By Katherine Hamilton
The Consumer Financial Protection Bureau on Friday sued the operator of payment app Zelle, as well as three major banks, alleging they did not do enough to protect consumers from fraud.
The CFPB sued Bank of America, JPMorgan Chase and Wells Fargo, alongside Zelle's operator, Early Warning Services--which is co-owned by these three banks, among several others. The CFPB argued that the companies rushed Zelle to the market to compete with Venmo and CashApp without creating enough fraud defense.
Customers of those three banks named in the lawsuit lost $870 million over the past seven years due to the lack of fraud measures, the CFPB alleged. Hundreds of thousands of consumers filed complaints and were largely denied assistance, did not have their cases properly investigated and were not reimbursed when it was legally required, it added.
The CFPB said its lawsuit aims to end the alleged unlawful conduct, as well as to obtain redress for harmed consumers and a civil money penalty paid to the CFPB's victims relief fund.
Early Warning Services refuted the CFPB's claims, arguing that 99.95% of its payments are sent without a report of fraud.
"The CFPB's attacks on Zelle are legally and factually flawed," Zelle spokesperson Jane Khodos said in a statement.
Zelle, which facilitates electronic money transfers, was founded in 2017 and is operated by Scottsdale, Ariz.-based Early Warning Services. Early Warning is co-owned by seven large banks, including those involved in the suit and Capital One, PNC Bank, Truist and U.S. Bank.
Write to Katherine Hamilton at katherine.hamilton@wsj.com
(END) Dow Jones Newswires
December 20, 2024 11:01 ET (16:01 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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