The Consumer Financial Protection Bureau has dropped its lawsuit against the operator of peer-to-peer payment network Zelle and three big banks that use it.
The lawsuit, filed in December, accused Zelle’s parent company, Early Warning Services, along with JPMorgan Chase, Bank of America, and Wells Fargo of improperly handling fraud complaints and denying victims reimbursement, per CNBC. In a filing on Tuesday, the CFPB announced the dismissal of the case “with prejudice." The agency under the Trump administration has dropped other Biden-era cases in a similar manner and agreed to not pursue them again, making it unlikely that victims will see their funds recovered, former CFPB head of enforcement Eric Halperin told CNBC.
Lindsey Johnson, president of the Consumers Bankers Association, said in a statement that "banks have consistently followed the law in offering services through Zelle."
“In a time when fraud and scam activity is surging ... we look forward to moving past finger-pointing and political grandstanding and instead working constructively with policymakers to counter the root causes of these threats," Johnson said.
Originally launched as an alternative to PayPal and Venmo, Zelle has quickly become one of the most popular payment apps, facilitating over $1 trillion in transactions.
The CFPB's lawsuit said not all of those were legitimate, and customers of JPMorgan, Bank of America and Wells Fargo who use Zelle lost a collective $870 million on the platform over the last seven years. When fraud victims reached out for assistance, the banks were largely unhelpful, the CFPB alleged; in some cases, victims were told to simply ask for their money back from the scammers.
The decision to drop the case comes as the CFPB, now led by White House budget director Russell Vought, has dropped multiple enforcement actions and faces internal upheaval over mass firings.
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