New York attorney general sues payment app Zelle, lawsuit comes just months after Trump administration dropped similar case

New York Attorney General Letitia James filed a lawsuit against Early Warning Services, the parent company of the Zelle payment platform, accusing it of failing to protect users from widespread fraud. The move comes months after the federal Consumer Financial Protection Bureau (CFPB) dropped a similar case amid disruptions following a change in federal administration. James, a Democrat, alleges in the New York state court filing that Early Warning Services, owned by a consortium of U.S. banks, neglected to incorporate essential safety features into Zelle’s design, leaving users vulnerable to scams. The lawsuit claims Zelle’s lack of robust verification processes allowed scammers to access accounts or deceive users into sending money to fraudulent accounts posing as legitimate businesses. “No one should be left to fend for themselves after falling victim to a scam,” James said in a statement, as reported by news agency AP. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.” The suit cites a case in which a Zelle user received a call from someone posing as a Con Edison employee, claiming the user’s electricity would be cut off unless $1,500 was sent via Zelle to an account labeled “Coned Billing.” After transferring the money, the user discovered the scam but was told by their bank the funds could not be recovered, according to James’ office. The lawsuit underscores ongoing concerns about the security of peer-to-peer payment platforms like Zelle, which enables near-instant money transfers but has been criticized for inadequate fraud protections.Zelle, through a spokesperson, dismissed the lawsuit as “a political stunt to generate press, not progress.” The company argued that James should focus on “stopping criminal activity and adherence to the law” rather than pursuing “meritless claims.”The CFPB had initiated a similar case earlier this year but abandoned it after President Donald Trump dismissed the agency’s leadership and curtailed its operations, closing its headquarters and laying off staff, James’ office noted.