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JP Morgan Chase, Bank of America and Wells Fargo sued over Zelle fraud

Posted on by Taylor Reeves
JP Morgan Chase, Bank of America and Wells Fargo sued over Zelle fraud

Topline

Financial regulators filed a lawsuit Friday against JPMorgan Chase, Bank of America, Wells Fargo and Zelle’s parent company, accusing the companies of failing to protect consumers from “widespread fraud” on the payments platform.

Important facts

According to a statement, the Consumer Financial Protection Bureau (CFPB) accused JPMorgan Chase, Bank of America, Wells Fargo and Early Warning Services – Zelle’s operating company – of failing to properly investigate allegations of fraud or compensate victims or other failures in the payments platform Agency.

Hundreds of thousands of consumers filed fraud complaints and were denied assistance by the three banks, which advised consumers to then contact those responsible for the alleged fraud for compensation, the agency claims.

The CFPB accuses the three banks of failing to take “timely, effective and appropriate measures” to prevent fraud. In addition, they have inadequate verification requirements to reduce the likelihood of risky transfers by consumers and prevent further fraud through the use of information provided by consumer complaints, according to a complaint filed by the agency.

The CFPB has requested compensation for affected customers in an amount to be determined by the court, in addition to compensation for fraud victims and other relief.

Zelle spokeswoman Jane Khodos told Forbes that the CFPB lawsuit was “meritless” and noted that the company had compensated its customers for “all fraud cases” as required by the agency, which, according to Khodos, “creates new legal requirements, that go far beyond the requirements of the CFPB.” is authorized to do so.

Brooklyn Bass, a spokesman for JPMorgan, said in a statement to Forbes that the CFPB is “overstepping its authority by holding banks accountable for criminals” and claiming the agency is endangering “the value and free nature of Zelle.” Bank of America nor Wells). Fargo immediately responded to requests for comment.

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Crucial quote

“By failing to provide adequate security precautions, Zelle became a goldmine for fraudsters while victims were often left to fend for themselves,” CFPB Director Rohit Chopra said in a statement.

Big number

More than $870 million. That’s how much customers of JPMorgan Chase, Bank of America and Wells Fargo have lost since Zelle launched in 2017, the CFPB claims.

Surprising fact

JPMorgan said in a filing with the U.S. Securities and Exchange Commission in August that the bank was considering litigation against the CFPB over the agency’s allegations about the bank’s involvement in Zelle. The CFPB accused JPMorgan of failing to remove criminal accounts from Zelle and compensate fraud victims, CNBC reported.

Important background

Lawmakers have been calling for investigations into fraud allegations against Zelle for years. In 2022, Sen. Elizabeth Warren, D-Wash., called on the CFPB to open an investigation into early warning services, while accusing the company of “increasing volumes of fraud and scams.” Warren also claimed that banks using the platform, including JPMorgan and Wells Fargo, refused to release information about Zelle fraud and failed to pay victims. Sens. Robert Menendez, D-N.J., and Jack Reed, D-R.I., wrote a letter to Early Warning Services in April 2022 asking the company to disclose its anti-fraud procedures at Zelle. The CFPB took several other actions in the remaining months of the Biden administration, including imposing an $8 cap on late payment interest on credit cards and stopping banks from overcharging overdraft fees, which the CFPB says costs consumers annually would save $5 billion.

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