CFPB Sues JPMorgan, BofA, Wells Fargo for Failure to Prevent Zelle Fraud

On By Littum

The US Consumer Financial Protection Bureau (CFPB) has filed suit against JPMorgan Chase, Bank of America and Wells Fargo for allegedly failing to protect consumers from “widespread fraud” on the Zelle payment platform.

Early Warning Services, which developed and operates Zelle, has also been named in the lawsuit.

It is jointly owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, US Bank and Wells Fargo.

The CFPB alleges that since Zelle’s launch in 2017, customers of the three banks have lost over $870 million due to inadequate fraud prevention and detection measures.

Zelle facilitates electronic funds transfers using linked email addresses or US-based mobile numbers.

According to ReutersZelle serves more than 143 million consumers and small businesses.

CFPB Director Rohit Chopra said, “The nation’s largest banks felt threatened by competing payment apps, so they rushed to put Zelle out. By failing to implement proper security measures, Zelle became a gold mine for fraudsters, often leaving victims to fend for themselves themselves.”

The CFPB alleges that Zelle’s limited identity verification methods have enabled fraudulent activity, allowing bad actors to create accounts and easily target users.

Despite receiving numerous fraud complaints, the defendant banks allegedly failed to use this information to prevent further fraud.

The CFPB also accuses them of violating Zelle Network’s rules by not consistently or promptly reporting fraud incidents.

It further alleges that the banks violated federal law, including the Electronic Funds Transfer Act and Regulation E, by failing to properly investigate Zelle customer complaints and failing to take appropriate action for certain types of fraud and errors.

Early Warning reported that in 2023 fraud and fraudulent incidents fell by almost 50%, even as transaction volume grew by 27%, according to the data.

In a statement to Reuters, a JPMorgan spokesman said: “As a last-ditch effort to pursue their political agenda, the CFPB is now overstepping its authority by holding banks accountable for criminals.

“It is a stunning demonstration of regulation by enforcement that circumvents the required rulemaking process.”

“We strongly disagree with the CFPB’s effort to impose huge new costs on the 2,200 banks and credit unions that offer the free Zelle service to customers,” a BofA spokesman was quoted by the news agency as saying.

Wells Fargo declined to comment on the news.

“CFPB sues JPMorgan, BofA, Wells Fargo for failing to prevent Zelle fraud” was originally created and published by Retail Bankers Internationala GlobalData owned brand.