In a blistering legal move, New York Attorney General Letitia James has accused Zelle of turning a blind eye to glaring security gaps that allegedly allowed fraudsters to siphon over \$1 billion from unsuspecting consumers.
Filed in Manhattan state court, the lawsuit paints a picture of a payment platform—backed by some of the biggest banks in America—failing to implement even the most basic safeguards. James claims Zelle’s parent company, Early Warning Services, and its bank owners, including Bank of America, JPMorgan Chase, and Wells Fargo, ignored years of warnings about vulnerabilities, often brushing aside customer complaints while scammers thrived on the platform.
The complaint describes fraud ranging from fake utility shut-off threats to elaborate puppy scams. In one case, a victim paid \$1,477 to “Coned Billing” after being told their electricity was in jeopardy; in another, a would-be pet owner wired \$2,600 for a non-existent puppy before the seller demanded even more cash.
James says that only after congressional scrutiny and regulatory pressure in 2023 did Zelle introduce long-delayed safety measures—steps she calls “too little, too late” for thousands already defrauded. While Zelle touts a fraud-free rate above 99.95% and dismisses the lawsuit as a “political stunt,” James insists the company still facilitates “substantial” scams.
The suit seeks restitution for victims, mandatory upgrades to Zelle’s anti-fraud protocols, and damages for New Yorkers who lost funds. James’s office has recently pursued similar actions against other financial giants, signaling a growing crackdown on consumer protection failures in the digital payment space.
