The Consumer Financial Protection Bureau (CFPB) has sued JPMorgan Chase, Bank of America, Wells Fargo, and Early Warning Services—the operator of the Zelle payment network—for failing to protect consumers from rampant fraud on the platform.
Key Allegations:
Inadequate Safeguards: The CFPB argues that the banks rushed Zelle to market to keep up with other payment apps, such as Venmo and CashApp, without adequate consumer protection measures in place.
Thank you for reading this post, don't forget to subscribe!Significant Consumer Losses: Since Zelle’s creation in 2017, customers of the three banks have lost more than $870 million to fraud, the lawsuit alleges.
Insufficient Response to Fraud Complaints: The lawsuit alleges that hundreds of thousands of fraud complaints were filed, but consumers were given little help, with some reportedly told to contact the fraudsters themselves to get their money back.
Failure to Investigate and Reimburse: The banks are accused of not properly investigating complaints or providing legally required reimbursements for fraud and errors, potentially violating the Electronic Fund Transfer Act and Regulation E.
CFPB Director Rohit Chopra stated, “The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle. By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
Bank of America and JPMorgan Chase have fought the suit, calling the CFPB’s demands overreaching and stating that the lawsuit has no merit.
Zelle is a peer-to-peer payment service launched in 2017 by a consortium of major US banks, including Bank of America, JPMorgan Chase, and Wells Fargo. It facilitates online and mobile transactions by using the recipient’s email addresses or mobile phone numbers for electronic fund transfer. However, even at this level of market saturation, Zelle has been criticized because it has many vulnerabilities to fraud and scams.
The CFPB is seeking to halt the alleged unlawful practices, secure redress for affected consumers, and impose penalties. The outcome of the lawsuit remains pending as legal proceedings continue.