The Consumer Financial Protection Bureau announced that it dropped its lawsuit against Zelle, Wells Fargo, and other major banks that alleged the companies of failing to protect consumers from widespread fraud.
In its dropped lawsuit, the CFPB claimed that hundreds of thousands of consumers filed fraud complaints to Wells Fargo, JP Morgan, and Bank of America and were denied help, with many being told to contact the fraudsters directly to recover their money. The major banks were alleged of failing to properly investigate the customer complaints and failing to reimburse such their customers for valid fraud claims.
The lawsuit originated from a investigation in 2021. The investigation found that three of the nation’s largest banks allegedly “rushed to launch a payment system without implementing basic protections for their customers.” As a result, “Defendants failed to take steps to ensure consumers were protected from fraud, while nevertheless marketing Zelle as safe and secure.”
This lawsuit was originally brought under the leadership of former CFPB Director Rohit Chopra. Chopra, who was appointed during the Biden administration, was fired in February, weeks after the commencement of the Trump administration. “This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses,” according to former CFPB Director Rohit Chopra said at the time. “These banks broke the law by running a payment system that made fraud easy, and then refusing to help the victims.”
Although the CFPB sought to hold those who failed to protect consumers from fraud accountable, its dismissal of the case has gathered much support. “Banks have and consistently do follow the law in offering services through Zelle,” Consumer Banks Association President and CEO Lindsey Johnson said. “In a time when fraud and scam activity is surging across industries and government alike, we look forward to moving past finger-pointing and political grandstanding and, instead, working constructively with policymakers to counter the root causes of these threats.”
This dropped lawsuit is the latest in a series of voluntary dismissals by the CFPB, which recently withdrew several cases against companies like Capital One and Rocket Homes. All of these lawsuits were initially filed during Chopra’s tenure as CFPB Director.
The CFPB has been rapidly dismantled in a matter of weeks, with employees ordered to halt nearly all work, approximately 150 staff members dismissed, and the bureau’s D.C. headquarters closed. This comes at a time in which President Trump has explicitly expressed his goal in shrinking the agency. 