The US Consumer Financial Protection Bureau has taken legal action against JPMorgan Chase, Bank of America, and Wells Fargo for their alleged inability to protect consumers from widespread fraud occurring on the Zelle payments network. The lawsuit also includes Zelle operator Early Warning Services in its claims.
This platform is co-owned by seven banks, which also include JPMorgan, Bank of America, and Wells Fargo. The consumer watchdog has stated that the banks breached federal law by failing in various critical aspects of consumer safety. They pointed out that Zelle's methods for verifying identities are notably limited, which has allowed scammers to exploit the system.
The CFPB noted that the defendants acted too slowly to restrict or monitor the activities of those taking advantage of the platform by managing multiple accounts on Zelle. Additionally, the banks reportedly neglected to properly investigate complaints or to provide necessary reimbursements that are legally required in cases of fraud and errors. Rohit Chopra, the CFPB Director, expressed his concerns by stating, "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." Since Zelle's inception in 2017, the customers of these three banks have incurred losses exceeding $870 million due to these failures, as highlighted by the CFPB, which is now pursuing redress and penalties against the banks. A spokesperson from JPMorgan criticized the CFPB's actions, stating, "As a last-ditch effort in pursuit of their political agenda, the CFPB is now overreaching its authority by making banks accountable for criminals, even including romance scammers.
Rather than going after criminals, the CFPB is jeopardizing the value and free nature of Zelle." Neither Bank of America nor Wells Fargo has provided comments regarding the issue, despite requests for statements. Meanwhile, a Zelle spokesperson has indicated that they plan to contest the lawsuit, labeling it as "meritless." The spokesperson added, "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.
The CFPB's misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses, and make it more difficult for thousands of community banks and credit unions to compete.".