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A federal regulator sued JPMorgan Chase, Wells Fargo and Bank of America on Friday, alleging the banks failed to protect hundreds of thousands of consumers from rampant fraud on the popular Zelle payments network, in violation of consumer financial laws.
in the federal civil complaintThe Consumer Financial Protection Bureau says banks rushed the peer-to-peer payments platform to market without effective safeguards against fraud and then, after consumers complained about being defrauded in the service, denied them in it helps greatly.
“Shortly after the launch of Zelle, significant problems quickly became apparent, including fraud perpetrated against consumers using Zelle. But defendants took no meaningful steps to address these clear flaws for years,” according to the lawsuit.
The CFPB claims the banks violated federal consumer financial laws governing electric funds transfers, which require banks to conduct “reasonable investigations” when consumers report errors in transactions, and the agency’s prohibition on acts or practices unfair by failing to take steps to prevent and address fraud on Zelle. 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 have lost more than $870 million over the seven years of the network’s existence due to these failures,” the CFPB said.
Also named as a defendant in the lawsuit is Early Alert Services, a Scottsdale, Arizona-based financial technology company that operates Zelle. EWS is owned by seven US banks, including JPMorgan, Wells Fargo and Bank of America. Those three banks are the largest financial institutions in the Zelle network and accounted for 73% of the activity on Zelle last year.
Bank of America said it strongly disagreed with the lawsuit, which it said would add “huge new costs” to banks and credit unions that offer the free Zelle service to customers. He said more than 99.95% of transactions on the Zelle network are completed without incident.
“When a customer has an issue, we work directly with them,” the Charlotte, North Carolina-based bank said.
In a statement, New York-based JPMorgan said the CPFB was “overstepping its authority by holding banks accountable for criminals.”
San Francisco-based Wells Fargo declined to comment on the lawsuit.
Early Alert called the lawsuit “defective in fact and law.”
“Zelle is leading the fight against scams and fraud and has industry-leading refund policies that go beyond the law,” the company said.
Since launching in 2017, Zelle has become one of the most widely used peer-to-peer payment networks in the US, with more than 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.
