JPMorgan Chase is contemplating legal action against the Consumer Financial Protection Bureau (CFPB) due to an ongoing investigation into the misuse of Zelle payments by scammers.
In March of last year, Senate Democrats, including Elizabeth Warren, urged financial regulators to address the fraudulent activities related to the bank-owned Zelle peer-to-peer (P2P) payments service.
Zelle, operated by Early Warning Services and owned by seven major U.S. banks, has gained tremendous popularity, facilitating $629 billion in transactions in 2022—twice as much as its closest competitor, Venmo.
However, it has also been criticized for enabling widespread fraud and scams. In a letter addressed to the Federal Reserve Board, FDIC, National Credit Union Administration, and OCC, Warren and fellow senators Bob Menendez, Jack Reed, Sherrod Brown, and Mark Warner expressed concerns regarding the safe operation of Zelle. They argued that financial institutions maintain that they are not obligated under the Electronic Funds Transfer Act to reimburse customers when fraudsters exploit the network to steal money. Instead, these institutions seemingly place the financial burden on their customers, often citing ambiguity over whether payments are classified as “authorized,” “unauthorized,” or an “error” to avoid refunding fraud victims.
Both Wells Fargo and JPMorgan have previously indicated that government authorities are conducting formal or informal inquiries regarding their handling of customer disputes.
In its recent financial statements, JPMorgan acknowledged the ongoing CFPB investigations into these issues. The statement noted, “JPMorgan Chase is responding to inquiries from the Consumer Financial Protection Bureau (CFPB) regarding the transfers of funds through the Zelle Network. In connection with this, the CFPB Staff has informed JPMorgan Chase that it is authorized to pursue a resolution of the inquiries or file an enforcement action. JPMorgan Chase is currently evaluating next steps, including litigation.”