JPMorgan Chase is considering taking legal action against the Consumer Financial Protection Bureau (CFPB) over an ongoing probe into the abuse of Zelle payments by scammers.
In March last year, Senate Democrats, including Elizabeth Warren, called on financial regulators to take action to tackle fraud related to the bank-owned Zelle P2P payments service.
Zelle is run by Early Warning Services, which is owned by seven of the biggest banks in the US. Launched in 2017, it has proved a huge hit, facilitating $629 billion in transactions in 2022, twice as many as its nearest competitor Venmo.
However, it has also "opened the door to fraud and scams on a tremendous scale," according to the letter from Warren and fellow senators Bob Menendez, Jack Reed, Sherrod Brown and Mark Warner to the Federal Reserve Board, FDIC, National Credit Union Administration and OCC.
"We raise these concerns about safe and sound operation of Zelle because depository institutions currently take the position that they are under no obligation under the Electronig Funds Transfer Act to make their customers whole when fraudsters use the network to steal their hard-earned money," the letter continued. "Instead, depository institutions appear to have forced their customers to foot the bill in the vast majority of these circumstances, often relying on ambiguity over whether a payment is classified as “authorized,” “unauthorized,” or an “error” to avoid reimbursing customers who have been victims of fraud."
Both Wells Fargo and JPMorgan have previously filed notice that government authorities have been conducting formal or informal inquiries or investigations regarding the handling of customer disputes.
In its recently released financial statements, JPMorgan notes the ongoing inquiries by the CFPB into the issues raised.
"JPMorgan Chase is responding to inquiries from the Consumer Financial Protection Bureau (CFPB) regarding the transfers of funds through the Zelle Network," the statement reads. " In connection with this, the CFPB Staff has informed JPMorgan Chase that it is authorized to pursue a resolution of the inquiries or file an enforcement action. JPMorgan Chase is evaluating next steps, including litigation."