Global: CFPB Files Lawsuit Against JPMorgan, Bank of America, and Wells Fargo Over Zelle Fraud

The Consumer Financial Protection Bureau (CFPB) has initiated legal action against JPMorgan Chase, Bank of America, and Wells Fargo, alleging that these institutions allowed fraud to proliferate on the peer-to-peer (P2P) payments platform Zelle.

Allegations Against Zelle and Its Owners

Zelle, operated by Early Warning Services—a consortium owned by seven major U.S. banks—has been a popular choice for P2P transactions since its launch in 2017. In 2022 alone, it facilitated $629 billion in transactions, outperforming competitors like Venmo. However, it has faced increasing criticism for its vulnerability to fraud.

The CFPB’s lawsuit accuses the banks and Early Warning Services of failing to implement adequate consumer protections, leading to widespread fraud on the platform. The watchdog alleges that Zelle was rushed to market in an attempt to compete with Venmo and CashApp without incorporating necessary safeguards, leaving users exposed to financial harm.

According to the CFPB, customers of the three named banks have collectively lost over $870 million to fraud on Zelle since its inception.

Consumer Complaints Ignored

The lawsuit highlights that hundreds of thousands of consumers filed fraud complaints over the years, yet many received little to no assistance. Some were even advised to contact the fraudsters directly to recover their funds.

Furthermore, the CFPB claims that the banks failed to adequately investigate complaints or provide legally mandated reimbursements for fraud and errors.

CFPB’s Stance

“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” said CFPB Director Rohit Chopra. “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 halt the alleged unlawful practices, secure compensation for affected consumers, and impose a civil money penalty. Funds from the penalty would be directed to the CFPB’s victims relief fund.

Previous Investigations

This lawsuit follows inquiries made by the CFPB in August, during which JPMorgan Chase confirmed it was cooperating with the regulator regarding Zelle. The bank also suggested it might consider its own legal response to the issue.

Broader Implications

As scrutiny of P2P payment platforms intensifies, the lawsuit could signal a broader regulatory push to hold financial institutions accountable for consumer protections in the rapidly growing digital payments space.