Attorney General James Sues Company Behind Zelle for Enabling Widespread Fraud
Users Lost More Than $1 Billion While Zelle Operator Controlled by Major Banks Knew the Platform Was Vulnerable to Scammers
AG James Encourages New Yorkers Who Lost Money to Zelle Scams to File a Report with OAG’s Consumer Frauds Bureau
NEW YORK – New York Attorney General Letitia James today sued Early Warning Services, LLC (EWS), a company owned and controlled by a group of the largest banks in the United States that was tasked with developing and operating the electronic payment platform Zelle, for failing to protect its users from massive amounts of fraud. An investigation by the Office of the Attorney General (OAG) revealed that EWS designed Zelle without critical safety features, allowing scammers to easily target users and steal over $1 billion between 2017 and 2023. EWS knew from the beginning that key features of the Zelle network made it uniquely susceptible to fraud, and yet it failed to adopt basic safeguards to address these glaring flaws or enforce any meaningful anti-fraud rules on its partner banks. Attorney General James filed this lawsuit after the Consumer Financial Protection Bureau (CFPB) abandoned a similar lawsuit, filed in December 2024, following the change in the federal administration. With this lawsuit, Attorney General James is seeking restitution and damages for affected New Yorkers, as well as a court order mandating Zelle maintain anti-fraud measures necessary to protect its users.
“No one should be left to fend for themselves after falling victim to a scam,” said Attorney General James. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”
EWS is a financial technology company owned and controlled by a group of the country’s largest banks, including JPMorgan Chase, Bank of America, Capital One, and Wells Fargo. Those banks tasked EWS with hastily launching an electronic payment platform to compete with payment apps like Venmo, PayPal, and CashApp, which were not controlled by banks. In their rush to launch, EWS prioritized attracting new users through a simple registration process and quick transfers that left consumers vulnerable to scammers.
Beginning in 2017, the year Zelle launched, anyone with a U.S. bank account could enroll in Zelle and send or receive near-instant money transfers through linked email addresses or U.S.-based mobile phone numbers. Scammers could sign up through a quick registration process that lacked important verification steps, allowing them to utilize misleading email addresses such as those associated with trusted businesses or government entities. Zelle’s emphasis on immediate and irreversible transfers means that by the time consumers realize they have been targeted by fraudsters, their money is often already gone.
As a result, Zelle quickly became a hub for fraudulent activity. The most common scams involved fraudsters gaining access to users’ accounts and making unauthorized transfers, and scammers convincing users to send funds under false pretenses, for example by offering non-existent goods or services or by impersonating a trusted institution like a bank or government office.
In one example of a common scam using Zelle, a New York user received a call from an individual impersonating a Con Edison employee advising that the consumer was delinquent on his energy bills and that his “electricity was going to be shut off that day” unless he paid Con Edison via Zelle. The fraudster identified “Coned Billing” as the name associated with the account. The consumer transferred $1,476.89 to a Zelle account named “Coned Billing,” but after realizing the call was a scam, was told by their bank, JPMorgan Chase, that the bank “can’t get [him] that money back.”
The OAG’s investigation revealed that EWS and its partner banks knew for years that fraud was spreading on Zelle and failed to take meaningful action to stop it. When participating banks received complaints from Zelle users about fraud, EWS allowed banks to report that fraud to EWS long after it occurred, which enabled bad actors to scam additional consumers. In fact, when Zelle launched, EWS did not require participating banks to report scams like the “Coned Billing” scheme in which fraudsters convinced users to send funds under false pretenses. Even when EWS did receive reports of fraud, it failed to promptly remove the fraudsters from the Zelle network or require banks to reimburse consumers for certain scams. EWS developed basic safeguards to address these issues as early as 2019, but failed to adopt them. EWS failed to meaningfully enforce even the limited, inadequate anti-fraud rules that it did have in place against participating banks despite knowing of widespread violations of those rules.
EWS aggressively marketed Zelle to New Yorkers, promising safety and security. However, EWS’s failures enabled fraudsters to run rampant on the Zelle network, leading to millions of dollars in losses for New Yorkers.
Attorney General James alleges that EWS violated New York law by creating a payment platform highly susceptible to fraud and doing little to stop it for years while falsely marketing it as a safe and secure service. With this lawsuit, Attorney General James is seeking restitution and damages for all affected New Yorkers and court orders mandating EWS maintain necessary anti-fraud safeguards and take other steps to protect their customers from fraud.
Attorney General James is a national leader in protecting consumers. In June, Attorney General James sued payday lending companies DailyPay and MoneyGram for exploiting workers with predatory loans. In May, Attorney General James sued Capital One for misleading its customers and cheating them out of millions of dollars of interest payments. In January 2024, Attorney General James sued Citibank for failing to protect its customers from fraud. In April 2022, Attorney General James led a multistate coalition of attorneys general in calling on the CEOs of JPMorgan Chase, Bank of America, U.S. Bank, and Wells Fargo to eliminate all overdraft fees on consumer bank accounts.
Attorney General James encourages all consumers who have lost money to scammers through Zelle to report their experiences to the OAG’s Consumer Frauds Bureau.
This matter is being handled by Assistant Attorneys General Chris Filburn and Christian Reigstad with the Consumer Frauds and Protection Bureau. The Consumer Frauds and Protection Bureau is led by Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura J. Levine, and is a part of the Division of Economic Justice, which is overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.