Federal regulators on Friday accused JPMorgan Chase & Co., Wells Fargo & Co., and Bank of America of violating consumer finance laws and costing hundreds of thousands of people their money from rampant fraud on the popular payment network Zelle. A lawsuit was filed for failing to protect the victims.
In a federal civil lawsuit, the Consumer Financial Protection Bureau said banks rushed peer-to-peer payment platforms to market without effective safeguards against fraud, so consumers complained they were defrauded on the service. They claim that even after filing their claims, they were largely denied relief. .
“Shortly after the launch of Zelle, serious problems quickly became apparent, including fraud against consumers using Zelle. “He did not take any action,” the complaint says.
The CFPB alleges that the banks violated federal consumer finance laws governing electronic fund transfers. The law requires banks to conduct a “reasonable investigation” when a consumer reports a transaction error, and also requires banks to conduct a “reasonable investigation” if a consumer reports a transaction error, and to take steps to prevent and address fraud related to electronic funds transfers. The agency prohibits unfair acts and practices. Zell.
The agency is seeking an unspecified amount to cover refunds, damages and penalties.
“Customers of the three banks named in today’s lawsuit lost more than $870 million over the seven-year life of the network as a result of these failures,” the CFPB said.
Early Warning Services, the Scottsdale, Ariz.-based fintech company that operates Zelle, is also named as a defendant in the lawsuit.
EWS is owned by seven U.S. banks, including JPMorgan, Wells Fargo and Bank of America.
These three banks are the largest financial institutions on the Zelle network, accounting for 73% of activity on Zelle last year.
Bank of America said it strongly opposes the lawsuit, saying it would add “significant new costs” to banks and credit unions that offer free Zelle services to their customers.
More than 99.95% of transactions across the Zelle network are completed without any issues.
“If a customer has an issue, we work directly with the customer,” the Charlotte, North Carolina-based bank said.
San Francisco-based Wells Fargo declined to comment on the lawsuit.
Representatives for New York-based JPMorgan did not immediately respond to a request for comment.
Since its launch in 2017, Zelle has become one of the most widely used peer-to-peer payment networks in the United States, with over 143 million users.
According to the CFPB, Zelle users transferred $481 billion in more than 1.7 billion transactions in the first half of 2024.
