NY attorney general sues Zelle's parent company after Trump administration drops similar case

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NEW YORK (AP) — New York's attorney general on Wednesday sued the parent company of the Zelle payment platform, months after the federal Consumer Financial Protection Bureau abandoned a similar case as the Trump administration was gutting the agency.

Attorney General Letitia James, a Democrat, sued Early Warning Services in New York state court, alleging that the company, which is owned by a group of U.S. banks, had failed to protect users from fraud by not including critical safety features in Zelle's design.

The Consumer Financial Protection Bureau earlier this year dropped a similar case after President Donald Trump fired the agency's leader and his administration halted nearly all the bureau's work, closed its headquarters and moved to fire many of its workers.

In a statement, James' office noted that its suit was filed after the Consumer Financial Protection Bureau abandoned its lawsuit following a “change in the federal administration.”

“No one should be left to fend for themselves after falling victim to a scam,” James said in a statement. “I look forward to getting justice for the New Yorkers who suffered because of Zelle’s security failures.”

James has been a leading antagonist of Trump, a Republican, and has sued him dozens of times. Last week, The Associated Press and other news outlets reported that the Justice Department has subpoenaed James as part of an investigation into whether she violated Trump's civil rights, according to people familiar with the matter.

James' case against Early Warning Services alleged that Zelle, which allows users to send and receive near-instant money transfers, failed to include adequate verification processes. Her office said scammers were able to access peoples' accounts or trick users into sending money to bogus accounts that posed as official businesses.

In one instance cited by the attorney general's office, a Zelle user got a call from someone posing as an employee of the utility company Con Edison who told the user that his electricity was going to be shut off unless he sent them money through Zelle. The user then transferred about $1,500 to a Zelle account named “Coned Billing" and then realized he had been scammed but was told by his bank that he could not get his money back, James' office said.

In a statement issued through a spokesperson, Zelle called James' lawsuit “a political stunt to generate press, not progress.”

“The Attorney General should focus on the hard facts, stopping criminal activity and adherence to the law, not overreach and meritless claims,” the statement said.