PROVIDENCE – A federal agency is suing JPMorgan Chase Bank N.A., Wells Fargo Bank N.A. and Bank of America N.A., accusing the banks of failing to protect consumers from fraud on the widely available peer-to-peer payments network Zelle.
Early Warning Services LLC, the operator of Zelle, is also named as a defendant in the lawsuit.
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The Consumer Financial Protection Bureau says Early Warning Services and the three of Zelle’s owner banks – JPMorgan Chase, Wells Fargo and Bank of America – rushed the network to market to compete with similar apps such as Venmo and CashApp without installing effective safeguards against fraud.
The bureau said customers of the three banks have lost more than $870 million to fraud over the network’s seven-year existence.
In addition, the CFPB lawsuit, filed on Dec. 20, accused the banks of largely denying assistance to consumers who filed fraud complaints, with some being told to contact the fraudsters directly to attempt to get their money back.
The lawsuit says the three banks did not properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors.
CFPB says it seeks to get the banks to act on fraud complaints, provide compensation to affected consumers and pay a civil penalty.
“The nation’s largest banks felt threatened by competing payment apps, so they rushed to put out Zelle,” CFPB Director Rohit Chopra said in a statement. “By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves.”
Bank of America Corp. is the second-largest bank operating in Rhode Island by deposit market share and has 25 branches. JPMorgan Chase Bank is ranked No. 11 in deposit market share in Rhode Island and has 15 locations.
Zelle is available on apps offered free by some of the largest banks operating in Rhode Island, including Citizens Bank, Santander Bank, Bank Rhode Island, BankNewport, Centreville Bank and TD Bank.
It’s also offered by several credit unions, including Coastal1 Credit Union.
Bank of America said it strongly disagreed with the lawsuit, which it said would add “huge new costs” on banks and credit unions offering the free Zelle service to clients. It said more than 99.95% of transactions across the Zelle network go through without incident.
“When a client has an issue, we work directly with them,” the bank based in Charlotte, N.C., said.
In a statement, New York-based JPMorgan said the CFPB was “overreaching its authority by making banks accountable for criminals.”
San Francisco-based Wells Fargo declined to comment on the lawsuit.
Early Warning called the lawsuit “legally and factually flawed.”
“Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law,” the company said.
With reports from The Associated Press.
