The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against four major banks and Early Warning Services, the parent company of the popular payment app Zelle. The regulator alleges that the group failed to provide adequate protections against fraud on the Zelle network, resulting in customer losses exceeding $870 million over its seven-year existence.
The CFPB named JPMorgan Chase, Bank of America, Wells Fargo, and Early Warning Services as defendants in the complaint. The latter is also co-owned by Capital One, PNC Bank, Truist, and U.S. Bank. The regulator claims that banks ignored red flags in fraud complaints and failed to comply with obligations under the Electronic Fund Transfer Act.
The CFPB alleges that Zelle’s insufficient identity verification and failure to restrict and track criminals on the network led to widespread consumer losses since its launch in 2017. Early Warning Services released a statement claiming the lawsuit is “legally and factually flawed” and suggests it was filed for political reasons.
The banks and Early Warning Services have responded, with JPMorgan Chase’s spokesperson stating that the CFPB’s efforts are jeopardizing the value of Zelle, while Bank of America’s spokesperson argued that the agency is imposing huge new costs on 2,200 banks and credit unions that offer the free Zelle service.
The CFPB lawsuit seeks to stop unlawful conduct, obtain compensation for harmed consumers, and impose a civil money penalty. The regulator has come under fire from President-elect Trump and Republicans, who have accused it of partisan overreach.
Source: https://fortune.com/2024/12/20/jpmorgan-chase-bank-of-america-and-wells-fargo-sued-over-zelle-scams-that-cost-870-million