Last year, the Consumer Financial Protection Bureau (CFPB) sued EWS (which operates Zelle payments) along with the major bank owners – Bank of America, JPMorgan Chase, and Wells Fargo. According to a statement published by the CFPB at the time, the operators failed to protect consumers from Zelle fraud perpetrated on their payment platform.
CFPB, which is a government agency with the main goal of protecting consumer interests by offering financial protection, said in a statement published on its website that customers using banking services from the said operators have lost over $870 million to fraud. This data shows records since the inception of Zelle, seven years ago. In the lawsuit filed by the CFPB, the agency alleged that Zelle and its banking partners failed to implement any solid measures to safeguard consumers from fraud.
But in the recent turn of events, CFPB has dropped its lawsuit. The agency submitted a brief, one-page document formally dismissing the complaint with prejudice, permanently preventing it from being refiled. In the second half of February alone, the CFPB has withdrawn at least seven lawsuits initiated under the Biden administration, including cases involving Rocket Homes, Capital One, and TransUnion.
Key Takeaways
- The Consumer Financial Protection Bureau has officially dismissed its lawsuit, with prejudice, against Early Warning Services (which operates Zelle), JPMorgan Chase, Bank of America, and Wells Fargo. This means the claims cannot be refiled.
- Since acting Director Russell Vought took over the CFPB, the agency has dropped at least seven lawsuits initiated under the Biden administration. These actions are part of broader changes to the agency’s direction and structure under the current leadership.
- The CFPB lawsuit alleged negligence in protecting consumers from fraud on the Zelle payment platform. The lawsuit highlighted nearly $870 million in consumer losses since Zelle’s launch in 2017, citing failures in fraud prevention, identity verification, and customer support.
- The lawsuit accused the defendants of violating the Electronic Fund Transfer Act and Regulation E by failing to adequately safeguard consumers. Banks, however, argued against the claims, describing the regulatory action as politically motivated and exceeding CFPB’s authority, with Zelle asserting that it employs leading fraud prevention measures.
- During that period, consumer protection groups supported CFPB’s focus on addressing systemic fraud issues, while the Consumer Bankers Association (CBA) defended the banks, highlighting Zelle’s comparatively lower fraud rates and criticizing the CFPB for what it deems an overly broad regulatory approach.
- The dismissals have sparked backlash from former officials and consumer advocates, who warn that the move may undermine efforts to hold financial institutions accountable and recover funds for defrauded customers. A CFPB employee union is now suing to block what it sees as the agency’s dismantling.
Consumer Watchdog Withdraws Zelle Fraud Case, Closing Door on Key Recovery Option
On March 4, 2025, the Consumer Financial Protection Bureau (CFPB) filed a notice in federal court signaling it was dropping the high-profile lawsuit it brought in December against JPMorgan Chase, Bank of America, and Wells Fargo over fraud on the Zelle peer-to-peer payments network. That December complaint, initiated by then-Director Rohit Chopra in the waning days of the Biden administration, accused the three banks—and Zelle’s operator, Early Warning Services – of failing to protect consumers from hundreds of millions of dollars in scam losses. The abrupt withdrawal marks one of at least seven Biden-era enforcement actions the agency has now abandoned under the Trump administration’s new leadership.
Zelle, launched in 2017 by Early Warning Services—a consortium controlled by seven major banks, including the defendants in this suit—quickly became one of the foremost U.S. person-to-person payment platforms. In 2024 alone, consumers and small businesses moved roughly $1 trillion over Zelle, a 27 percent jump from the prior year, and completed some 3.6 billion transactions across 151 million enrolled accounts. Despite its popularity, the CFPB alleged that Zelle’s rapid roll-out lacked the necessary safety features to stop fraudsters from exploiting the network.
In its original filing, the CFPB charged that, in a rush to compete with apps such as PayPal’s Venmo and Block’s Cash App, EWS and its bank owners “rushed to put out Zelle” without implementing proper consumer safeguards. Over seven years, customers of the named banks reportedly lost $870 million to scams on the platform, and hundreds of thousands of fraud complaints were either inadequately investigated or outright denied. Some victims were allegedly told to contact the scammers directly to seek reimbursement—a stark contravention of norms under the Electronic Fund Transfer Act.
