NY’s attorney general picks up Zelle fraud fight from CFPB

New York’s attorney general is picking up an effort dropped by the Trump administration’s Consumer Financial Protection Bureau, accusing a bank-owned financial-technology company of allowing fraud to run rampant on the Zelle peer-to-peer payments network.

New York Attorney General Letitia James sued Early Warning Services LLC on Wednesday in New York state court, claiming that EWS’s rush to market “made the Zelle network an obvious conduit for fraudulent activity.”

“The Zelle network’s emphasis on immediate funds availability facilitated quick getaways and deprived consumers of any chance to recover stolen funds,” according to the complaint. “And the ability to seamlessly shift email addresses, bank accounts and banks enabled fraudsters to engage in multiple ongoing frauds while evading detection or restriction.”

Zelle is offered by Early Warning Services, the fintech owned by JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Capital One Financial Corp., PNC Financial Services Group Inc., Truist Financial Corp. and U.S. Bancorp. Zelle was the banks’ response to the growing popularity of PayPal Holdings Inc.’s Venmo and Block Inc.’s Cash App.

Early Warning Services didn’t immediately respond to a request for comment.

Under former President Joe Biden, the CFPB sued JPMorgan, Bank of America and Wells Fargo along with EWS late last year, bringing similar claims to those of James’ office. That lawsuit was dismissed in March, after President Donald Trump took office, along with a bevy of other Biden-era enforcement actions.

In addition to abandoning lawsuits and other actions, the Trump administration has largely hollowed out the CFPB, created in the wake of the global financial crisis. As federal consumer protections have been pared back, state-level watchdogs have stepped up.

“No one should be left to fend for themselves after falling victim to a scam,” James said in a statement. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”

Though EWS finally did implement safeguards, “these measures were too little too late: EWS did nothing to remedy the vast losses that consumers already suffered due to its failure to adopt the basic network safeguards in July 2019, and even with those safeguards in place Zelle continues to facilitate substantial fraudulent activity,” according to the complaint.

The original CFPB suit claimed that consumer complaints of Zelle fraud weren’t addressed, with banks failing to provide relief to consumers.

James has pursued other Wall Street banks over Zelle-linked allegations, including Citigroup Inc. Her office sued the bank in January 2024, alleging that its commercial-banking unit failed to protect customers using wire transfers and online payment services such as Zelle.

A federal judge in January 2025 ruled that Citigroup will have to face some of New York’s claims, but tossed several other allegations of state-law violations. The bank had argued that the Electronic Fund Transfer Act – the 1978 federal law governing electronic payments – didn’t cover the transactions at the heart of New York’s 2024 lawsuit.

Citigroup was granted permission to seek an early appeal in the case in April.