CFPB Sues Major US Banks Over Alleged Zelle Fraud, Claiming Consumer Losses of $870 Million

Consumer Financial Protection Bureau Director Rohit Chopra testifies before the Senate Banking, Housing and Urban Affairs Committee in Washington on April 26, 2022. Win McNamee/Getty Images

The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against three of the nation’s largest banks—Bank of America, JPMorgan Chase, and Wells Fargo—accusing them of failing to protect consumers from alleged widespread fraud on payments platform Zelle.

The lawsuit, announced on Dec. 20, also targets Early Warning Services, which operates Zelle, a peer-to-peer payment network. It accuses the operator and the banks—which co-own Zelle—of failing to implement effective consumer safeguards when rushing it to market to compete against growing payment apps such as Venmo and CashApp, leading consumers to suffer more than $870 million in losses.

“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” CFPB director Rohit Chopra said in a statement. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”

The CFPB’s lawsuit alleges that major banks failed to address widespread fraud complaints, often denying assistance or reimbursement, and seeks to end these practices while securing redress and penalties for affected consumers.

Jane Khodos, a Zelle spokesperson, dismissed the lawsuit as flawed and politically motivated, warning it could harm consumers, small businesses, and financial institutions.

“Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law,” she said.

“The CFPB’s misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses, and make it harder for thousands of community banks and credit unions to compete.”

A Zelle spokesperson also challenged the CFPB’s $870 million figure, noting that it was calculated using customers’ reported fraud claims, which in a number of cases were found not to be actual instances of payment fraud.

“The CFPB’s headline grabbing number is misleading, as many reported frauds claims are not found to involve actual fraud after investigation,” the spokesperson said.

The spokesperson added that Zelle reimburses customers for all instances of fraud, as required by law.

The lawsuit is part of the CFPB’s intensified regulatory push in the final weeks of the Biden administration ahead of the inauguration of President-elect Donald Trump, who has been critical of the agency and is expected to review its posture as part of his pledge for a wide-scale regulatory rollback. The move also flies in the face of GOP demands for agencies to halt any new rulemaking in the waning days of the Biden presidency.

Republicans have intensified efforts to counter “midnight rules,” regulations issued in the final days of an administration. On Dec. 17, the House passed the Midnight Rules Relief Act (H.R. 115), which would allow Congress to review multiple rules at once for potential annulment. A day later, the measure was received in the Senate, read twice, and referred to the Committee on Homeland Security and Governmental Affairs for further consideration.

House Rules Committee chairman Rep. Michael Burgess (R-Texas) described the measure as a necessary response to the anticipated surge of new regulations under the Biden administration, characterizing such rules as an undue burden on businesses and taxpayers.

Some in Trump’s orbit have also challenged the consumer watchdog agency’s existence itself. Elon Musk, who co-leads the Department of Government Efficiency (DOGE) initiative that Trump has tasked with leading the effort to cut government expenditures and roll back bureaucracy, recently called for the CFPB to be abolished.

“Delete CFPB,” Musk wrote in a recent post on X. “There are too many duplicative regulatory agencies.”

A JPMorgan Chase spokesperson criticized the CFPB’s lawsuit as “a stunning example of government overreach” in the final days of the Biden administration, accusing the agency of expanding its authority to hold banks accountable for scams, including romance and social media marketplace fraud.

A JPMorgan Chase spokesperson criticized the CFPB’s lawsuit as an example of government overreach.

“As a last ditch effort in pursuit of their political agenda, the CFPB is now overreaching its authority by making banks accountable for criminals, even including romance scammers,” the spokesperson said in an emailed statement.

“Rather than going after criminals, the CFPB is jeopardizing the value and free nature of Zelle, a trusted payments service beloved by our customers.”

A Bank of America spokesperson told The Epoch Times in an emailed statement that over 99.95 percent of transactions on the Zelle network are completed without issues and that the bank works directly with clients to resolve any concerns.

“We strongly disagree with the CFPB’s effort to impose huge new costs on the 2,200 banks and credit unions that offer the free Zelle service to clients,” the spokesperson said in an emailed statement, adding that 23 million Bank of America clients have embraced Zelle and use it regularly to send money to people they trust.

A Wells Fargo spokesperson declined to comment.

This article has been updated with responses from the three banks.