Key facts
- A New York judge ruled that Zelle must face a lawsuit filed by Attorney General Letitia James.
- The lawsuit alleges Zelle's lack of critical safety features enabled over $1 billion in consumer fraud.
- Justice Phaedra Perry-Bond stated James sufficiently alleged Zelle prioritized accessibility over consumer safety.
- The judge questioned Zelle's practice of collecting fees from fraudulent transactions.
- Zelle intends to appeal the decision, calling the claims meritless.
A New York judge has ruled that Zelle must face a lawsuit brought by New York Attorney General Letitia James, who alleges the electronic payment platform's inadequate safety features facilitated over $1 billion in fraud against consumers.
Justice Phaedra Perry-Bond stated that James had sufficiently alleged that Zelle's parent company, Early Warning Services, prioritized accessibility and market dominance over consumer safety when launching the platform. The court also raised questions about Zelle's practice of collecting fees from fraudulent transactions, suggesting it could imply tacit approval of such activities.
James also took issue with Zelle's marketing, which claimed the platform offered "peace-of-mind" and was "backed by the banks, so you know it's secure." Zelle, owned by major U.S. banks including Bank of America, JPMorgan Chase, and Wells Fargo, intends to appeal the ruling.
Zelle spokesperson Eric Blankenbaker stated that fraud reports are exceptionally low and that the attorney general is pursuing the case for political gain, recycling claims previously rejected by other courts. He asserted the claims are unsupported by facts or law.
The lawsuit follows the Consumer Financial Protection Bureau's decision to drop a similar case in March 2025, shortly after the start of U.S. President Donald Trump's second White House term. Zelle argued that advertising the platform as secure was not misleading and that it bore no liability for alleged "passive nonfeasance."
Typical scams cited by James include account hacking for unauthorized transfers and convincing users to send money for nonexistent goods or services. Zelle reportedly implemented basic safeguards in 2023, four years after they were initially proposed, following probes by the CFPB and members of Congress.