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New York Attorney General Letitia James on Wednesday sued Early Warning Services (EWS), which operates Zelle, alleging the electronic money-transfer service fails to protect its users from “massive amounts of fraud.”
The lawsuit alleges that EWS knew that key features of Zelle’s service made it susceptible to fraud, but it still failed to implement safety measures and allowed scammers to steal over $1 billion. EWS is owned by a consortium of large US banks, including JPMorgan Chase, Bank of America, Capital One and Wells Fargo.
The lawsuit, filed in New York State Supreme Court, comes after the Consumer Financial Protection Bureau dropped a similar case against some of Zelle’s backers in March, part of a broader pullback in enforcement under the Trump administration.
“No one should be left to fend for themselves after falling victim to a scam, and I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures,” James said in a statement.
In a statement to CNN, a Zelle spokesperson called the lawsuit a “political stunt to generate press.”
“This is nothing more than a copycat of the Consumer Financial Protection Bureau lawsuit that was dismissed in March. Despite the Attorney General’s assertions, they did not conduct an investigation of Zelle. 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,” the spokesperson said. “The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims.”
EWS launched Zelle in 2017 as a competitor to popular payment apps like Venmo and Cash App. Zelle said its payment network had grown to 151 million users in 2024.
The NY AG’s lawsuit claims that in its rush to sign up new customers, Zelle allowed safety precautions to fall by the wayside. The lawsuit claims that scammers were able to sign up for Zelle through a quick registration process that lacked verification steps, allowing them to pose as businesses and government entities, tricking unsuspecting users into sending funds under false pretenses.
Zelle’s irreversible transfers also meant that many consumers were not able to get their money back after realizing they had been targeted in a scam, the NY AG claims.
In one example cited in the lawsuit, a New York user was misled by a scammer into believing his home’s electricity would be shut off if he didn’t send money to Con Edison through Zelle. The New Yorker sent nearly $1,500 to a fraudulent account called “Coned Billing.” By the time he realized it was a scam, his bank, JPMorgan Chase, told him they couldn’t get his money back, the AG alleged.
The lawsuit, which is partially redacted, alleges that EWS and its partner banks knew for years about Zelle’s fraud problem but failed to take meaningful steps to fix the problem.
The suit also said EWS failed to remove fraudsters from the Zelle network after receiving complaints and that EWS did not require banks to reimburse customers for certain scams.
EWS began to adopt basic network safeguards in 2023, years after they were first proposed, which significantly curtailed fraud on the platform, the lawsuit says.
In December, the CFPB sued EWS and three of its owner banks, Bank of America, JPMorgan Chase and Wells Fargo, for “allowing fraud to fester.” Hundreds of thousands of consumers who filed fraud complaints about Zelle were largely denied assistance, according to the CFPB’s lawsuit. Some victims of fraud were even told to contact the fraudsters directly to try to recover their money, the suit alleged.
However, earlier this year, the CFPB dropped its suit against EWS, along with several other cases against companies that had been accused of hurting consumers. The dropped lawsuits come as the White House has made efforts to sideline the CFPB since President Donald Trump returned to office in January.
The NY AG’s lawsuit is seeking restitution and damages for New Yorkers affected by fraud on Zelle’s platform, along with a court order mandating that Zelle adopts anti-fraud measures.
CNN’s Matt Egan contributed to reporting.
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