The U.S. Consumer Financial Protection Bureau (“CFPB”) dismissed a sweeping lawsuit against JPMorgan JPM, $Bank of America Corp(BAC-N)$. BAC and Wells Fargo & Co. WFC for failing to protect consumers from fraud on Zelle, the renowned payment network. The lawsuit against Early Warning Services LLC, Zelle’s official operator, was also dropped.
Launched in 2017, the Zelle network aimed to be the go-to alternative to money transfer giants like Venmo and Cash App. It is owned by seven major banks, including JPM, BAC and WFC.
The app enables near-instant electronic money transfers through the use of “tokens” created by linking email addresses or U.S.-based mobile numbers. This allows users to create numerous tokens across banks and rapidly reassign themselves between institutions, leaving consumers susceptible to fraudulent practices.
In December 2024, the CFPB alleged that Early Warning Services and three of its largest Zelle operators — JPMorgan, Bank of America and Wells Fargo — rushed the introduction of the network to the market without effectively implementing consumer safeguards.
The lawsuit described how hundreds of thousands of customers sought assistance and were denied, while some were asked to contact the fraudsters to get back their lost money. Also, Bank of America, JPMorgan and Wells Fargo allegedly failed to look into the complaints properly or offer their clients a legally necessary reimbursement for fraud and errors.
The lawsuit alleged that JPM, WFC and BAC customers lost more than $870 million due to the ongoing failures since Zelle’s launch.
On Tuesday, the CFPB mentioned in a filing with the U.S. District Court in Arizona that it dismissed the lawsuit against the operator of payment platform Zelle and three of the largest operators with prejudice.
A spokesman for EWS, Eric Blankenbaker, stated that the lawsuit was “without merit, and legally and factually flawed.” “We look forward to continuing to provide Zelle, a trusted service, to 151 million enrolled American consumer and small business accounts,” he wrote in an email to Payments Dive.
A JP Morgan spokesperson informed, “Banks play a crucial role in scam prevention and consumer education, but this is a national security problem that requires a collective effort across the public and private sectors.”
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