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New York Sues Zelle Over $1 Billion in Consumer Fraud Losses

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New York Attorney General Letitia James filed a lawsuit against Zelle, claiming the electronic payment platform’s failure to adopt key security measures allowed fraudsters to steal more than $1 billion from consumers. The case was filed in Manhattan state court following the U.S. Consumer Financial Protection Bureau’s decision in March to drop a similar case.

James alleged that Zelle’s parent, Early Warning Services, owned by seven major U.S. banks, knew about the platform’s vulnerabilities for years but resisted implementing safeguards. She said fraudsters exploited the platform through scams such as fake utility bills, nonexistent goods, and impersonating banks, leaving victims without support even after money was stolen.

Zelle responded that fraud occurs when users are tricked into sending money and that over 99.95% of transactions are completed without reported fraud. The company called the lawsuit a “political stunt” and warned that holding it liable could raise consumer fees.

The lawsuit seeks stronger anti-fraud protections and restitution for affected New Yorkers. Previous actions by James include suits against Capital One and settlements with MoneyGram over similar consumer protections issues.

UK’s FCA to Strengthen Payment Firms’ Safeguarding Rules from May 2026

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Britain’s Financial Conduct Authority (FCA) announced stricter regulations for electronic payment firms, effective from May 2026, aiming to better protect customers’ money by ensuring it is kept separate from firms’ own funds. This move follows growing consumer exposure to risks associated with payment providers as their use has surged dramatically in recent years.

The FCA’s reforms will require larger payment firms to submit monthly reports and undergo annual audits, as well as conduct daily checks to confirm the correct safeguarding of customer funds. These rules will apply to payment institutions, e-money institutions (EMIs), and credit unions that issue e-money.

The regulator highlighted recent failures in the sector, such as foreign exchange broker Argentex, which entered special administration last month after liquidity problems caused by market volatility. Between 2018 and mid-2023, failed payment firms showed an average shortfall of 65% in safeguarding customers’ funds.

Matthew Long, FCA’s director of payments and digital assets, emphasized the importance of these reforms to protect consumers from losing money when firms fail, and noted the FCA will monitor firms’ compliance to decide if further rules tightening is needed.

UK Finance, representing the finance industry, welcomed effective safeguarding but urged careful assessment to avoid imposing unrealistic demands, especially on smaller firms, and to maintain international competitiveness.