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 statement on Friday.
CFPB, the government’s consumer financial watchdog agency, alleges customers of the top three banks lost more than $870 million over the seven years that Zelle has been in existence due to the banks’ failures to protect them.
Among the CFPB allegations are that Zelle and the banks failed to implement proper fraud prevention safeguards, allowing scammers to proliferate, and that banks failed to properly investigate customer complaints about Zelle.
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” said CFPB Director Rohit Chopra in a statement. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
The agency said its lawsuit was intended to stop “unlawful conduct,” obtain redress for consumers impacted and seek a civil monetary penalty.
Zelle responded by saying it was “fully prepared” to defend itself against “this meritless 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.
Zelle is operated by a company called Early Warning Services, which is co-owned by seven of the largest banks in the U.S.: Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo.
Early Warning Services, as well as three of its owner banks — Bank of America, JPMorgan Chase, and Wells Fargo — are named in CFPB’s complaint.
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