The CFPB claims the banks negligence leaves users unprotected
of ConsumerAffairsThe Consumer Financial Protection Bureau is suing the operator of Zelle and three of the United States' largest banksBank of America, JPMorgan Chase, and Wells Fargo. The suit charges they are failing to protect consumers from extensive fraud on the popular peer-to-peer payment network.
The lawsuit claims the alleged negligence of these financial institutions in implementing adequate consumer safeguards has resulted in over $870 million in consumer losses over Zelle's seven-year history.
Zelle called the action "meritless."
The CFPBs attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle," said Zelle spokesperson Jane Khodos.
"Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law. The CFPBs misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses and make it harder for thousands of community banks and credit unions to compete," Khodos said.
Zelle, operated by Early Warning Services and co-owned by seven major banks, was introduced to compete with other payment apps like Venmo and CashApp.
However, the CFPB claims that in their haste to launch the service, the banks neglected to establish necessary fraud prevention measures. The bureau says this oversight has turned Zelle into a lucrative tool for fraudsters, leaving many victims without recourse.
CFPB Director Rohit Chopra said the banks putcompetition over consumer safety.
Lack of proper safeguards
"The nations largest banks felt threatened by competing payment apps, so they rushed to put out Zelle," Chopra said. "By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves."
The lawsuit says hundreds of thousands of consumers have filed fraud complaints, only to be largely ignored or inadequately assisted by the banks. Some customers were even advised to contact the fraudsters directly to recover their lost funds.
The CFPB accuses the banks of failing to properly investigate these complaints or provide the legally required reimbursements for fraud and errors.
Some banks have said it is challenging to block Zelle fraud because of the way the app was designed. However, some critics have suggested banks could crack down on Zelle fraud if they shared information.
"An essential part of protecting Amerians"
In its reponse, Zelle said the CFPB "fails to acknowledge our consumer reimbursement policies that already go beyond legal and regulatory requirements." It said that despite a 27% increase in transaction volume,reports of scams and fraud decreased by nearly 50%, resulting in 99.95% of payments being sent without a report of scams and fraud.
Zelle said itreimburses customers for all instances of fraud as required by the law under the Electronic Funds Transfer Act and Reg E.
"Zelle also goes above and beyond what is required by law and reimburses customers for certain types of scams where the customer authorized the transaction," the company said.
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-12-20 19:10:10
