Lawsuit Alleges Zelle’s Flaws Led to Over $1 Billion in Consumer Fraud

Swaraj

Published on November 6, 2025

On Wednesday, New York Attorney General Letitia James filed a lawsuit against Zelle, alleging that the electronic payment platform’s lack of necessary safety features allowed fraudsters to steal more than $1 billion from customers. Filed in a Manhattan state court, this lawsuit follows the March decision of the U.S. Consumer Financial Protection Bureau to stop a similar case.

Following the return of U.S. President Donald Trump to the White House, the agency has since cut most of its enforcement operations. Starting in 2017, Zelle contends against other services, including Block’s Cash App, PayPal’s Venmo, and others. Its parent business, Early Warning Services, is owned by seven major U.S. banks: Bank of America, Capital One, JPMorgan Chase, PNC, Truist, US Bank, and Wells Fargo.

James said that for years, Zelle’s parent firm and the linked banks knew of the platform’s vulnerability to fraud yet opted to ignore basic protective measures. In some cases, the banks disregarded consumer complaints while Zelle let crooks stay on the platform. As stated in the complaint, this carelessness led to broad fraud, which Zelle frequently failed to handle even while purporting to be a safe alternative to cash and checks and being backed by the banks, so you know it’s secure.

Responding, Zelle argued that rather than being a problem of the platform itself, scams start when fraudsters dupe people into sending money; thus, holding it accountable could mean greater prices for customers. Highlighting its industry leadership, Zelle also noted that over 99.95% of the transactions it processes are completed without any reported fraud. “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.” Based in Scottsdale, Arizona, Early Warning Services did not name as defendants in the case the seven banks participating.

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