New York Sues Zelle Operator Early Warning Over $1 Billion Fraud Losses

New York Attorney General Letitia James sued Early Warning Services LLC on Wednesday, alleging that lax security on its Zelle peer-to-peer payments network enabled fraudsters to steal more than $1 billion from consumers between 2017 and 2023. The civil complaint, filed in New York State Supreme Court in Manhattan, says the company failed to adopt basic verification and monitoring tools even after being warned about growing scams on the platform. Early Warning, owned by seven of the nation’s largest banks — Bank of America, Capital One, JPMorgan Chase, PNC, Truist, U.S. Bank and Wells Fargo — is accused of downplaying customer complaints and misrepresenting Zelle as a safe alternative to cash. While the banks are not named as defendants, the suit contends they knew of the vulnerabilities. James seeks restitution and damages for affected New Yorkers and a court order compelling the company to implement stronger anti-fraud controls. The action revives allegations the U.S. Consumer Financial Protection Bureau abandoned in March after the agency curtailed enforcement activity. In a statement, Zelle said more than 99.95% of its transactions occur without reported fraud and called the lawsuit “meritless,” arguing that expanding liability could raise costs for consumers.