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The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against America’s three largest banks—JPMorgan Chase, Wells Fargo, and Bank of America—alleging widespread failures to protect customers from fraud on Zelle, the popular peer-to-peer payment platform they co-own.
The suit, which also names Zelle’s operator Early Warning Services LLC, claims users have lost more than $870 million over the platform’s seven-year history due to insufficient safeguards.
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” said CFPB Director Rohit Chopra. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
Key Allegations
The CFPB accuses the banks and Early Warning Services of:
- Poor identity verification: Allegedly allowing bad actors to create accounts and target users.
- Enabling repeat offenders: Permitting fraudsters to retain access to the platform.
- Neglecting consumer complaints: Failing to investigate and report fraud instances adequately.
- Ignoring fraud reports: Allegedly leaving users unprotected against scams.
The lawsuit seeks operational changes for Zelle, penalties to fund the CFPB’s victims relief fund, and stronger protections for consumers.
Banks and Zelle Respond
Zelle’s operator, Early Warning Services, and bank representatives have strongly denied the allegations.
“The CFPB’s attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle,” said Zelle spokesperson Jane Khodos. “Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law.”
JPMorgan Chase echoed these sentiments, describing the lawsuit as “a last-ditch effort in pursuit of their political agenda.” The bank added, “The CFPB is now overreaching its authority by making banks accountable for criminals, even including romance scammers.”
Early Warning Services highlighted recent improvements, claiming reports of scams and fraud on Zelle decreased by nearly 50% in 2023, with 99.95% of payments processed without fraud reports.
Zelle’s Fraud History Under Scrutiny
Zelle, launched in 2017, enables users to send and receive money electronically. While convenient, it has faced criticism from lawmakers, including Sen. Richard Blumenthal (D-Conn.), who revealed that consumers disputed $372 million in scams and fraud on Zelle in 2023 alone, with nearly 75% of those losses left unreimbursed by banks.
Despite this, Zelle remains a widely used payment tool, raising concerns about balancing convenience with customer security.
CFPB’s Broader Consumer Protection Efforts
This lawsuit comes amid heightened efforts by the CFPB to protect consumers. Facing challenges to its existence under the incoming second Trump administration, the agency has announced several initiatives to address fraud and strengthen consumer safeguards.
Whether the lawsuit leads to meaningful changes in Zelle’s operations or becomes a drawn-out legal battle remains to be seen. The case underscores the tension between consumer protection and corporate responsibility in the rapidly evolving digital payments landscape.
