NEW YORK, Aug 13 (Reuters) - Zelle was sued on Wednesday

by New York Attorney General Letitia James, who said the

electronic payment platform's refusal to adopt critical safety

features enabled fraudsters to steal more than $1 billion from

consumers.

The lawsuit in a New York state court in Manhattan followed

the U.S. Consumer Financial Protection Bureau's decision in

March to drop a similar case.

That agency has ended most enforcement activity following

U.S. President Donald Trump's return to the White House.

Zelle was launched in 2017, and competes with apps such as

PayPal's ( PYPL ) Venmo and Block's Cash App.

Its parent, Early Warning Services, is owned by seven large

U.S. banks: Bank of America ( BAC ), Capital One,

JPMorgan Chase ( JPM ), PNC, Truist, US Bank

and Wells Fargo ( WFC ).

James said Zelle's parent and the banks knew for years that

the platform was vulnerable to fraudsters but ignored basic

safeguards, with the banks sometimes ignoring customer

complaints while Zelle let fraudsters stay on the platform.

The result was "rampant" fraud, according to the

complaint.

Typical scams involved hacking into users' accounts and

making unauthorized transfers, convincing users to send money

for nonexistent goods and services, and impersonating banks,

government offices and utilities.

James said one victim was told his electricity would be shut

off unless he paid Con Edison $1,477 via Zelle, to an account

named "Coned Billing."

The lawsuit seeks to require Zelle to beef up its anti-fraud

protections, and pay restitution and damages to defrauded New

Yorkers.

"No one should be left to fend for themselves after falling

victim to a scam," James said in a statement.

Early Warning Services did not immediately respond to a

request for comment. The banks were not named as defendants.

James sued Capital One in May for allegedly cheating savings

depositors out of millions of dollars in interest, and in June

settled claims against MoneyGram over remittance transfer

lapses. The CFPB abandoned similar cases earlier in the year.