Federal regulatory body, the Consumer Financial Protection Bureau, files lawsuits against JPMorgan, Bank of America, and Wells Fargo, alleging misconduct related to their use of the digital money transfer service, Zelle.
Zelle Fraud Investigation: CFPB Drops Lawsuit Against Major Banks
In a significant turn of events, the Consumer Financial Protection Bureau (CFPB) has dropped its lawsuit against Early Warning Services and its three largest bank owners—JPMorgan Chase, Bank of America, and Wells Fargo—alleging failure to protect consumers from fraud on the Zelle platform.
The lawsuit, which was closed with prejudice, means it cannot be refiled by the CFPB. However, the issue continues to be a focus of congressional inquiry and regulatory scrutiny.
The CFPB's investigation had earlier cited approximately $870 million in consumer losses linked to Zelle's insufficient fraud safeguards. Despite the dismissal, this figure remains a concern, with complaints related to payment scams on Zelle surging dramatically in 2025. Over 29,000 consumer complaints were filed with the CFPB in the first half of the year, a significant increase from the prior year.
The CFPB had alleged that the banks and Early Warning Services violated the Consumer Financial Protection Act's prohibition on unfair acts or practices. However, Early Warning Services called the lawsuit "meritless" and claimed it would harm consumers, small businesses, and community banks while empowering fraudsters.
The investigation, which has been underway for years, revealed two major patterns of account takeover fraud that the banks failed to address. These included criminals obtaining one-time passcodes to take over accounts and sending funds, and criminals stealing phones and making unauthorized transfers.
The banks were also accused of routinely denying requests for help when customers provided clear evidence that their accounts had been taken over and that transactions were unauthorized.
In response to the CFPB's action, Democratic senators Elizabeth Warren, Richard Blumenthal, and Representative Maxine Waters sent letters to the banks that own Early Warning Services, including JPMorgan Chase, requesting updates on how they monitor and address fraud on Zelle. JPMorgan Chase announced in February 2025 it would stop approving Zelle payments originating from social media platforms like Facebook, reflecting efforts to combat scams.
Despite the dismissal of the lawsuit, the CFPB's senior official has stated that they will take action where they see violations of law. Sen. Elizabeth Warren has urged the CFPB to bolster and clarify Regulation E, which governs when banks must repay harmed customers.
Meanwhile, the four banks not mentioned in the suit—PNC, U.S. Bank, Truist, and Capital One—were not probed by the Senate Permanent Subcommittee on Investigations this year.
A Bank of America spokesperson disagrees with the CFPB's effort to impose huge new costs on the banks offering the free Zelle service to clients. JPMorgan Chase's spokesperson criticizes the CFPB for its "last ditch effort" in pursuit of a "political agenda," stating that the CFPB is now overreaching its authority by making banks accountable for criminals.
The National Consumer Law Center praises the CFPB's action, calling it a crucial step in holding system operators accountable for enabling fraudulent and unauthorized payments.
In conclusion, while the CFPB no longer pursues the lawsuit against these banks and Early Warning Services, regulatory oversight and congressional attention on Zelle fraud remain active. Lawmakers continue to push for improved protections, with Sen. Elizabeth Warren urging the CFPB to bolster regulations and clarify the rules for when banks must reimburse customers for fraudulent transactions.
- The Consumer Financial Protection Bureau (CFPB) has dropped a lawsuit against Early Warning Services, JPMorgan Chase, Bank of America, and Wells Fargo, accusing them of failing to protect consumers from Zelle fraud.
- The dismissed lawsuit, which cannot be refilled, leaves the issue of consumer losses linked to Zelle's insufficient fraud safeguards as a focus of regulatory scrutiny and congressional inquiry.
- In 2025, consumer complaints related to payment scams on Zelle surged dramatically, with over 29,000 complaints filed with the CFPB in the first half of the year.
- The CFPB investigated the banks and Early Warning Services for violating the Consumer Financial Protection Act and for their failure to address patterns of account takeover fraud on the Zelle platform.
- Meanwhile, lawmakers such as Sen. Elizabeth Warren are urging the CFPB to bolster Regulation E, which governs when banks must reimburse harmed customers, and to take action where they see violations of law.
- The National Consumer Law Center has praised the CFPB's action, calling it a crucial step in holding system operators accountable for enabling fraudulent and unauthorized payments, while bank spokespersons have criticized the CFPB for overreach and a political agenda.
