New York Sues Early Warning Over Zelle Fraud Losses Seeks Restitution

New York Attorney General Letitia James filed a lawsuit in state court on Wednesday against Early Warning Services, the parent company of the Zelle digital payment platform, alleging that the network failed to implement basic antifraud safeguards and allowed more than $1 billion in fraud losses between 2017 and 2023. The action comes after a federal consumer protection case against the same company was abandoned earlier this year as the federal agency underwent leadership changes and a broader shift in priorities. The New York suit seeks restitution for affected consumers and a court order requiring stronger anti-fraud measures.

Early Warning Services is owned by a consortium of seven major banks and financial firms, including Bank of America, JPMorgan Chase, Wells Fargo, Capital One, PNC, Truist, and U.S. Bank. Zelle, launched in 2017, has since grown to hundreds of millions of users, with the network promoted as a fast, secure way to transfer funds within customers’ banking apps. The attorney general’s office contends that design choices—such as a rapid sign-up process, limited transaction information, immediate availability of funds, and ease of altering recipient...