The CFPB’s March 4 filing was notably terse—just one page—and dismissed the complaint “with prejudice,” meaning it cannot be revived in the future. This move follows a broader pullback: in recent weeks, the bureau has dropped suits against Capital One, Rocket Homes, TransUnion, and Vanderbilt Mortgage & Finance, among others. Many other pending cases initiated under Chopra have been paused, leaving a swath of consumer-protection actions in limbo.
These developments unfolded amid a sweeping reorganization of the CFPB under the Trump administration. President Trump ordered the bureau to halt nearly all its work, shutter its headquarters, and seek mass firings of career staff—measures that agency officials contend would violate federal law. In addition, Office of Management and Budget Director Russ Vought, serving as Acting CFPB Director, publicly decried prior litigation as a “weaponization of ‘consumer protection’” and has overseen the cancellation of multiple enforcement actions. Employee unions and consumer-advocate groups have already filed suit to block what they view as an unlawful gutting of the agency.
Banks and industry groups greeted the suit’s dismissal with relief. Early Warning Services called the case “without merit, and legally and factually flawed,” and said it looks forward to continuing service to its 151 million account holders. JPMorgan stressed that combating fraud “requires a collective effort across the public and private sectors.” Bank of America declined to comment, while the Consumer Bankers Association noted that its members have “consistently followed the law” and urged policymakers to focus on underlying causes rather than assign blame.
For consumers who lost money to fraud on Zelle, the dismissal eliminates one avenue for relief. Because the dismissal is with prejudice, those defrauded cannot return to this particular suit to recover funds. Instead, they must rely on voluntary bank reimbursement policies or future regulatory rule-making, though with the CFPB’s enforcement arm in retreat, even those prospects appear uncertain. The retreat is not limited to the CFPB: the Securities and Exchange Commission has also paused or closed several high-profile cryptocurrency cases, signaling a broader pullback in federal financial oversight.
This episode is emblematic of a larger shift in U.S. financial regulation. Under former Director Chopra, the CFPB pursued a robust agenda of consumer-protection litigation, targeting an array of financial and fintech firms. Now, nearly all of those suits have been halted or dismissed, dramatically lowering the regulatory risk for large banks while raising questions about the future of consumer safeguards in the payments space. Should fraud losses continue to mount, state attorneys general or Congress itself may feel compelled to step in.
The CFPB’s decision to drop the Zelle lawsuit against JPMorgan Chase, Bank of America, and Wells Fargo underscores how swiftly enforcement priorities can be upended by a change in administration. As peer-to-peer networks proliferate and digital payment volumes climb, the adequacy of voluntary industry safeguards—and the willingness of regulators to enforce them—will remain under scrutiny. For now, Zelle’s users will have to trust that platforms and banks will shoulder more responsibility for stopping fraud, even as the federal watchdog steps back from its most aggressive tools.
On March 4, 2025, the Consumer Financial Protection Bureau (CFPB) filed a notice in federal court signaling it was dropping the high-profile lawsuit it brought in December against JPMorgan Chase, Bank of America, and Wells Fargo over fraud on the Zelle peer-to-peer payments network. That December complaint, initiated by then-Director Rohit Chopra in the waning days of the Biden administration, accused the three banks—and Zelle’s operator, Early Warning Services – of failing to protect consumers from hundreds of millions of dollars in scam losses. The abrupt withdrawal marks one of at least seven Biden-era enforcement actions the agency has now abandoned under the Trump administration’s new leadership.
Zelle, launched in 2017 by Early Warning Services—a consortium controlled by seven major banks, including the defendants in this suit—quickly became one of the foremost U.S. person-to-person payment platforms. In 2024 alone, consumers and small businesses moved roughly $1 trillion over Zelle, a 27 percent jump from the prior year, and completed some 3.6 billion transactions across 151 million enrolled accounts. Despite its popularity, the CFPB alleged that Zelle’s rapid roll-out lacked the necessary safety features to stop fraudsters from exploiting the network.
