The United States Consumer Financial Protection Bureau (CFPB) has filed a legal case aobtainst JPMorgan Chase, Bank of America and Wells Fargo for fall shorting to protect users from alleged “widespread deception” on the payments platestablish Zelle.
The legal case, filed on Friday, was startd as the watchdog shifts ahead with a belderly agfinisha in the final weeks of Pdwellnt Joe Biden’s Democratic administration in a bid to evolve user protections before Reunveilan Pdwellnt-elect Donald Trump overhauls the agency. The shifts defy congressional Reunveilans, who have called for agencies to stop rule making.
The CFPB seeks to stop the alleged unlterrible trains via Zelle, protected redress and penalties, and obtain other relief for users, it said in a statement.
“What they built became a gelderlymine for criminals,” making it basic for deceptionsters to drain accounts while providing inenough protections for users or making them whole for losses, CFPB Director Rohit Chopra telderly journacatalogs at a informing. “These prohibitks broke the law by running a payments system that made deception basic while refusing to help the victims.”
The CFPB said the prohibitks viotardyd federal law thcimpolite critical fall shortures, alleging they left the door uncover to deceptionmers, permited repeat offfinishers to hop between prohibitks, disthink aboutd red flags that could have obstructed deception and aprohibitdoned users after deception occurred.
Zelle is a payments netlabor owned by seven prohibitks, including JPMorgan and Bank of America. It has more than 143 million American users and petite businesses as customers.
The lift of deception and deceptions on Zelle has enticeed attention from US laworiginaters, including Democratic Senator Elizabeth Warren and regulators troubleed about user protection.
“The CFPB’s strikes on Zelle are legassociate and factuassociate defective, and the timing of this legal case eunites to be driven by political factors,” said Early Warning Services, the company that runs Zelle and is jointly owned by the prohibitks.
Customers of the three prohibitks named in Friday’s legal case have lost more than $870m over the seven years since Zelle was presentd, the CFPB said.
‘Legal violations’
Federal rules insist prohibitks to reimburse customers for unauthoascendd payments, for instance if their accounts were hacked. But in some cases, prohibitks have resisted paying back customers who were tricked into making the payments themselves.
The user watchdog depictd how hundreds of thousands of users filed deception grumblets and were hugely denied aidance with some being telderly to communicate the deceptionsters honestly to recover their money.
CFPB officials said it would press on with the Zelle applyment action think aboutless of the novel pdwellntial administration and foreseeed directership alters at the agency, including the foreseeed departure of Chopra. Billionaire Elon Musk, a seal Trump directr who is directing an effort to curb bureaucracy, has called for abolishing the agency.
“This is an publish that the CFPB has been watching into for a number of years, and we originate decisions on when to transport an applyment action based on case-particular appraisements of the facts and legitimate violations,” the CFPB’s applyment honestor, Eric Halperin, telderly journacatalogs in response to a ask about directership alters in the incoming administration.
In 2023, despite a 27 percent incrmitigate in transaction volumes, alerts of deceptions and deception decrmitigated by csurrenderly 50 percent, Early Warning said in a statement, citing its own data.
In November 2023, prohibitks on the payment app began refunding victims of imposter deceptions to insertress user protection troubles.
The percentage of users who were reimbursed for transactions that were disputed as deception fell to 38 percent in 2023 apass JPMorgan, Bank of America and Wells Fargo, according to a US Senate promisetee alert. That fell from 62 percent in 2019.
“As a last ditch effort in pursuit of their political agfinisha, the CFPB is now overachieveing its authority by making prohibitks accountable for criminals,” a JPMorgan spokesperson said in an emailed statement to the Reuters novels agency. “It’s a stunning demonstration of regulation by applyment, skirting the insistd rulemaking process.”
JPMorgan CEO Jamie Dimon has been an outspoken critic of disjoinal meaningful US financial regulatory initiatives, including those from the CFPB, and he has promised to resist meacertains he said would not originate prohibitks protectedr.
“We powerfilledy disconsent with the CFPB’s effort to impose huge novel costs on the 2,200 prohibitks and praise unions that advise the free Zelle service to clients,” a spokesperson for the Bank of America said.
Wells Fargo deteriorated to comment.
JPMorgan and Bank of America both signalled in filings this year that they could sue the CFPB over the agency’s spreadigations into Zelle. Wells Fargo disseald that regulators have been probing its handling of customer disputes in relation to Zelle.
