ALBANY, NY – Today, the state of New York filed a lawsuit against the owners of the payment platform Zelle, alleging that app has not done enough to combat payment frauds committed by scammers.
Zelle, jointly owned by seven of the nation’s largest banks, is a popular FinTech peer-to-peer payment platform used by consumers to easy send and receive money without additional fees.
The lawsuit claims that the platform has failed in its duties to protect consumers, and seeks sweeping powers forcing Zelle to reimburse any New York resident who has somehow lost money connected with Zelle payment apps.
Yaël Ossowski, deputy director of the consumer advocacy group Consumer Choice Center, responds to the suit launched by New York Attorney General Letitia James:
“Rather than focusing on actual scammers and criminals harming American consumers, New York is overstepping its authority in suing a peer-to-peer payment app used by millions of consumers to send and receive payments and ignoring the thousands of scammers they could easily reach who are already breaking the law,” said Ossowski.
“In targeting the platform rather than punishing those who perpetuate fraud, the state is regulating by enforcement, hoping to introduce backdoor liability for FinTech firms and payment services that hasn’t been endorsed or approved by Congress or any state law. This could make debanking and offloading of customers even worse, which is recognized as problem for everyday Americans.
“Payment services already employ strict anti-fraud and scam measures that allow consumers to get their money back and dispute claims. Using lawfare to enact new policies will result in costly and intrusive rules that will degrade the consumer experience, make it more difficult for consumers to use or even qualify for these apps, and likely create more amenable conditions for bad actors to steal,” added Ossowski.
The lawsuit remains similar in scope and wording to the Consumer Financial Protection Bureau‘s lawsuit filed last year, but dropped in March of 2025.
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Recently, the Consumer Choice Center launched a policy primer to evaluate legislative solutions for combatting and alleviating the harm caused by payment scams and frauds.
This primer analyzes the Protecting Consumers From Payment Scams Act, and whether the liability remedies proposed would help combat consumer fraud and scams or would ultimately create unintended consequences for consumers that do not punish wrongdoers.
The primer includes key policy suggestions for legislators to help consumers avoid frauds and scams while demonstrating the errors that would come with expanded institutional liability:
- Shifting liability to financial institutions and payment apps will ultimately backfire on consumers, leading to more expansive financial surveillance, higher costs due to more compliance and reimbursements, and a generally degraded consumer experience that eradicates the advantage of popular financial tech and banks.
- Consumer financial education is the most effective way to prevent scams.
- A national privacy law fostering innovation while protecting consumers
- Stiffer penalties for individuals committing frauds and scams
The CCC represents consumers in over 100 countries across the globe. We closely monitor regulatory trends in Ottawa, Washington, Brussels, Geneva, Lima, Brasilia, and other hotspots of regulation and inform and activate consumers to fight for #ConsumerChoice. Learn more at consumerchoicecenter.org.