In its original filing, the CFPB charged that, in a rush to compete with apps such as PayPal’s Venmo and Block’s Cash App, EWS and its bank owners “rushed to put out Zelle” without implementing proper consumer safeguards. Over seven years, customers of the named banks reportedly lost $870 million to scams on the platform, and hundreds of thousands of fraud complaints were either inadequately investigated or outright denied. Some victims were allegedly told to contact the scammers directly to seek reimbursement—a stark contravention of norms under the Electronic Fund Transfer Act.
The CFPB’s March 4 filing was notably terse—just one page—and dismissed the complaint “with prejudice,” meaning it cannot be revived in the future. This move follows a broader pullback: in recent weeks, the bureau has dropped suits against Capital One, Rocket Homes, TransUnion, and Vanderbilt Mortgage & Finance, among others. Many other pending cases initiated under Chopra have been paused, leaving a swath of consumer-protection actions in limbo.
These developments unfolded amid a sweeping reorganization of the CFPB under the Trump administration. President Trump ordered the bureau to halt nearly all its work, shutter its headquarters, and seek mass firings of career staff—measures that agency officials contend would violate federal law. In addition, Office of Management and Budget Director Russ Vought, serving as Acting CFPB Director, publicly decried prior litigation as a “weaponization of ‘consumer protection’” and has overseen the cancellation of multiple enforcement actions. Employee unions and consumer-advocate groups have already filed suit to block what they view as an unlawful gutting of the agency.
Banks and industry groups greeted the suit’s dismissal with relief. Early Warning Services called the case “without merit, and legally and factually flawed,” and said it looks forward to continuing service to its 151 million account holders. JPMorgan stressed that combating fraud “requires a collective effort across the public and private sectors.” Bank of America declined to comment, while the Consumer Bankers Association noted that its members have “consistently followed the law” and urged policymakers to focus on underlying causes rather than assign blame.
For consumers who lost money to fraud on Zelle, the dismissal eliminates one avenue for relief. Because the dismissal is with prejudice, those defrauded cannot return to this particular suit to recover funds. Instead, they must rely on voluntary bank reimbursement policies or future regulatory rule-making, though with the CFPB’s enforcement arm in retreat, even those prospects appear uncertain. The retreat is not limited to the CFPB: the Securities and Exchange Commission has also paused or closed several high-profile cryptocurrency cases, signaling a broader pullback in federal financial oversight.
This episode is emblematic of a larger shift in U.S. financial regulation. Under former Director Chopra, the CFPB pursued a robust agenda of consumer-protection litigation, targeting an array of financial and fintech firms. Now, nearly all of those suits have been halted or dismissed, dramatically lowering the regulatory risk for large banks while raising questions about the future of consumer safeguards in the payments space. Should fraud losses continue to mount, state attorneys general or Congress itself may feel compelled to step in.
The CFPB’s decision to drop the Zelle lawsuit against JPMorgan Chase, Bank of America, and Wells Fargo underscores how swiftly enforcement priorities can be upended by a change in administration. As peer-to-peer networks proliferate and digital payment volumes climb, the adequacy of voluntary industry safeguards—and the willingness of regulators to enforce them—will remain under scrutiny. For now, Zelle’s users will have to trust that platforms and banks will shoulder more responsibility for stopping fraud, even as the federal watchdog steps back from its most aggressive tools.
CFPB Accused Major Banks and Zelle Operator of Negligence in Addressing Fraud Risks: A Brief Look
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On 20 December 2024, the CFPB took legal action, where the centre of the allegations in the lawsuit was that these banks and EWS failed to implement adequate measures to protect and prevent widespread fraud in the payments network. As mentioned, the figures reported (which almost touch a billion dollars) in the lawsuit showcase the drastic ignorance by the “leading” and “trusted” banks in the US. The CFPB at the time took a dig at the banks for not acting and even addressing the ongoing widespread fraud on the network, despite having the means and obligations to do so under the Electronic Fund Transfer Act and Regulation E, which require financial institutions to investigate and resolve errors in electronic fund transfers.
Rohit Chopra at the time stated that this situation involved financial institutions meeting their fundamental responsibilities to safeguard customer funds and assist fraud victims in recouping their losses. He, at the time, criticized the banks for violating the law by operating a payment system that facilitated fraud and subsequently failing to support the affected customers.
