CFPB sues JPMorgan, Bank of America over alleged Zelle fraud

The Consumer Financial Protection Bureau sued JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. along with the parent company of Zelle alleging the firms rushed a peer-to-peer payment network to market without first implementing adequate consumer protections.

“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 in a Friday statement.

A Zelle spokesperson said the CFPB’s actions are legally and factually flawed and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle. The CFPB claimed fraud complaints weren’t addressed, with consumers largely denied relief when they went to their banks, according to a lawsuit filed in the U.S. District Court for the District of Arizona.

Representatives for JPMorgan and Bank of America did not have an immediate comment. A representative for Wells Fargo declined to comment.

Both JPMorgan and Wells Fargo previously disclosed that the consumer agency was investigating their handling of Zelle transactions. JPMorgan also said earlier this year it was evaluating its response to the government scrutiny, including potential litigation.

Consumer payment scams via Zelle and Venmo previously caught the attention of Senate Democrats including Elizabeth Warren. Early Warning Services, the company that operates Zelle, is owned by seven of the largest US banks: the three named in the lawsuit as well as Capital One Financial Corp., PNC Financial Services Group Inc., Truist Financial Corp. and US Bancorp.

Zelle competes with PayPal Holdings Inc.-owned Venmo and Block Inc.-owned Cash App, two of the most popular peer-to-peer payment apps in the US.

—With assistance from Hannah Levitt and Katherine Doherty.