Three of the biggest US banks are facing a lawsuit for ‘widespread fraud’ on Zelle

Consumer Financial Protection Bureau (CFPB) A lawsuit has been filed Targeting Zelle and the three banks it owns – Wells Fargo, Bank of America and JPMorgan Chase – claiming they failed to “protect consumers from widespread fraud.” Zelle is a payments network that aims to compete with payment platforms like Venmo and Cash App, but CFPB stands for bank The “rush” to market led to fraud, costing consumers more than $870 million Since its launch in 2017.

The lawsuit cites Zelle’s design and functionality, including a “limited” authentication process that involves assigning a user’s email address or mobile phone number a “token” that they can use to verify their identity with a one-time password. account. The CFPB said this setup makes it easier for scammers to take over accounts and hide their identity or impersonate another institution.

The CFPB accused Zelle and the bank trio of failing to track and quickly stop criminals on the platform because they allegedly failed to forward information about known fraudulent transactions to other institutions in the payment network. It also claims that Bank of America, JPMorgan Chase and Wells Fargo failed to adequately address fraud risks despite receiving “hundreds of thousands” of complaints.

Zelle dismisses lawsuit statement issued on friday. “The CFPB’s attack on Zelle is legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors that have nothing to do with Zelle,” Zelle spokesperson Jane Khodos said. “The CFPB’s misleading attack will embolden criminals.” “We’ve made it harder for thousands of community banks and credit unions to compete by burdening consumers with more costs.”

The CFPB asked the court to stop Zelle’s parent company Early Warning Services and banks from violating consumer protection laws and to compensate users and other penalties.