(Credit: Tierney L. Cross/Bloomberg via Getty Images)
The Consumer Financial Protection Bureau (CFPB) has sued the operator of Zelle—as well as Bank of America, JPMorgan Chase, and Wells Fargo—for failing to protect consumers on the peer-to-peer payment network.
Zelle launched in 2017 and is operated by a private firm, Early Warning Services, which is jointly owned by the US banking giants. The CFPB, an independent US agency, alleges that Zelle "rushed the network to market to compete against growing payment apps such as Venmo and CashApp without implementing effective consumer safeguards."
The CFPB says "hundreds of thousands" of Zelle consumers filed fraud complaints but "were largely denied assistance" and in some cases were even told to "contact the fraudsters directly to recover their money." It also accused the banks of failing to properly investigate complaints or provide consumers with "legally required reimbursement" for fraud and other errors.
Customers of the three banks have lost more than $870 million over seven years.
The CFPB is now seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief, which will then be paid into a victims' relief fund.
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Specifically, it claimed that Early Warning Services and the defendant banks were "too slow to restrict and track criminals" as they exploited multiple accounts across the network. The watchdog also claimed that Zelle’s "limited identity verification" methods helped criminals quickly create accounts and target Zelle users.
"This is not just about convenience or technological innovation," said CFPB Director Rohit Chopra. "This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses."
He added: "These banks broke the law by running a payment system that made fraud easy and then refusing to help the victims."
This isn't the first time the watchdog has cracked down on Zelle. After a 2022 New York Times investigation found fraudsters were using Zelle to impersonate bank employees and scam unwitting consumers, 2,100 banks that had used Zelle issued refunds to victims.