Chopra criticized the banks for favoring quick service at the expense of security. He explained that the country’s major banks, feeling the pressure from rival payment applications, quickly launched Zelle. However, their lack of adequate security measures turned Zelle into an attractive target for fraudsters.
According to the lawsuit, the said parties failed to offer standard fraud detection and protection measures, which were the direct outcome of thousands of consumers losing millions of dollars since the launch of Zelle in 2017. The lawsuit highlighted these key lapses:
- Failure to Track and Restrict Fraudsters: The lawsuit criticized Early Warning Services and the defendant banks for not acting swiftly to restrict and track criminals exploiting the system. It was noted that banks did not share information about known fraudulent transactions, allowing repeat offenders to exploit multiple institutions.
- Inadequate Identity Verification: The CFPB claimed that Zelle’s limited identity verification methods allowed fraudsters to easily create accounts and target users, linking victims’ tokens to fraudulent accounts and redirecting intended payments.
- Neglecting Red Flags: Despite numerous fraud complaints, the banks reportedly failed to use this information effectively to prevent further fraudulent activities and did not consistently report fraud incidents as required by the Zelle Network’s rules.
- Inadequate Consumer Support: The banks were also accused of failing to properly investigate and resolve customer complaints about fraud, which is required under the Electronic Fund Transfer Act and Regulation E.
The CFPB’s legal action aimed to stop these unlawful practices, secure redress for affected consumers, and impose penalties against the institutions involved. The agency had been investigating payment networks like Zelle since 2021 to address these systemic issues.
Zelle, in response to the lawsuit back then, had defended its practices, stating that the lawsuit’s claims were baseless and asserted that the platform has industry-leading fraud prevention measures in place. The company argued that the legal action is politically motivated and not based on factual evidence of the network’s operations.
Zelle had expressed its readiness to robustly challenge what it describes as an unfounded lawsuit. In its defense, Zelle claimed that the allegations made by the CFPB are both legally and factually incorrect, suggesting that the lawsuit’s timing might be influenced by political motivations that do not pertain to the company’s operations.
Whereas, EWS also at the time criticized the CFPB’s actions, claiming they could unintentionally support criminal activities, increase consumer fees, hinder small businesses, and challenge the competitive ability of many community banks and credit unions.
In its statement to counter the lawsuit, Bank of America reported that over 99.95% of Zelle transactions are completed without any problems, criticizing the CFPB’s attempts to introduce substantial new costs for the more than 2,200 banks and credit unions that provide Zelle services to their customers at no extra charge.
Additionally, JPMorgan Chase had at the time accused the CFPB of exceeding its regulatory authority by holding banks responsible for the actions of criminals, including those involved in romance scams. The bank described this move as a clear case of “regulation by enforcement,” arguing that it bypasses the standard rulemaking process, which typically guides such regulatory actions.
Consumer Banking Association Defending Banks
The Consumer Bankers Association (CBA) at the time had openly expressed its concerns regarding the Consumer Financial Protection Bureau’s (CFPB) regulations on digital payments. The association back then had specifically pointed out the CFPB’s oversight as overly broad, surpassing what they considered to be the legislative boundaries set by Congress. They particularly highlight the CFPB’s scrutiny of Zelle, a payment platform operated by banks, noting that it recorded fewer fraud cases than other platforms.
The CBA acknowledged the importance of consumer protection but suggested that the CFPB’s regulatory path might be unnecessarily stringent and not aligned with legislative intentions.
In a statement released at that time, CBA President Lindsey Johnson emphasized the banking industry’s commitment to safeguarding customers against fraud, pointing out that combating such threats requires a collective effort beyond just the banking sector. Johnson also criticized the CFPB for its focus on a bank-owned platform, which, he noted, reports significantly fewer fraud incidents than other platforms, suggesting that the CFPB’s approach may be unfairly targeted.
Additionally, the CBA had underscored its proactive steps towards securing customer transactions, which include implementing multi-factor authentication, chip-enabled cards, and AI-driven technology to identify and mitigate fraud risks. They stress the need for a multi-sector effort to effectively combat fraud, extending beyond just the financial industry to include cooperation from government bodies and other sectors.
