As part of a push to maintain relevance in the digital finance world, several years ago big banks partnered up to launch their own instant payments and transfer system Zelle. The payments platform has emerged as a significant success – except for claims of fraud or lax security for users. Today, the Consumer Financial Protection Bureau (CFPB) is suing big banks over these allegations.
The CFPB says it has filed suit against three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo – as well as the operator of Zelle, Early Warning Services. The agency claims these banks failed to protect consumers using the peer-to-peer network. The CFPB claims the firms rushed to compete with the likes of Venmo and CashApp – so much so that they failed to implement sufficient safeguards.
The CFP states that customers of the three banks have lost more than $870 million over the network’s seven-year existence due to these failures.
The CFPB’s lawsuit alleges that hundreds of thousands of consumers filed fraud complaints and were largely denied assistance.
Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors.
CFPB Director Rohit Chopra commented taht these banks created a service that “became a gold mine for fraudsters.”
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.”