Judge Rejects Zelle's Attempt to Dismiss New York State's Fraud Lawsuit

By Kelly Cloonan

A judge denied the owner of Zelle's attempt to dismiss a lawsuit from New York State Attorney General Letitia James that alleges the payments platform failed to protect its users from fraud.

A New York state court judge said in a Monday decision that James adequately alleged that Zelle's parent company Early Warning Services prioritized accessibility, convenience, consumer adoption and market dominance at the expense of consumer safety, even after facing objections from its partner banks.

James also sufficiently alleged that Early Warning Services--which is owned by a consortium of banks including Bank of America, JPMorgan Chase and Wells Fargo--knowingly engaged in deceptive marketing, the judge said.

The New York attorney general's lawsuit, filed last year, alleged Early Warning Services failed to include critical safety features when it launched Zelle in 2017, allowing scammers to steal more than $1 billion from users. According to the lawsuit, the company knew about design flaws that allowed scams to proliferate but pushed ahead anyway.

Zelle said it strongly disagrees with and intends to appeal the ruling.

"Reports of fraud and scams committed by bad actors against Zelle users have always been exceptionally low," spokesperson Eric Blankenbaker said. "Rather than pursuing the criminals responsible for these scams, the Attorney General is targeting our company for political gain by recycling claims that courts across the country have rejected as meritless," he added.

Write to Kelly Cloonan at kelly.cloonan@wsj.com

(END) Dow Jones Newswires

July 22, 2026 13:43 ET (17:43 GMT)