By PAUL O’DONOGHUE, Senior Correspondent
NEW York officials have sued Early Warning Services LLC (EWS), accusing the bank-owned fintech of allowing fraud to flourish on the Zelle peer-to-peer payments network.
Attorney General Letitia James filed the case Wednesday in New York state court. She claims EWS rushed Zelle to market, making it “an obvious conduit for fraudulent activity.”
“An investigation by the Office of the Attorney General (OAG) revealed that EWS designed Zelle without critical safety features,” the OAG said in a statement.
It said this allowed scammers to “easily target users and steal over $1 billion between 2017 and 2023”.
The OAG’s complaint also said the Zelle network’s emphasis on immediate funds availability “facilitated quick getaways”.
“And [it] deprived consumers of any chance to recover stolen funds,” it said.
It also stated: “The ability to seamlessly shift email addresses, bank accounts and banks enabled fraudsters to engage in multiple ongoing frauds. While evading detection or restriction.”
The lawsuit seeks to require Zelle to beef up anti-fraud protections, and pay restitution and damages to defrauded New Yorkers.
JPMorgan Chase, Bank of America, Wells Fargo, Capital One, PNC Financial, Truist Financial and U.S. Bancorp own EWS. The seven banks were not named as defendants.
In a statement, Zelle said scams start when criminals trick people into sending money, rather than on the platform itself, and holding it liable could lead to higher fees for consumers.
Zelle also said more than 99.95% of transactions it handles are completed without reported fraud, leading the industry.
“This lawsuit is a political stunt to generate press, not progress,” Zelle said. “The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims.”
Early Warning Services is based in Scottsdale, Arizona.
Zelle legal action
Under President Joe Biden, the Consumer Financial Protection Bureau (CFPB) sued JPMorgan, Bank of America, Wells Fargo and EWS in late 2023 with similar claims. That case ended in March 2025 after Donald Trump took office. It was one of several Biden-era enforcement actions that were dropped.
The Trump administration also scaled back the CFPB, which was created after the global financial crisis. With fewer federal actions, state regulators have taken a larger role.
“No one should be left to fend for themselves after falling victim to a scam,” James said. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”
James said EWS eventually added safeguards, but said they were “too little too late.” Her office says the company failed to address major losses caused by delaying basic protections until July 2019. It also says Zelle still facilitates “substantial fraudulent activity.”
The original CFPB case alleged that banks ignored consumer complaints about Zelle fraud and refused to reimburse victims.
James has also targeted other banks over Zelle-related allegations. In January 2024, she sued Citigroup, saying its commercial banking unit failed to protect customers using wire transfers and online payment services.
In January 2025, a federal judge allowed some of New York’s claims in that case to proceed but dismissed others. Citigroup argued the Electronic Fund Transfer Act of 1978 did not cover the disputed transactions. The bank won permission in April to seek an early appeal.
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