The agency alleges that these institutions failed to implement adequate consumer protections, leaving users vulnerable to widespread fraud. According to the CFPB, over USD 870 million in consumer losses have been reported on the Zelle platform since its launch in 2017.
The lawsuit claims the companies prioritised quick deployment of Zelle to compete with other payment apps, such as Venmo and CashApp, without instituting sufficient safeguards to detect and prevent fraudulent activity. Thousands of complaints from affected users were allegedly mishandled, with some victims reportedly advised to contact the fraudsters directly to recover lost funds. The CFPB further alleges that the banks failed to properly investigate fraud complaints or provide required reimbursements under federal law.
The CFPB’s suit outlines multiple areas of concern. Among them, the limited identity verification methods employed by Zelle reportedly made it easier for scammers to exploit the platform. Fraudsters could link a victim's payment credentials, or ‘tokens,’ to their own accounts, diverting funds intended for the victim.
The complaint also highlights systemic failures in preventing repeat offenders. Early Warning Services and the defendant banks were allegedly slow to share information about fraudulent transactions, allowing bad actors to exploit accounts across the network undetected. Despite receiving hundreds of thousands of fraud complaints, the banks are accused of neglecting to act on red flags that could have mitigated further losses.
Moreover, the lawsuit accuses Bank of America, JPMorgan Chase, and Wells Fargo of not adhering to their legal obligations under the Electronic Fund Transfer Act and Regulation E. The banks allegedly failed to investigate fraud claims adequately and, in some cases, refused to compensate consumers for losses.
CFPB officials commented on the case, stating that the rapid rollout of Zelle without proper safeguards created opportunities for fraudsters while leaving consumers to bear the consequences.
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