Federal regulators filed a lawsuit Friday against JPMorgan Chase, Wells Fargo and Bank of America, alleging that the banks violated consumer finance laws and failed to protect hundreds of thousands of consumers from rampant fraud on the popular payments network Zelle.
In federal civil affairs complaintThe Consumer Financial Protection Bureau alleges that banks rushed to bring peer-to-peer payment platforms to market without effective protections against fraud and largely denied relief to consumers after they complained that they had been defrauded by the services.
“Shortly after the launch of Zelle, significant problems became apparent, including fraud perpetrated against consumers using Zelle, but Defendants took no meaningful action for several years to address these obvious deficiencies,” according to the complaint. there is.
The CFPB alleges that the bank violated federal consumer finance laws governing electronic fund transfers. The law requires banks to conduct a “reasonable investigation” when consumers report transaction errors and prohibits unfair acts or practices by failing to take steps to prevent and address fraud. Gel. The agency is seeking an unspecified amount of money to cover refunds, damages and penalties.
“Customers of the three banks named in today’s lawsuit lost more than $870 million over the network’s seven years as a result of these failures,” the CFPB said.
Early Warning Services, a fintech company headquartered in Scottsdale, Arizona, that operates Zelle, was 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 in the Zelle network, accounting for 73% of Zelle activity last year.
Bank of America said it strongly disagrees with the lawsuit, which would add “tremendous new costs” to banks and credit unions that offer free Zelle services to their customers. It said more than 99.95% of transactions over the Zelle network proceed without incident.
“When our customers have issues, we work directly with them,” the Charlotte, North Carolina-based bank said.
New York-based JPMorgan said in a statement that CPFB was “abusing its power by holding banks accountable for wrongdoing.”
San Francisco-based Wells Fargo declined to comment on the lawsuit.
Early Warning called the lawsuit “legally and factually flawed.”
“Zelle is leading the fight against fraud and fraud and has an industry-leading refund policy that goes beyond the law,” the company said.
Since launching in 2017, Zelle has established itself as one of the most widely used peer-to-peer payment networks in the United States, with over 143 million users. In the first half of 2024, Zelle users transferred $481 billion in more than 1.7 billion transactions, according to the CFPB.
