NY's top legal officer files a lawsuit against Zelle's parent company, following the Trump administration's abandonment of a similar court case.
Zelle Payment Platform Accused of Inadequate Fraud Protection
The parent company of the Zelle payment platform, Early Warning Services, is under fire for allegedly failing to protect users from fraud, according to a lawsuit filed by New York Attorney General Letitia James.
The lawsuit, filed in New York state court, accuses Early Warning Services of allowing widespread fraud totaling over $1 billion in consumer losses. The Attorney General's complaint alleges that Early Warning's streamlined registration process lacked adequate verification safeguards, enabling fraudsters to take over legitimate user accounts and induce users to transfer funds under false pretenses.
The lawsuit cites an instance where a Zelle user was scammed by someone posing as an employee of Con Edison, resulting in a transfer of about $1,500 to a fraudulent Zelle account. The user was informed by their bank that they could not get their money back, according to James' office.
Early Warning Services has responded to the allegations, calling James' lawsuit a "political stunt to generate press, not progress." Zelle's statement also claimed that the company should focus on stopping criminal activity and adhering to the law, not "overreach and meritless claims."
It's important to note that the Consumer Financial Protection Bureau (CFPB) abandoned its lawsuit against Early Warning Services in March 2025, following a change in the federal administration under President Donald Trump. The Trump administration significantly curtailed the agency's activities, including firing its leadership and closing its headquarters, thus halting many enforcement actions.
However, after the CFPB dropped the case, Attorney General James took up the cause with a state-level lawsuit. The Justice Department has also subpoenaed James as part of an investigation into whether she violated Trump's civil rights.
Early Warning Services is owned by a group of U.S. banks. The company's critics argue that the design of Zelle lacks critical safety features, which has contributed to the high level of fraud.
The Consumer Financial Protection Bureau's work was halted, its headquarters was closed, and many of its workers were fired under the Trump administration. The agency dropped a similar case earlier this year.
Attorney General Letitia James has been a leading antagonist of former President Donald Trump and has sued him dozens of times. The ongoing investigation and lawsuit against Early Warning Services add another chapter to the contentious relationship between James and Trump.
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