CFPB Alleges 3 Banks Failed to Protect Consumers from Zelle Scam: NPR

The payment network Zelle and three of its owner banks were sued by the Consumer Financial Protection Bureau on Friday.

Roy Rochlin/Getty Images for Zelle

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Roy Rochlin/Getty Images for Zelle

The Consumer Financial Protection Bureau sued the operator of Zelle, as well as Bank of America, JPMorgan Chase and Wells Fargo “for failing to protect consumers from widespread fraud” at the payment provider, according to a release Friday.

The CFPB, the government’s consumer financial watchdog, claims that customers of the top three banks have lost more than $870 million over the seven years Zelle has been around because of the banks’ failure to protect them.

Among the CFPB allegations are that Zelle and the banks failed to implement proper fraud prevention safeguards, allowing fraudsters to proliferate, and that the banks failed to properly investigate customer complaints about Zelle.

The three banks are co-owners of Early Warning Services, which operates Zelle and was also named in the CFPB’s complaint.

“This is about financial institutions fulfilling their fundamental obligations to protect customers’ money and help fraud victims recover their losses,” said CFPB Director Rohit Chopra. “These banks broke the law by running a payment system that made fraud easy and then refusing to help victims.”

The agency said its lawsuit was intended to stop “unlawful conduct,” obtain damages for affected consumers and seek a civil penalty.

Banks and Zelle push back against CFBP’s lawsuit

Zelle responded by saying it was “fully prepared” to defend itself against “this frivolous lawsuit.”

“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,” the company said in a statement.

Meanwhile, Bank of America said that “more than 99.95 percent of transactions across the Zelle network go through without incident,” adding that “we strongly disagree with the CFPB’s efforts to impose on the 2,200 banks and credit unions large new costs. free Zelle service for customers.”

JPMorgan Chase said the CFPB is “now overstepping its authority by holding banks accountable for criminals, even including romance scammers.”

“It is a stunning demonstration of regulation by enforcement that circumvents the necessary rulemaking process,” JPMorgan Chase added.

Wells Fargo declined to comment.

Early Warning Services is co-owned by seven of the largest banks in the United States, also including PNC Bank, Truist, US Bank and Capital One.