Last month, New York Attorney General Letitia James sued Early Warning Services, LLC (EWS), the company that operates the Zelle Network, for allegedly failing to protect its users from fraud. The complaint, much of which was filed under seal, claims that EWS harmed consumers by creating "a payment network that was highly susceptible to fraudulent activity, that lacked the basic network safeguards, and that exposed millions of consumers to widespread fraud." Although filed under different legal authority, the suit is thematically similar to the federal complaint that the CFPB filed last year and later dismissed with prejudice in March 2025.
Consistent with our prediction that state attorneys general might step up enforcement efforts following the Bureau's dismissal, this copycat litigation comes as no surprise. The one-count complaint alleges that by establishing and operating the Zelle Network, EWS has engaged in, and continues to engage in, repeated and persistent fraud in violation of Executive Law § 63(12), which permits the NYAG to seek injunctive relief, restitution, and damages from any individual or business that "engage[s] in repeated fraudulent or illegal acts or otherwise demonstrate[s] persistent fraud or illegality in the carrying on, conducting or transaction of business."
Ostensibly in support of that claim, the complaint alleges that EWS engaged in two particular fraudulent acts.
First, NYAG alleges that EWS "created an atmosphere conducive to fraud by establishing the Zelle network, creating the Zelle App, and unilaterally integrating the Zelle network directly into consumers' banking apps and websites, knowing that its design and features, and glaring flaws in its antifraud measures, render it highly susceptible to fraudulent activity, which was and is in fact widespread over the Zelle network, yet failing to meaningfully enforce its own network rules or take basic, known, effective measures to prevent or remedy fraud."
Second, the NYAG alleges that EWS promoted and marketed "the safety and security of the Zelle network and its participating banks when in fact Zelle was and is not safe or secure from fraudsters, EWS did not require reimbursement for induced fraud, and EWS failed to implement basic, known, effective measures to prevent or remedy fraud."
The complaint seeks an order (i) enjoining EWS from engaging in the fraudulent practices described in the complaint, (ii) ordering EWS to maintain the basic network safeguards (discussed in a prior blog post) and any other antifraud measures that are necessary to protect consumers and limit consumer harm from fraudulent activity; (iii) ordering EWS to provide an accounting of all New York consumers who reported losses to EWS or its participating banks; and (iv) awarding restitution, disgorgement, and other relief as appropriate.
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