The Consumer Financial Protection Bureau (CFPB) has filed a complaint against three major US banks – JPMorgan Chase, Bank of America, and Wells Fargo – and the operator of Zelle, alleging that they allowed fraud to flourish on the platform. The CFPB claims that hundreds of thousands of customers have lost over $870 million since Zelle’s launch seven years ago due to faulty safeguards.
The CFPB alleges that banks failed to investigate complaints properly, leaving victims to fend for themselves. It also claims that banks did not provide reimbursement for fraud and errors as required by law. Zelle disputes the estimate, stating that it goes above and beyond what is required by law in reimbursing customers for certain types of scams.
The complaint specifically alleges that banks failed to stop transfers when there were indications of fraud and failed to protect their own account owners from using Zelle to perpetrate fraud. This resulted in millions of complaints about Zelle fraud, with losses totaling over $290 million for Bank of America customers alone.
In response to the CFPB’s complaint, Early Warning Services, the operator of Zelle, described the suit as “meritless” and said it was driven by political factors unrelated to Zelle. The company claims that its industry-leading reimbursement policies go above and beyond what is required by law.
The CFPB suit raises questions about the potential impact on a new administration under President-elect Donald Trump. Analysts predict that the case could have legs, given Trump’s populist leanings. However, banks may have a strong defense in court, arguing that they should not be held responsible for transactions that prove fraudulent.
Source: https://edition.cnn.com/2024/12/20/business/zelle-fraud-lawsuit-banks/index.html