FILE PHOTO: Office of Management and Budget (OMB) Acting Director Russell Vought testifies before House Budget Committee on 2020 Budget on Capitol Hill in Washington, U.S., March 12, 2019.
Yuri Gripas | Reuters
The Consumer Financial Protection Bureau on Tuesday dismissed its lawsuit against the operator of the Zelle payments network and the three U.S. banks that dominate transactions on it.
The CFPB sued Early Warning Services, which runs the peer-to-peer payments network, as well as JPMorgan Chase, Bank of America and Wells Fargo in December, alleging that the firms failed to properly investigate fraud complaints or give victims reimbursement.
The CFPB “dismisses this action against Defendants Early Warning Services, LLC, Bank of America, N.A., JPMorgan Chase Bank, N.A., and Wells Fargo Bank, N.A., with prejudice,” the regulator said in its filing.
Since Acting Director Russell Vought has taken over the CFPB, the agency has dropped at least a half dozen cases brought by his predecessor, Rohit Chopra. The agency is now embroiled in a legal battle after a union representing CFPB employees sued to halt mass firings and the purging of data that would’ve happened under Vought and Elon Musk’s Department of Government Efficiency.
The CFPB said customers of the three banks have lost more than $870 million since the launch of Zelle in 2017. The service was launched to provide bank customers an alternative to peer-to-peer platforms including PayPal. Last year Zelle crossed $1 trillion in total volumes, which it said was the most ever for a peer-to-peer platform.
Since the recent cases were dismissed with prejudice, the CFPB has agreed to never bring these claims again, shutting off the possibility of clawing back funds for consumer relief, former head of enforcement Eric Halperin told CNBC last week.
“Banks have consistently followed the law in offering services through Zelle,” Lindsey Johnson, president of the Consumer Bankers Association, said in a statement after the dismissal. “In a time when fraud and scam activity is surging … 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.”
