A government agency that protects consumers has sued JPMorgan Chase, Bank of America, and Wells Fargo. The three major banks and the operator of Zelle, a popular payment app, were sued last Friday, December 20. The Consumer Financial Protection Bureau accused them of allowing fraud to fester on Zelle’s peer-to-peer network. The CFPB says shoddy safeguards on the network resulted in losses of hundreds of millions of dollars to fraud for bank customers.
In a news release, the CFPB says Early Warning Services, which operates Zelle and the three banks, “…rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards. ” Customers of the three banks have reportedly lost more than $870 million over the network’s seven years of operation.
Hundreds of thousands of consumers reportedly filed fraud complaints and were largely denied assistance. Furthermore, the banks allegedly “failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors. ”
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” said CFPB Director Rohit Chopra in the release. “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 is seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief.
