NY attorney general sues Zelle's parent company, alleging the payment service enabled widespread fraud
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On Wednesday, New York’s attorney general initiated a lawsuit against the parent company of the Zelle payment platform. This move comes months after the federal Consumer Financial Protection Bureau ceased a similar legal action during a period when the Trump administration was significantly scaling back the agency’s operations.

Letitia James, the Attorney General and a member of the Democratic Party, filed this case in New York state court. The lawsuit targets Early Warning Services, a firm owned by several U.S. banks, accusing it of not incorporating key security measures into Zelle’s design, thereby leaving users exposed to fraudulent activities.

Options to use the Zelle payments network are seen on a mobile banking app in New York, Dec. 20, 2024.

Options to use the Zelle payments network are seen on a mobile banking app in New York, Dec. 20, 2024.

AP Photo/Patrick Sison, File

Earlier this year, the Consumer Financial Protection Bureau withdrew a comparable lawsuit, following the dismissal of its leader by President Donald Trump. The administration subsequently shut down many of the bureau’s operations, closed its main office, and initiated a series of layoffs.

According to a statement from James’ office, their lawsuit was introduced in response to the Consumer Financial Protection Bureau’s decision to drop their case due to a “change in the federal administration.”

“No individual should be left vulnerable after becoming a victim of fraud,” James expressed in a statement. “I am eager to seek justice for the New Yorkers who suffered due to the insufficient security measures of Zelle.”

James has been a prominent opponent of Trump and has taken legal action against him numerous times. Recently, reports by The Associated Press and other media indicated that the Justice Department has issued a subpoena to James as part of an inquiry into whether she infringed upon Trump’s civil rights, according to sources familiar with the situation.

James’ case against Early Warning Services alleged that Zelle, which allows users to send and receive near-instant money transfers, failed to include adequate verification processes. Her office said scammers were able to access peoples’ accounts or trick users into sending money to bogus accounts that posed as official businesses.

In one instance cited by the attorney general’s office, a Zelle user got a call from someone posing as an employee of the utility company Con Edison who told the user that his electricity was going to be shut off unless he sent them money through Zelle. The user then transferred about $1,500 to a Zelle account named “Coned Billing” and then realized he had been scammed but was told by his bank that he could not get his money back, James’ office said.

In a statement issued through a spokesperson, Zelle called James’ lawsuit “a political stunt to generate press, not progress.”

“The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims,” the statement said.

Copyright © 2025 by The Associated Press. All Rights Reserved.

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