New York Attorney General Letitia James has filed a lawsuit against Zelle, accusing the electronic payment platform of failing to implement basic anti-fraud safeguards, which allegedly allowed fraudsters to steal over $1 billion from consumers. The lawsuit, filed in a Manhattan state court, follows a similar case dropped by the U.S. Consumer Financial Protection Bureau (CFPB) earlier this year.
Zelle, launched in 2017, competes with apps like PayPal’s Venmo and Block’s Cash App. The platform is owned by Early Warning Services, a consortium of seven major U.S. banks, including Bank of America, Chase, and Wells Fargo. James claims that despite being aware of the platform’s vulnerabilities, Zelle and the banks behind it resisted necessary safeguards, leaving users vulnerable to fraud. She asserts that fraud on the platform was widespread, with Zelle often failing to address complaints or reimburse victims.
Zelle, however, defended itself, arguing that scams occur when criminals trick users into sending money, rather than from flaws within the platform itself. The company warned that holding Zelle accountable for these scams could result in higher fees for consumers.
The lawsuit seeks to force Zelle to adopt stronger anti-fraud protections and compensate defrauded customers. The complaint details various scams, including puppy sales and utility bill fraud, where users were tricked into sending money for goods or services that didn’t exist.
James also highlighted that while Zelle introduced basic safeguards in 2023—after probes from the CFPB and Congress—these measures were “too little, too late” for many victims who had already lost money.
The lawsuit adds to James’ growing focus on consumer protection, following her earlier actions against Capital One and MoneyGram.
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