The Zelle scandal: why Bank of America, JPMorgan and Wells Fargo were sued

Founded in 2016 by seven of the United States’ largest banks, including Bank of America, JPMorgan and Wells Fargo, Zelle has become one of the most popular banking apps in the U.S. thanks to its simplicity, with money able to be transferred almost instantaneously by entering only a contact’s mobile phone number or email address.

Millions of users therefore were therefore hugely concerned by the news that the Consumer Financial Protection Bureau (CFPB) had filed a lawsuit against Bank of America, JPMorgan and Wells Fargo last December because of Zelle. The suit, however, has now been dropped.

The reason Bank of America, JPMorgan and Wells Fargo were sued

The CFPB had accused the banks of failing to protect their customers from widespread fraud on the Zelle electronic payment system. The claim was that Bank of America, JPMorgan and Wells Fargo customers had lost a substantial amount of money since Zelle’s launch in 2017, had not been provided with any assistance and, in some cases, had even been told to “contact the scammers directly to recover their money.”

“The nation’s largest banks felt threatened by competing payment apps, so they rushed to launch Zelle. By not implementing proper safeguards, Zelle became a goldmine for scammers, often leaving victims to fend for themselves,” claimed CFPB Director Rohit Chopra, who was recently fired by U.S. President Donald Trump.

CFPB drop Zelle lawsuit after Trump changes

The banks emphatically denied the allegations, calling them “legally and factually flawed,” and the CFPB dropped the suit at the beginning of March, without offering an explanation. Several other suits which were filed by the bureau under Chopra, including ones against Capital One, Rocket Homes and Vanderbilt Mortgage and Finance, have also been withdrawn.

Under new acting director Russell Vought, the CFPB has closed offices and attempted to fire hundreds of employees, a move that was blocked by a federal judge.

Since Trump’s return to the Oval Office in January, federal agencies have pulled back significantly on enforcement actions taken by the previous administration.

How safe is it to send money with Zelle?

In general, Zelle is considered a secure way to send money because transactions don’t require you to share confidential financial information. Even so, it’s a good idea to enable authentication and monitoring features to help ensure all payments are properly authorized.

That said, Zelle is best used for sending money to people you know and trust.

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