CFPB Files Lawsuit Against Major U.S. Banks for Allowing Fraudulent Activity on Zelle

The Consumer Financial Protection Bureau is suing America’s three largest banks and Zelle’s official operator, Early Warning Services LLC, for allegedly failing to protect customers from fraud on the Zelle payment platform. The suit claims that Zelle users have lost over $870 million due to the banks’ failures in implementing proper safeguards, such as poor identity verification methods and allowing repeat offenders to access the platform. The CFPB is seeking changes to Zelle’s operations and a civil money penalty to be paid into a victims relief fund. Zelle has defended its platform, calling the lawsuit misguided and politically motivated, and claiming to have industry-leading reimbursement policies. The banks have also criticized the CFPB’s actions as overreaching and jeopardizing the value of Zelle as a trusted payments service. Despite criticism, Zelle states that reports of scams and fraud have decreased significantly, with the majority of payments being sent without issue. The CFPB’s actions come as it faces threats to its existence from the incoming Trump administration, and follows complaints from Senate Democrats about the platform’s handling of fraud and scams.

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