New York’s Attorney General Letitia James has launched a high-profile lawsuit against Early Warning Services (EWS), the parent company behind the popular Zelle payment platform, alleging that the company’s failure to implement critical safety features enabled scammers to steal over $1 billion from users between 2017 and 2023. The suit, filed in New York state court on August 13, 2025, comes in the wake of a similar case dropped earlier this year by the federal Consumer Financial Protection Bureau (CFPB), a move that has sparked controversy and debate over consumer protection in the rapidly growing digital payments sector.
According to a press release from the Attorney General’s Office, Zelle, which is owned by a consortium of major U.S. banks including JPMorgan Chase, Bank of America, and Wells Fargo, was designed “without critical safety features.” The complaint alleges that this lack of safeguards made the platform uniquely susceptible to fraud, allowing criminals to exploit weaknesses in the system and target unsuspecting users. James’ office contends that both EWS and its partner banks were aware for years that Zelle was vulnerable to fraudulent activity but failed to take meaningful action to address the problem.
“No one should be left to fend for themselves after falling victim to a scam,” James said in her official statement. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”
The lawsuit details a range of common scams that have plagued Zelle users, from hackers gaining unauthorized access to accounts and making illicit transfers, to fraudsters posing as legitimate businesses or government agencies. In one particularly egregious case cited by James’ office, a user received a call from someone claiming to be a Con Edison employee who threatened to cut off the user’s electricity unless payment was made via Zelle. The victim transferred $1,477 to an account named “Coned Billing,” only to discover later that he had been duped. Despite the clear evidence of fraud, the victim’s bank refused to reimburse the lost funds.
Another case involved a would-be pet owner who sent $2,600 in two installments via Zelle to purchase a puppy, only to realize that the seller was a scammer demanding ever more money. Again, neither the bank nor Zelle offered meaningful assistance or restitution.
The Attorney General’s lawsuit argues that Zelle’s registration process lacked adequate verification steps, making it easy for scammers to create fraudulent accounts and operate with impunity. The suit further alleges that EWS and its partner banks “knew for years” about the spread of fraud on the platform but resisted implementing basic anti-fraud safeguards. According to James, it wasn’t until 2023—after mounting pressure from the CFPB and several members of Congress—that Zelle finally adopted “basic” security measures that had been proposed years earlier. While these changes did result in a sharp decline in reported fraud losses, James insists that the steps were “too little too late” for consumers who had already lost significant sums.
The timing of the lawsuit is notable. Earlier in 2025, the CFPB dropped a similar case against EWS and several major banks, a decision that followed a change in federal administration and a broader rollback of the bureau’s consumer protection activities. The CFPB’s retreat has left state officials like James to take up the mantle of consumer advocacy, a role she appears eager to embrace. “This lawsuit is a political stunt to generate press, not progress,” a Zelle spokesperson shot back in a statement, dismissing the Attorney General’s claims as meritless and accusing her office of failing to conduct a proper investigation.
Zelle’s parent company, Early Warning Services, is based in Scottsdale, Arizona and is owned by seven of the largest U.S. banks. While the banks themselves are not named as defendants in the suit, the complaint makes clear that they played a central role in the alleged failures to protect consumers. The Attorney General is seeking restitution and damages for defrauded New Yorkers, as well as a court order requiring Zelle to implement more robust anti-fraud protections.
In its defense, Zelle argues that more than 99.95% of its transactions are completed without any report of scam or fraud—a figure it claims leads the industry. The company maintains that scams typically begin when criminals trick users into sending money, rather than exploiting weaknesses in the platform itself. Zelle has warned that holding it liable for user losses could result in higher fees for consumers, and it has characterized the Attorney General’s lawsuit as a “copycat” of the earlier CFPB action.
Still, critics argue that Zelle’s rapid growth and popularity have outpaced the development of adequate security measures. With near-instant money transfers and easy account setup, the platform has become a favored tool for scammers, who exploit the lack of verification and the difficulty users face in recovering lost funds. The Attorney General’s complaint alleges that Zelle often ignored customer complaints and allowed known fraudsters to remain on the platform, despite repeated assurances that the service was “backed by the banks, so you know it’s secure.”
James’ office is seeking not only monetary compensation for affected consumers, but also structural reforms to make Zelle safer for all users. The lawsuit requests that the court mandate the implementation of stricter verification processes, more effective monitoring of suspicious activity, and greater transparency in how fraud complaints are handled.
This is not the first time James has taken on major financial institutions over consumer protection issues. In May, she sued Capital One for allegedly cheating savings depositors out of millions in interest, and in June, she settled claims against MoneyGram over remittance transfer lapses. Her latest lawsuit against Zelle underscores the growing scrutiny of peer-to-peer payment platforms and the challenges regulators face in keeping up with technological innovation.
For now, the legal battle between New York’s Attorney General and Zelle is shaping up to be a major test case for consumer rights in the digital age. With billions of dollars at stake and millions of Americans relying on electronic payments for everything from utility bills to pet purchases, the outcome could have far-reaching implications for the future of online banking security and accountability.
