A Judge Sends New York's $1 Billion Zelle Case to Discovery
The court refused to dismiss the state's suit against the network's operator, keeping alive a case that could establish who pays when a customer is tricked into authorizing a transfer.
A New York judge declined in late July to dismiss the state attorney general's lawsuit against the operator of Zelle, allowing a case that alleges the payment network enabled more than $1 billion in scams between 2017 and 2023 to proceed into discovery.
The ruling matters far beyond one network. It keeps alive the most consequential open question in American consumer payments: who bears the loss when a customer is deceived into authorizing a transfer themselves.
The gap in federal law
Under the Electronic Fund Transfer Act, banks must reimburse customers for unauthorized transactions — a stolen card, a hacked account, a transfer the customer did not make.
Scams work differently. The victim is persuaded, often by someone impersonating their own bank, to send the money voluntarily. Because the customer authorized the transfer, institutions have generally treated the loss as the customer's, and courts have largely agreed.
Payments of this kind are effectively final. Once sent, the money is gone in seconds, which is precisely what makes real-time networks useful and what makes them attractive to fraudsters.
How the case got here
Federal regulators sued the network's operator and its three largest owner banks in December 2024, alleging that customers of those banks alone had lost more than $870 million over seven years. That case was dropped in March 2025 as the agency that brought it was wound down.
New York's attorney general filed suit months later under state law. The July ruling means the state's claims — that the network was designed and operated in a way that facilitated fraud — will be tested on the evidence.
What is at stake for banks
An adverse outcome would expose a bank-owned network, its seven owner institutions and the more than 2,200 banks and credit unions that use it to reimbursement obligations for transactions their customers authorized.
Britain adopted mandatory reimbursement for this category of fraud, split between sending and receiving institutions, and the industry's response there was to invest heavily in warnings, transfer delays and confirmation-of-payee checks.
That is the likely American path too, whether it arrives through a verdict, a settlement or the state-by-state legislation that follows either one.
