Zelle faces a new lawsuit over allegations that it lacked critical safety features, enabling criminals to steal more than $1 billion from consumers. The suit builds on an earlier complaint from the U.S. Consumer Financial Protection Bureau, which was dropped in March. Although Zelle has since implemented protective measures, the lawsuit seeks to compel the company to further enhance its anti-fraud protections and provide restitution to victims.
Zelle is owned by seven of the country’s largest banks, including JPMorgan Chase, Bank of America, and Wells Fargo. The suit claims that these parent banks, operating under the name Early Warning Services, knew for years that the platform was vulnerable to criminal activity but resisted implementing basic safeguards. The result was widespread fraud, which Zelle at times allegedly failed to address.
According to the complaint: “EWS knew from the beginning that key features of the Zelle network made it uniquely susceptible to fraud, and yet it failed to adopt basic safeguards to address these glaring flaws or enforce any meaningful anti-fraud rules on its partner banks.”
A Hasty Rollout
The New York State Attorney General’s office said the problems started when EWS hastily rolled out an electronic payment platform to allow the major banks to compete with new payment apps like Venmo and PayPal. “In their rush to launch,” the complaint says, “EWS prioritized attracting new users through a simple registration process and quick transfers that left consumers vulnerable to scammers.”
As early as 2018, published reports indicated that scams were already a problem on Zelle. The platform’s rapid payment resolution became a boon for criminals, who could withdraw money quickly and irretrievably, then disappear. The New York complaint cites a victim who was told his electricity would be shut off unless he paid “Coned Billing” $1,477 via Zelle, and another who said Zelle refused to help him after he sent $2,600 in two installments via Zelle to buy a puppy.
Addressing the Problem
Zelle’s position is that scams result from criminals tricking individuals into sending money, rather than from issues with the platform itself. Zelle also stated that more than 99.95% of transactions are completed without any reported fraud.
The member banks have already taken steps to address the fraud problem. In March, JPMorgan Chase updated Zelle’s terms of service to grant Chase the right to delay, block, or cancel payments, specifically flagging social media as a high-risk area. The complaint acknowledges that Zelle adopted basic safeguards starting in 2023, but only after the CFPB and several members of Congress began investigating the service.
