New York Attorney General Letitia James filed a lawsuit against Early Warning Services, the parent company of the Zelle payment platform, alleging that the company failed to protect users from scams by not building adequate security features into its system. Early Warning Services, which is owned by major U.S. banks, operates Zelle, a platform that allows near-instant money transfers. James’ lawsuit follows the Consumer Financial Protection Bureau’s decision earlier this year to drop a similar case after the Trump administration moved to limit the agency’s work. According to James, “No one should be left to fend for themselves after falling victim to a scam. I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”
The Attorney General cited multiple incidents where users lost money to fraud, including a case in which a consumer transferred about $1,500 to a scam account posing as Con Edison. James’ office said banks often refused to refund victims, leaving them without recourse. In response, a Zelle spokesperson called the lawsuit “a political stunt to generate press, not progress,” adding, “The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims.” The case now sets up a high-profile battle between state regulators and the banking industry over consumer protections in digital payments.
