NEW YORK — In a sweeping lawsuit that could shake the banking industry, New York Attorney General Letitia James has accused the company behind the popular payment app Zelle — owned by some of America’s largest banks — of knowingly enabling massive fraud that has cost consumers more than $1 billion over the past six years.
The target of the lawsuit is Early Warning Services, LLC (EWS), a financial technology firm controlled by banking giants JPMorgan Chase, Bank of America, Capital One, and Wells Fargo. According to the Attorney General’s investigation, EWS rushed Zelle to market in 2017 to compete with Venmo, PayPal, and Cash App — but in doing so, it skipped essential fraud-prevention measures.
The result, James says, was predictable: Zelle became a haven for scammers.
A Platform Built for Speed — and for Scams
Zelle’s appeal has always been its promise of instant, irreversible money transfers between bank accounts. By linking an email address or U.S.-based mobile phone number, users can send or receive cash in seconds. But investigators say those very features made Zelle irresistible to criminals.
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The lawsuit alleges that scammers exploited Zelle’s “quick and easy” registration process, which lacked robust identity verification. Fraudsters could create accounts using deceptive names and emails, often impersonating trusted institutions like banks, government agencies, or utility companies.
Because transfers happen instantly, victims often realized too late that they had been conned — and once the money was gone, there was no getting it back.
Real People, Real Losses
The Attorney General’s complaint includes striking examples of Zelle-enabled fraud. In one case, a New York consumer received a phone call from someone pretending to be a Con Edison employee. The caller claimed the man’s electricity would be shut off that day unless he paid immediately through Zelle. The scammer’s Zelle account appeared under the name “Coned Billing,” lending it an air of legitimacy.
Panicked, the victim transferred $1,476.89 — only to later discover the call was fake. His bank, JPMorgan Chase, refused to reimburse him, telling him there was no way to reverse the transaction.
This, the Attorney General argues, was not an isolated incident but part of a pattern of predictable fraud that EWS and its partner banks allowed to fester.
Banks and EWS ‘Knew for Years’
The state’s investigation concluded that EWS and the banks controlling it were aware for years that fraud was rampant on Zelle. Yet, according to the complaint, they failed to take meaningful action.
When banks received fraud complaints, they were allowed to report them to EWS long after the incidents occurred — giving scammers more time to target new victims. Initially, Zelle didn’t even require banks to report scams where users were tricked into sending money under false pretenses.
Even when EWS had reports of fraudulent accounts, the lawsuit claims it failed to promptly remove bad actors or require banks to reimburse victims. By 2019, EWS had developed basic safeguards to reduce fraud but chose not to implement them.
False Promises of Security
While fraud ran unchecked, EWS aggressively marketed Zelle as a “safe and secure” payment method to consumers, including New Yorkers. The Attorney General’s office says this marketing was deceptive, given what EWS and the banks knew internally.
“Zelle’s security failures cost New Yorkers millions — and we intend to hold them accountable,” James said in announcing the lawsuit. “No one should be left to fend for themselves after falling victim to a scam.”
Legal Demands
The lawsuit accuses EWS of violating New York’s consumer protection laws by creating a payment platform highly susceptible to fraud and misleading the public about its safety. James is seeking:
- Restitution and damages for New Yorkers who lost money through Zelle scams
- A court order forcing EWS to adopt meaningful anti-fraud measures
- Stronger enforcement of rules against participating banks
A Pattern of Action Against Banks
This is not the first time James has taken on major financial institutions over consumer protection failures. In recent years, her office has sued Citibank for failing to protect customers from fraud, Capital One for misleading customers about interest payments, and payday lenders for predatory practices.
In April 2022, James led a coalition of state attorneys general in urging JPMorgan Chase, Bank of America, U.S. Bank, and Wells Fargo to eliminate overdraft fees.
What Victims Should Do
New Yorkers who believe they have been defrauded through Zelle are encouraged to file a report with the OAG’s Consumer Frauds Bureau. The case is being handled by Assistant Attorneys General Chris Filburn and Christian Reigstad, under the leadership of Bureau Chief Jane M. Azia.
If proven in court, this case could mark one of the most significant challenges yet to the safety claims surrounding instant payment platforms — and could force some of the nation’s largest banks to overhaul the way they operate Zelle.