The Consumer Financial Protection Bureau (CFPB) has launched a lawsuit against JPMorgan Chase, Bank of America, and Wells Fargo, accusing them of enabling widespread fraud on the P2P payments platform Zelle.
Zelle’s Growth and Challenges
Zelle, a payment platform owned by Early Warning Services—a consortium of seven major U.S. banks—has achieved massive success since its 2017 launch, processing $629 billion in transactions in 2022. However, alongside its popularity, Zelle has faced significant scrutiny for its handling of fraud, with figures like Senator Elizabeth Warren urging regulatory action.
Allegations of Negligence
The CFPB alleges that the banks and Early Warning Services failed to implement robust fraud safeguards in their haste to compete with rivals like Venmo and CashApp. Customers of the three named banks reportedly lost more than $870 million over the platform’s seven years. Despite hundreds of thousands of fraud complaints, users were often denied assistance, and some were told to confront fraudsters themselves to reclaim lost funds.
CFPB Demands Accountability
CFPB director Rohit Chopra emphasized:
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle. By failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
The suit seeks to:
- Halt unlawful conduct,
- Secure compensation for affected consumers,
- Impose civil monetary penalties to fund relief for victims.
Banks Under Fire
In August, JPMorgan Chase disclosed ongoing inquiries from the CFPB regarding Zelle fraud and hinted at possible independent legal actions in response to the situation.