Zelle, the widely used payments application often utilized for transactions such as rent payments, has been thrust into the spotlight with a lawsuit announced on Friday by the Consumer Financial Protection Bureau (CFPB).

The CFPB is initiating legal proceedings against Early Warning Services, the fintech firm owned by major banks that manages Zelle, along with JPMorgan Chase, Bank of America, and Wells Fargo. The agency asserts that customers of these financial institutions have collectively incurred losses exceeding $870 million due to fraud on Zelle since its inception seven years ago.

In a [statement](https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-jpmorgan-chase-bank-of-america-and-wells-fargo-for-allowing-fraud-to-fester-on-zelle/), the CFPB accused Zelle and its partner banks of neglecting to safeguard consumers from rampant fraud on what it labels “America’s most widely accessible peer-to-peer payment network.” The agency contends that Zelle was rushed into the market to contend with other payment services like Venmo and CashApp, without sufficient consumer protections in place.

“The nation’s largest banks perceived a threat from competing payment applications, prompting them to hastily launch Zelle,” remarked CFPB Director Rohit Chopra in the statement. “By not establishing proper safeguards, Zelle turned into a lucrative opportunity for fraudsters, often leaving victims to struggle on their own.”

A [Senate report](https://aboutblaw.com/beXw) published earlier this year indicated that banks reimbursed merely 38 percent of fraud claims submitted by Zelle users. Numerous banks decline to reimburse customers by claiming the payments were “authorized,” even if the customer was deceived into transferring funds, as they are not legally obligated to cover such losses, according to [CNBC](https://www.cnbc.com/2024/12/20/cfpb-sues-jpmorgan-chase-bank-of-america-wells-fargo-over-zelle-fraud.html).

“The banks neglected to address evident flaws in their systems even as hundreds of thousands of customers reported fraud,” Chopra conveyed to reporters on Friday, as reported by CNBC. “The banks were aware that their customers were being robbed of their money, but since they weren’t incurring the costs of these losses themselves, they were slow to rectify the issues.”

In reaction to the lawsuit, the banks and Zelle have refuted the claims. Early Warning Services labeled the lawsuit “meritless,” while a representative for JPMorgan Chase characterized it as “a last-ditch effort in pursuit of [the CFPB’s] political agenda,” according to [The Hill](https://thehill.com/business/5050661-zelle-fraud-consumer-protection-bureau/).