New York AG Sues Zelle’s Parent Company Over Fraud Concerns

New York Attorney General Letitia James has launched a lawsuit against Early Warning Services, LLC (EWS), the company behind the electronic payment platform Zelle, for allegedly failing to protect users from fraud. Filed on Wednesday, the lawsuit accuses EWS of prioritizing the rapid launch of Zelle in 2017 over necessary security features, creating a system that left consumers vulnerable to various scams.

The lawsuit claims that EWS, which is owned by major banking institutions including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo, falsely marketed Zelle as a secure payment option. A press release from 2017 stated, “Send and receive money fast – all with the peace-of-mind that your transactions will be backed by the security of your trusted financial institution.”

According to the complaint, EWS developed comprehensive anti-fraud measures by July 2019 but did not implement them until 2023. During this delay, consumers reportedly lost hundreds of millions of dollars due to fraud occurring on the platform. The types of fraud included impersonation scams, where criminals masqueraded as banks or utility companies, fake purchase schemes for non-existent items, and account takeover fraud facilitated by Zelle’s minimal verification processes.

Legal Grounds and Implications

This delay is central to AG James’ legal argument, which asserts that EWS maintained a defective product while misrepresenting its safety. New York Executive Law § 63(12) empowers the Attorney General to address repeated fraudulent acts within businesses. Under the state’s fraud statute, the AG does not need to prove intent to defraud; it suffices to show that representations or omissions were likely to mislead a reasonable consumer.

The lawsuit seeks significant relief, including restitution for affected New Yorkers, forfeiture of profits, and the mandatory implementation of anti-fraud measures. If successful, this case could set a legal precedent for state-level regulations governing payment platforms, potentially leading to similar actions in other jurisdictions. The implications for regulatory practices in the fintech industry could be profound.

This lawsuit follows a federal litigation effort against EWS. In December 2024, the US Consumer Financial Protection Bureau (CFPB) filed a lawsuit against the company for allowing fraud on the Zelle platform. However, this lawsuit was dropped in March 2025 amid significant layoffs at the CFPB.

As the case progresses, the outcome may not only shape the future of EWS and Zelle but could also influence the broader landscape of digital payments and consumer protection in the financial technology sector.