New York Attorney General Letitia James announced a lawsuit against Zelle, after the Financial Consumer Protection Office filed his own lawsuit against the bank money transfer.
The Associated Press
THEThe patchwork system of US state and federal economic regulatory authorities is confusing and, at times, unnecessary. However, this redundancy means when one regulator is neutered, another may enter.
On Friday, an appellate court an order was raised This had kept the White House proceeding with mass deposits to the Federal Consumer Protection Office (CFPB). However, as Trump’s administration is proceeding with its plans to disassemble CFPB and the reduction of federal regulations, states (in particular, democratic controlled) are in a hurry to fill the gap.
The last example came earlier this week, when New York Attorney General Letitia James announced a trial against early warning services of the Bank behind the popular Zelle money transfer application. The lawsuit claims that timely warning allows fraud to multiply in Zelle for several years and did not have enough to stop it, which cost consumers “hundreds of millions of dollars” in losses. The case was initially set by CFPB in December 2024, under President Biden. In March 2025, while Trump’s administration was preparing to dramatically reduce CFPB staff and activity, the Agency withdrew Zelle’s lawsuit.
In an email statement, a Zelle spokesman called on the new lawsuit of New York Attorney General “a copy of the lawsuit of the Consumer Financial Protection Office in March”. He added that “over 99.95 percent of all Zelle transactions are completed without any report of fraud or fraud”.
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Kareem Saleh, a former lawyer and employee of the Foreign Ministry, who is now the founder and CEO of Fairplay Fairplay, points out two other examples of states that increase regulatory actions. Both are related to the concept of different impact, when a lender uses a seemingly neutral method of risk assessing the risk that it disproportionately excludes or damages borrowers based on protected characteristics such as race, religion, nationality or age. The Supreme Court first recognized the theory of different effects in 1971.
Last spring, President Trump issued an executive order requesting the elimination of responsibility for a different impact and guiding federal services to “withdraw” the execution of the laws and regulations related to the different impact. However, government regulators and courts continued to make decisions based on the different impact.
On July 10 Regulatory consent order With Massachusetts about her student loans. The state claimed that Earnest made unjust, manual adjustments to risk ratings and that its foster models have created different impacts on loan approval rates and terms, “with black and Spanish candidates more likely to be punished by white applicants”. Earnest agreed to pay a fine of $ 2.5 million and develop a “corporate governance system for fair borrowing tests, internal controls and risk ratings for the use of artificial intelligence models”, in addition to taking other steps. Earnest denied allegations and did not acknowledge an offense, agreeing with the execution of lawsuits for “avoiding the uncertainty of disputes”, according to the consent order.
Then on July 28, Maryland’s Supreme Court ruled That an apartment complex owner may have been distinguished against an applicant rental, Katrina Hare. The owner demanded the applicants to earn 2.5 times the cost of the monthly rent in income and refused Hare’s request. He argued that the 2.5-fold threshold should only apply to the amount of rent responsible for the payment after the count of the government issued by the housing coupon. The opinion of the Maryland Supreme Court concluded that it would need more analysis to decide whether the rule of the owner’s minimum income disproportionately (and illegally) hurts the holders of the vouchers under the state’s housing opportunities.
Fairplay’s Saleh expects this tendency to continue state regulatory activity. “I think these are the first examples of what is likely to be a broad initiative from the states in the coming years,” he says.
He also notes that there was “brain drainage” from CFPB to regulators. Gabriel O’Malley, who had spent 12 years on CFPB, more recently as Deputy Director of Political and Strategy, left in March to become an executive deputy inspector in the Department of Financial Services in New York. Atur Desai has been on CFPB for nearly 10 years and was deputy chief technologist for law and strategy there before leaving last month, also for a substitute role in the New York Financial Services Department, according to LinkedIn’s profile.
