CFPB sues JPMorgan, BofA, Wells Fargo over fraud on Zelle

The Consumer Financial Protection Bureau sued the operator of Zelle and three of the country’s largest banks — JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) — on Friday, alleging they allowed widespread fraud on the peer-to-peer payment platform.

The consumer financial services watchdog agency said that Zelle customers have lost more than $870M during its seven-year existence.

Early Warning Service, which operates Zelle, and three of its owner banks “rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards,” the agency said on Friday.

The CFPB lawsuit said hundreds of thousands of consumers filed fraud complaints and were largely denied assistance, with some being told to contact the perpetrators of the fraud to recover their money. The three banks allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors, the CFPB 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,” said CFPB Director Rohit Chopra.

Early Warning Services is co-owned by seven banks, including JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), PNC Bank (PNC), Truist Financial (TFC), and U.S. Bancorp (USB).

The CFPB’s lawsuit seeks to halt unlawful conduct, obtain redress for harmed consumers, and obtain a civil money penalty, which would be paid into the CFPB’s victims relief fund, and secure other appropriate relief.

The news didn’t appear to harm the banks’ stock in early Friday trading. Bank of America (BAC) stock rose 0.6%, JPMorgan Chase (JPM) +0.6%, and Wells Fargo (WFC) increased 0.8%.