FILE - Collage image of Wells Fargo, JPMorgan and Bank of America. (Getty Images)
LOS ANGELES - Hundreds of thousands of customers were victims of fraud after using Zelle through Wells Fargo, JPMorgan and Bank of America, according to a federal lawsuit that was filed on Friday.
The Consumer Financial Protection Bureau filed the lawsuit and claimed the banks rushed to get the peer-to-peer payments platform to market without implementing effective safeguards against fraud.
Even after customers complained about being defrauded while using Zelle, the banks largely denied them any relief,
"Shortly after Zelle’s launch, significant problems, including fraud being perpetrated on consumers using Zelle, quickly became apparent. But defendants did not take meaningful action to address these clear defects for years," according to the complaint.
What does the lawsuit say?
The CFPB claims that the banks violated federal consumer financial laws governing electric funds transfers, which require banks conduct "reasonable investigations" when consumers report transaction errors, and the agency's prohibition on unfair acts or practices by failing to take steps to prevent and address fraud on Zelle. The agency seeks an unspecified amount of money to cover refunds, damages and penalties.
"Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures," the CFPB said.
Also named as a defendant in the lawsuit is Early Warning Services, a fintech company based in Scottsdale, Arizona, that operates Zelle. EWS is owned by seven U.S. banks, including JPMorgan, Wells Fargo and Bank of America. Those three banks are the largest financial institutions on the Zelle network, accounting for 73% of activity on Zelle last year.
BofA, JPMorgan respond
Bank of America said it strongly disagreed with the lawsuit, which it said would add "huge new costs" on banks and credit unions offering the free Zelle service to clients. It said more than 99.95% of transactions across the Zelle network go through without incident.
"When a client has an issue, we work directly with them," the bank based in Charlotte, North Carolina, said.
In a statement, New York-based JPMorgan said the CPFB was "overreaching its authority by making banks accountable for criminals."
San Francisco-based Wells Fargo declined to comment on the lawsuit.
What is Zelle?
Since its launch in 2017, Zelle has become one of the most widely used peer-to-peer payment networks in the U.S., with more than 143 million users. In the first half of 2024, Zelle users transferred $481 billion across more than 1.7 billion transactions, according to the CFPB.