CFPB Alleges Three Banks Failed to Protect Consumers from Zelle Fraud: NPR

Payments network Zelle and three of its owner banks were sued by the Consumer Financial Protection Bureau on Friday.

Roy Rochlin/Getty Images for Zelle

Hide caption

Toggle label

Roy Rochlin/Getty Images for Zelle

The Consumer Financial Protection Bureau sued Zelle’s operator, 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 Friday.

CFPB, the federal consumer finance regulator, claims that customers of the three largest banks have lost more than $870 million in the seven years that Zelle has existed because the banks failed to protect them.

The CFPB allegations include that Zelle and the banks failed to implement adequate fraud prevention safeguards, allowing fraudsters to proliferate, and that banks failed to properly investigate customer complaints about Zelle.

The three banks are co-owners of Early Warning Services, the operator of Zelle, which was also named in the CFPB’s complaint.

“This is about financial institutions meeting their fundamental obligations to protect customers’ money and help fraud victims recover their losses,” said CFPB Director Rohit Chopra. “These banks broke the law by operating a payment system that facilitated fraud and then refusing to assist victims.”

The agency said its lawsuit aims to stop “unlawful conduct,” seek redress for affected consumers and seek a civil monetary penalty.

Banks and Zelle are defending themselves against the CFBP’s lawsuit

Zelle responded by saying it was “fully prepared” to defend itself against “this baseless 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.

Meanwhile, Bank of America said that “more than 99.95 percent of transactions across the Zelle network occur without incident,” adding that “we give tremendous credit to the efforts of the CFPB, the 2,200 banks and credit unions that offer this.” To impose costs, completely disagree with free Zelle service for customers.”

JPMorgan Chase said the CFPB “is now exceeding its authority by holding banks accountable for criminals, including romance scammers.”

“It is an impressive demonstration of regulation through enforcement that bypasses the required rulemaking process,” JPMorgan Chase added.

Wells Fargo declined to comment.

Early Warning Services is co-owner of seven of the largest banks in the United States, including PNC Bank, Truist, US Bank and Capital One.