02:59 PM EST, 12/20/2024 (MT Newswires) -- The US Consumer Financial Protection Bureau sued JPMorgan Chase ( JPM ) , Bank of America ( BAC ) , and Wells Fargo ( WFC ) for not being able to protect consumers against alleged "widespread fraud" on the Zelle payments network.

The lawsuit also named Zelle operator Early Warning Services as a defendant. Zelle is co-owned by seven banks, including JPMorgan ( JPM ), Bank of America ( BAC ) and Wells Fargo ( WFC ).

The consumer watchdog alleged that the defendants breached federal law through various "critical failures." The Zelle platform's identity verification methods are "limited," leaving the door open to scammers, the CFPB said Friday. The defendants were too slow to restrict and track bad actors as they "exploited multiple accounts" across Zelle, the watchdog added. The banks failed to properly probe complaints or provide legally required reimbursement for fraud and errors, according to the statement.

"The nation's largest banks felt threatened by competing payment apps, so they rushed to put out Zelle," CFPB Director Rohit Chopra said in the statement. "By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves."

The three banks' customers have lost more than $870 million since Zelle's launch in 2017 due to the failures, according to the CFPB. The watchdog said it is seeking redress and penalties.

"As a last-ditch effort in pursuit of their political agenda, the CFPB is now overreaching its authority by making banks accountable for criminals, even including romance scammers," a JPMorgan ( JPM ) spokesperson said in a statement e-mailed to MT Newswires. "Rather than going after criminals, the CFPB is jeopardizing the value and free nature of Zelle."

Bank of America ( BAC ) and Wells Fargo ( WFC ) didn't respond to MT Newswires' requests for comment.

A Zelle spokesperson said it will defend the "meritless" lawsuit by the CFPB.

"The CFPB's attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle," the spokesperson said in remarks published on the platform's website. "The CFPB's misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses and make it harder for thousands of community banks and credit unions to compete."

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