Customers lose $870 million in alleged Zelle fraud by major banks
- Hundreds of thousands of consumers have experienced fraud losses on Zelle.
- The CFPB's lawsuit highlights major banks' failure to investigate fraud claims properly.
- The case aims to secure changes and penalties for the banks to better protect consumers.
In the United States, the Consumer Financial Protection Bureau has filed a lawsuit against three major banks: Bank of America, JPMorgan Chase, and Wells Fargo, concerning their operation of the digital payment platform Zelle. The lawsuit, which was officially announced on December 20, 2024, alleges that the banks did not implement adequate consumer safeguards, allowing widespread fraud to occur on the platform since its launch in 2017. It has been reported that customers have collectively lost over $870 million due to this issue. The CFPB contends that the banks rushed the Zelle app to market fearing competition from other payment systems, lacking the necessary measures to ensure user protection. The lawsuit outlines several key shortcomings, including inadequate identity verification processes that have enabled fraudsters to exploit the platform, ongoing access for repeat offenders, a failure to act on reports of fraud, and neglect in addressing consumer complaints. In addition to seeking operational changes from the banks and Zelle’s operator, Early Warning Services LLC, the CFPB aims to secure a civil money penalty payable to a victims relief fund. Despite the lawsuit's claims, Zelle has defended itself, with its spokesperson labeling the lawsuit as misguided and politically motivated. This legal action follows a growing concern about fraudulent activities associated with Zelle, with ongoing investigations prompted by allegations made by various Senate leaders, including Senator Elizabeth Warren. The lawsuit reflects a critical step in addressing consumer financial protection and promoting accountability among financial institutions for their roles in electronic payment systems.