policy that places consumers at greater risk.” They also pointed out that this lawsuit mirrors the earlier one from the Consumer Financial Protection Bureau, which was dismissed.
