Three of the nation’s largest banks—Bank of America, JPMorgan Chase, and Wells Fargo—have found themselves at the center of a lawsuit. The claim was filed by the Consumer Financial Protection Bureau (CFPB) which accuses the banks of rushing Zelle to market without having sufficient protection against fraud.
According to the suit, customers have lost hundreds of millions of dollars through scams facilitated by the platform, while the banks ignored the complaints. Operated by Early Warning Services (EWS), Zelle is owned by the three banks along with four other financial institutions. The CFPB says the network has quickly developed to compete with other entities such as Cash App and Venmo but failed to ensure safety protections were put in place for users. As a result, since its establishment in 2017, Zelle has experienced more than $870 million in fraud-related losses by customers of the three banks.
“The nation’s largest banks felt threatened by competing apps, so they rushed to put out Zelle. By failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves,” CFPB Director Rohit Chopra said.
Since the lawsuit, Zelle and the accused banks have denied the allegations, with a spokesperson for the company stating that the CFPB claims are “legally and factually flawed.” Additionally, JPMorgan also chimed into the conversation accusing the CFPB of pursuing a “political agenda” and overstepping its authority.
“Many reported fraud claims are not found to involve actual fraud after investigation,” the spokesperson said.
Nonetheless, this isn’t the first time Zelle was hit was scrutiny. In 2022, Sen. Elizabeth Warren released a report that highlighted increasing fraud incidents on the platform and criticized the banks for not reimbursing customers. The following year, the EWS started issuing refunds to an unknown number of victims who were faced with fraud.
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