Financial regulators on Friday filed a lawsuit against JPMorgan Chase, Bank of America, Wells Fargo and Zelle’s parent firm, accusing the companies of failing to protect consumers from “widespread fraud” on the payments platform.

Customers across the three banks have lost a combined $870 million since Zelle launched in 2017, … [+] regulators claim.

NurPhoto via Getty Images

Key Facts

The Consumer Financial Protection Bureau (CFPB) accused JPMorgan Chase, Bank of America, Wells Fargo and Early Warning Services—Zelle’s operating firm—of failing to properly investigate claims of fraud or reimburse victims or other errors with the payment platform, according to a statement from the agency.

Hundreds of thousands of consumers filed complaints of fraud and were denied assistance by the three banks, which advised the consumers to then contact those responsible for the alleged fraud for relief, the agency claims.

The CFPB alleges the three banks have failed to take “timely, effective and appropriate measures” to prevent fraud, in addition to having inadequate verification requirements to reduce the chance of consumers carrying out risky transfers and prevent additional instances of fraud by using information provided by consumer complaints, according to a complaint filed by the agency.

The CFPB has requested relief for affected customers at an amount that would be determined by a court, in addition to reimbursement for victims of fraud and other relief.

Zelle spokesperson Jane Khodos told Forbes the CFPB lawsuit is “meritless,” noting the company has reimbursed customers for “all instances of fraud” as required by the agency, which Khodos claimed was creating “new legal requirements that go well beyond” what the CFPB is authorized to do.

Brooklyn Bass, a spokesperson for JPMorgan, said in a statement to Forbes the CFPB was “overreaching its authority by making banks accountable for criminals” and claimed the agency was “jeopardizing the value and free nature of Zelle” (neither Bank of America nor Wells Fargo immediately responded to requests for comment).

Get Forbes Breaking News Text Alerts: We’re launching text message alerts so you’ll always know the biggest stories shaping the day’s headlines. Text “Alerts” to (201) 335-0739 or sign up here.

Crucial Quote

“By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves,” CFPB director Rohit Chopra said in a statement.

Big Number

More than $870 million. That’s how much customers across JPMorgan Chase, Bank of America and Wells Fargo have lost since Zelle was launched in 2017, the CFPB claims.

Surprising Fact

JPMorgan revealed in a Securities and Exchange Commission filing in August the bank was considering litigation against the CFPB over claims the agency made about the bank’s involvement in Zelle. The CFPB accused JPMorgan of failing to remove criminal accounts from Zelle and reimburse victims of scams, CNBC reported.

Key Background

Lawmakers have called for investigations into claims of fraud on Zelle for years. In 2022, Sen. Elizabeth Warren, D-Wash., requested the CFPB to launch an investigation into Early Warning Services while accusing the company of inhabiting a “rising volume of fraud and scams.” Warren also alleged banks using the platform, including JPMorgan and Wells Fargo, refused to release information about fraud on Zelle and failed to pay victims. Sens. Robert Menendez, D-N.J., and Jack Reed, D-R.I., wrote a letter to Early Warning Services in April 2022 requesting the company to disclose its procedures to address fraud on Zelle. The CFPB has taken several other actions in the remaining months of the Biden administration, including implementing an $8 ceiling for credit card late fees and blocking banks from overcharging on overdraft fees, which the CFPB claims would save consumers $5 billion annually.

Further Reading