The Consumer Financial Protection Bureau (CFPB) has initiated a lawsuit against JPMorgan Chase, Bank of America, and Wells Fargo, alleging negligence in allowing fraud to “fester” on the P2P payments platform Zelle.
Zelle, operated by Early Warning Services—owned by seven major U.S. banks—was launched in 2017 and rapidly gained popularity, processing $629 billion in transactions in 2022, which is double the amount of its closest competitor, Venmo.
However, the service has faced increased scrutiny, particularly from Senate Democrats such as Elizabeth Warren, who have urged financial regulators to address the fraud issues associated with the platform.
The CFPB’s lawsuit asserts that the banks and Early Warning Services have not adequately protected users from “widespread fraud.” It contends that the rush to release Zelle, aimed at competing with apps like Venmo and CashApp, occurred without implementing necessary user safeguards.
As a result, customers of the three banks involved are said to have lost over $870 million during Zelle’s seven years of operation. The lawsuit details numerous consumer fraud complaints that were reportedly “largely denied,” with some victims advised to contact the fraudsters directly for recovery of their funds. Additionally, Bank of America, JPMorgan Chase, and Wells Fargo allegedly did not conduct thorough investigations of these complaints or provide legally required reimbursements for fraud and errors.
CFPB Director Rohit Chopra stated, “The nation’s largest banks felt threatened by competing payment 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.”
The lawsuit seeks to stop unlawful practices, provide redress for affected consumers, and impose civil money penalties that would contribute to the CFPB’s victims relief fund. In August, JPMorgan Chase acknowledged that it was cooperating with CFPB inquiries regarding Zelle, indicating the possibility of pursuing its own legal action related to the matter.