Case Overview
During 2020, an estimated 18 million Americans were defrauded through peer-to-peer (“P2P”) payment apps, including Early Warning Services, LLC d/b/a Zellepay.com (“Zelle”). Created and owned by America’s largest banks to enable digital money transfers, Zelle comes embedded in banking apps and is now America’s most widely used money transfer service. Plaintiffs allege that Zelle and the banks are aware of the widespread fraud, but are not taking the necessary measures to (1) stop the fraud, (2) educate consumers about the risks of fraud, and (3) help victims get their money back when they have been defrauded.
Zelle advertises its money transfer services by claiming that it is “a fast, safe and easy way to send and receive money.” The banks similarly advertise their mobile banking app service by featuring their convenience and security measures, and embedding Zelle into their banking apps. Plaintiffs allege that Zelle and the banks are disregarding their “error resolution obligations” outlined in the Consumer Financial Protection Bureau’s Electronic Fund Transfers FAQs. The Federal Deposit Insurance Corporation issued a report in March 2022 finding that Regulation E’s liability protection for unauthorized transfers applies even if a consumer is deceived into giving someone their authorization credentials. Zelle’s conduct is also under investigation by the U.S. Senate, which issued a report on July 23, 2024, “A Fast and Easy Way to Lose Money: Insufficient Consumer Protection on the Zelle Network.” The report explains that nearly two-thirds of consumers’ “fraud” claims are denied, and almost nine out of ten “scam” claims are denied. Denied fraud claims specific to just three of the major banks totaled over $102 million during 2023.
Zelle was designed to allow its users to transfer money directly from their bank accounts to other registered Zelle users and is marketed as a fast, safe, and easy way to send and receive money. Unfortunately, Zelle, America’s most widely used P2P money transfer service, and the banks, are not taking sufficient actions to protect their customers.
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