The government's consumer watchdog has alleged that Zelle and three major banks failed to protect users from fraud on peer-to-peer payment networks.
The Consumer Financial Protection Bureau (CFPB) said Friday that Bank of America, JPMorgan Chase and Wells Fargo were slow to crack down on fraudsters, failed to properly investigate fraud complaints and failed to provide refunds to victims. It claimed on Friday that it had caused more than $870 million in damages to consumers. Zelle was launched in 2017.
“The nation's largest banks felt threatened by competing payment apps and rushed to implement Zelle,” said Rohit Chopra, director of the CFPB. “By not taking proper safeguards, Zelle became a gold mine for scammers, while leaving victims to fend for themselves.”
Zelle said in a statement that it is defending itself against “unjustified lawsuits.”
“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.
“The CFPB's misguided attack will embolden criminals, increase the burden of fees on consumers, squeeze small businesses, and make it harder for thousands of community banks and credit unions to compete.”
Bank of America also rejected the CFPB's lawsuit.
If a client has a problem, we work directly with the client. “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,” said Bank of America spokesperson Bill Hardin. said.
A JPMorgan Chase spokesperson said in a statement that the CFPB's actions were “a stunning demonstration of executive regulation.”
“As a last resort to pursue political objectives, the CFPB is now overreaching its power by holding banks accountable against criminals, including romance fraudsters,” the spokesperson said. Ta.
Approximately 143 million consumers and small businesses are registered with Zelle. The company said that in 2023, 99.95% of payments were made without any reports of fraud or fraud, and the number of reports decreased by 50%, despite a 27% increase in transaction volume.
Payment networks also reimburse customers for all fraudulent activity as required by law, and go beyond their legal obligations to reimburse customers for certain types of fraud for which they have authorized transactions. claims.
Wells Fargo declined to comment. Bank of America and JPMorgan Chase did not respond to requests for comment.
Updated at 1:24 p.m. ET
