The Consumer Financial Protection Bureau (CFPB) recently sued Bank of America, JPMorgan Chase, Wells Fargo and Early Warning Services, a financial technology and consumer reporting company co-owned by seven of the United States’ largest banks that operates peer-to-peer payment network Zelle.
The agency alleges the banks and Early Warning Services did not protect consumers from widespread fraud on the network.
The lawsuit alleges customers lost more than $870 million over seven years and describes hundreds of thousands of fraud complaints. The banks also failed to properly investigate complaints or provide consumers with reimbursement for fraud and errors as legally required.
Customers’ complains describe how they were denied assistance. Some customers were told to contact the fraudsters directly to recover their money.
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” CFPB Director Rohit Chopra said. “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 lawsuit also contends the banks and Early Warning Services’ limited identity verification methods allowed fraudsters to quickly create accounts and target Zelle users, and the companies were too slow to restrict and track criminals.