The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against JPMorgan Chase, Bank of America, and Wells Fargo over alleged widespread fraud on the payments platform Zelle. The lawsuit was filed as the agency aims to advance consumer protections before the end of the Biden administration. The CFPB seeks to stop unlawful practices on Zelle, obtain relief for consumers, and impose penalties on the banks.
The CFPB Director Rohit Chopra highlighted how the banks allowed fraud to occur on Zelle, making it easy for criminals to drain accounts while providing insufficient protections for consumers. Despite federal rules requiring banks to reimburse customers for unauthorized payments, the banks have resisted reimbursing customers tricked into making payments themselves.
Statements from Early Warning Services, operator of Zelle, and the banks named in the lawsuit, denied the allegations and criticized the timing of the lawsuit. The banks facing the lawsuit have seen customers lose over $870 million to fraud on Zelle over seven years.
In response to the lawsuit, JPMorgan and Bank of America expressed disagreement with the CFPB’s actions and signaled potential legal challenges. Wells Fargo declined to comment. Despite increased transaction volumes, reports of scams and fraud on Zelle decreased by nearly 50 percent in 2023.
The CFPB’s move to hold banks accountable for fraud on Zelle has sparked criticism from the banks and their representatives. JPMorgan CEO Jamie Dimon, in particular, has been critical of financial regulatory initiatives and vowed to oppose measures that he believes will not improve bank safety. Overall, the lawsuit against the banks over Zelle fraud highlights ongoing concerns about consumer protection in the financial sector.
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