The US Consumer Financial Protection Bureau has filed a lawsuit against Zelle and four of its partner banks

On Friday, the Consumer Financial Protection Bureau (CFPB) issued… File a lawsuit against Four financial companies are involved with Zelle. CFPB lawsuit (via CNBC) accuses the operator of Zelle (Early Warning Services) and three of the service’s partner banks – JPMorgan Chase, Bank Of America and Wells Fargo – of failing to protect consumers from widespread fraud in the peer-to-peer payment system.

The CFPB says customers of those three banks lost more than $870 million during Zelle’s run Seven years as a payment service. The lawsuit alleges that hundreds of thousands of customers who filed fraud complaints were denied meaningful assistance, with some being told to “contact the scammers directly to get their money back.” (Pro tip: Don’t do it.)

“The nation’s largest banks felt threatened by competing payment apps, so they rushed to roll out Zelle,” CFPB Director Rohit Chopra said. books In a statement. “By failing to put proper safeguards in place, Zelle has become a goldmine for scammers, while often leaving victims to fend for themselves.”

One loophole in the system, the CFPB says, is that “tokens” (linked U.S. phone numbers or email addresses) can be used and reallocated across different banks. The agency claims scammers can exploit this by linking a victim’s number or email to the perpetrator’s deposit account, causing payments intended for the consumer to be diverted to the scammer’s account instead.

The lawsuit accuses Zelle and the banks of allowing repeat offenders to move between financial institutions with impunity. “The banks did not share information about known fraudulent transactions with other banks on the network,” the CFPB wrote. “As a result, bad actors can execute repeated fraud schemes across multiple organizations before they are discovered, if they are discovered at all.”

The CFPB also alleges that the defendant banks did not respond to red flags to prevent further fraud, report incidents consistently or timely, properly investigate customer complaints or take appropriate action.

On Friday, Zell portrayed the government’s lawsuit as a political hit that would help criminals and force them to charge. “The CFPB’s attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle,” Jane Khudos, a Zelle spokeswoman, wrote in a statement. statement. “Zelle leads the fight against scams and fraud and has industry-leading payment policies that go beyond the law. The CFPB’s misleading attacks will embolden criminals, cost consumers more in fees, stifle small businesses and make it difficult for thousands of community banks and credit unions to compete.”

In September, JPMorgan Chase books In quarterly file (trans CNBC) that it would consider filing a countersuit if the CFPB takes action against the bank because of its role with Zelle.

last month, The Washington Post I mentioned President-elect Donald Trump and Republicans in Congress plan to limit the CFPB’s funding and powers, in line with the agendas of large financial institutions. Elon Musk and Vivek Ramaswamy, his “government efficiency” advisers, have said they want to abolish the agency, which was established in 2011 in response to the 2007-2008 financial crisis and resulting recession.

Repealing the agency would require a vote in Congress, which is unlikely to pass, given the slim Republican majority. But they could do what Trump did in his first term: appoint a new director to effectively slow or stop regulatory action Knees Agency as long as they are responsible.