Communications from the CBA at the time advocated for a regulatory approach that avoids placing undue burdens on bank-owned payment systems and promotes cooperative regulatory development that includes significant input from the financial sector. They sought a more equitable regulatory framework that does not hinder bank-operated services while still maintaining robust consumer protections.
About Bank of America
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Bank of America, N.A. is a subsidiary of Bank of America Corporation, with its main office in Charlotte, North Carolina. This significant financial institution provides a broad array of banking, investment, asset management, and risk management products and services. It manages around 3,700 retail financial centers and 15,000 ATMs across the U.S., and it supports 58 million digital users.
On an international scale, it serves corporations, governments, and individual clients, and it plays a key role in wealth management, corporate, and investment banking. As of mid-2024, Bank of America reported more than $2.5 trillion in total assets and is listed on the New York Stock Exchange under the ticker symbol NYSE: BAC. The bank serves approximately 69 million U.S. consumer and small business customers, underlining its strong influence in the financial markets both in the U.S. and globally.
About JPMorgan Chase Bank
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JPMorgan Chase Bank, N.A., a subsidiary of JPMorgan Chase & Co., is based in Columbus, Ohio, and is the largest bank in the United States. As of mid-2024, it holds more than $3.5 trillion in total assets. The bank’s operations are divided into several segments: Consumer & Community Banking, Commercial & Investment Banking, and Asset & Wealth Management. It provides a wide range of financial services, including banking, asset management, and investment services worldwide.
JPMorgan Chase is recognized for its extensive market presence and offers services to a broad spectrum of clients, including individual consumers, large corporations, and government entities, with a strong emphasis on innovation and customer service.
About Wells Fargo Bank
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JPMorgan Chase Bank, N.A., a subsidiary of JPMorgan Chase & Co., is based in Columbus, Ohio, and is the largest bank in the United States. As of mid-2024, it holds more than $3.5 trillion in total assets. The bank’s operations are divided into several segments: Consumer & Community Banking, Commercial & Investment Banking, and Asset & Wealth Management. It provides a wide range of financial services, including banking, asset management, and investment services worldwide.
JPMorgan Chase is recognized for its extensive market presence and offers services to a broad spectrum of clients, including individual consumers, large corporations, and government entities, with a strong emphasis on innovation and customer service.
About Early Warning Services
JPMorgan Chase Bank, N.A., a subsidiary of JPMorgan Chase & Co., is based in Columbus, Ohio, and is the largest bank in the United States. As of mid-2024, it holds more than $3.5 trillion in total assets. The bank’s operations are divided into several segments: Consumer & Community Banking, Commercial & Investment Banking, and Asset & Wealth Management. It provides a wide range of financial services, including banking, asset management, and investment services worldwide.
JPMorgan Chase is recognized for its extensive market presence and offers services to a broad spectrum of clients, including individual consumers, large corporations, and government entities, with a strong emphasis on innovation and customer service.
About Zelle
Zelle, managed by Early Warning Services, enables quick electronic money transfers using linked email addresses or U.S. mobile phone numbers, often referred to as “tokens.” Users have the option to link multiple tokens to various banking institutions, which allows for swift transfers between banks.
Conclusion
The CFPB’s decision to withdraw its lawsuit against JPMorgan Chase, Bank of America, Wells Fargo, and Zelle operator Early Warning Services brings a sudden halt to what was shaping up to be a significant legal battle over consumer protection in digital payments. By dismissing the case with prejudice, the agency has closed the door on any future attempts to litigate these specific claims, leaving affected consumers without a direct path to recover fraud-related losses through this action.
This move reflects broader changes underway at the CFPB under new leadership, which has rolled back several enforcement efforts initiated during the previous administration. The shift has drawn criticism from former officials, consumer advocates, and even within the agency itself, raising concerns about the agency’s long-term ability to hold large financial institutions accountable.
While Zelle and the banks involved continue to defend their fraud prevention efforts, the withdrawal of the case leaves questions about the role of federal regulators in overseeing fast-growing digital payment platforms. As fraud risks persist, the burden may now shift to states, Congress, or voluntary industry reforms to address gaps in consumer protection. For now, users of peer-to-peer payment systems are left to rely largely on the internal policies of banks and platforms—an uncertain safeguard in an environment where fraud remains a growing concern.
