The Consumer Financial Protection Bureau is suing the three largest U.S. banks for failing to protect customers from fraud on the jointly owned payments platform Zelle.
The lawsuit, which also targets Zelle’s official operator Early Warning Services LLC, claims that Zelle users lost more than $870 million during the network’s seven-year life as a result of these claims. He said he suffered a loss.
“The nation’s largest banks rushed to implement Zelle because they felt threatened by competing payment apps,” CFPB Director Rohit Chopra said in a statement. “By not taking proper safeguards, Zelle became a gold mine for scammers, while leaving victims to fend for themselves.”
Some of the charges include:
Poor identity verification methods allowed malicious actors to quickly create accounts and target Zelle users. Allowing repeat offenders to continue accessing the platform Ignoring and failing to report fraudulent activity Failure to properly investigate consumer complaints
The CFPB’s lawsuit seeks to change the platform’s operations as well as obtain civil monetary penalties to be paid to the CFPB’s Victim Relief Fund.
A spokesperson for Mr. Zell called the lawsuit misguided and politically motivated.
“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,” Zelle spokeswoman Jane Kodos said. said in an emailed statement. We have an industry-leading refund policy that prevents fraud and exceeds the law. ”
A Zelle spokesperson said in a subsequent statement that the magnitude of the CFPB’s claims about customer losses due to fraud is “misleading,” adding, “Many of the reported fraud allegations are, upon investigation, found to be He has not been found to be involved in any wrongdoing.”
A JPMorgan spokesperson echoed those sentiments, calling it a “last-ditch effort to pursue a political agenda.”
“The CFPB is currently overreaching its power by holding banks accountable for criminals, including romance fraudsters,” the bank said. “This circumvents the necessary rulemaking process and is an alarming display of regulation by enforcement agencies.Rather than go after criminals, the CFPB endangering the value and free nature of
A Bank of America spokesperson emphasized the importance of Zelle to everyday users.
“We strongly oppose the CFPB’s efforts to impose significant new costs on the 2,200 banks and credit unions that provide free Zelle services to their customers,” William Holdin said in an emailed statement. said. “23 million Bank of America customers have adopted Zelle and use it regularly to send money to friends, family and people they trust.”
A Wells Fargo spokeswoman declined to comment via email.
Launched in 2017, Zelle allows users to send and receive money electronically. The platform had previously been criticized by Senate Democrats. Just recently, Sen. Richard Blumenthal (D-Conn.) discovered that his customers were in dispute over $372 million in fraud and fraud in 2023, but only a quarter of the claimed losses. Nearly 3 were not compensated by the government. It’s a bank. ”
In a statement regarding the CFPB’s lawsuit, Early Warning said fraud and fraud reports decreased by nearly 50% in 2023, resulting in 99.95% of payments being transferred without fraud or fraud reports. .
The CFPB announced a number of measures this month aimed at protecting consumers amid the existential threat posed by the incoming second Trump administration.