$870 Million in Fraud Losses Get’s America’s Largest Banks Clapped with Lawsuits…Ooof

Well, well, well—looks like the CFPB just went full Jerry Springer on America’s Big Three banks and their payments lovechild, Zelle. Bank of America, JPMorgan Chase, and Wells Fargo (because of course Wells Fargo is in the mix) are being dragged to court for allegedly letting fraud run wild on Zelle like Jordan Belfort himself has been running it. 

(Source: NBC News) 

The Consumer Financial Protection Bureau—aka the financial world’s hall monitor—claims the banks and Zelle’s operator, Early Warning Services, dropped the ball on safeguarding users. How bad is it? Try $870 million in fraud losses over seven years bad. Live view of me, who uses Zelle right now: 

(Source: Giphy) 

In short, according to the  CFPB Director Rohit Chopra, the banks freaked out when apps like Venmo and Cash App started eating their lunch. But the mistake was that their reaction was to slap Zelle together faster than a McDonald’s drive-thru order—and apparently with the same level of care (a.k.a. none). 

The CFPB came out swinging, claiming that there have been numerous fraudsters opening up accounts like they were signing up for a free trial of Netflix—with repeat offenders having a warm welcome back at any given time. All they had to do was change their name (with no due diligence on the Banks part), and boom, they were back in the game.

(Source: Giphy) 

What’s more, is that as customers began complaining about scams, the banks were ultimately telling them to “handle it themselves”---as if calling the scammer and saying “Can I have my money back please” was the most effective solution LOL. The worst part? The banks treated fraud complaints like spam emails. Straight to the bin.

Now honestly, I feel slimy just typing all that out, so I can’t imagine how the “decent” employees that actually work for these banks feel. Especially considering victims were often denied refunds. However, without hesitation, Zelle isn’t taking this lying down. Spokesperson Jane Khodos called the lawsuit “misguided” and “politically motivated.” She even claimed Zelle is leading the fight against fraud. (Uhhh ok).

(Source: CNN) 

Additionally, Zelle also disputed the CFPB’s math, saying not all fraud claims are legit. Sometimes, people authorize sketchy transactions and regret it later—with Zelle saying it reimburses customers in certain cases—above and beyond the law, they swear. Meanwhile, JPMorgan Chase chimed in to call the lawsuit “regulation by enforcement” and accused the CFPB of overreach. 

So yeah, this is a massive clusterf**k in the making here. But the bottom line is that this lawsuit has everything for it: giant banks, a vigilante regulator, and $870 million in alleged losses. Now whether this case sticks or becomes a political sh*t show depends on who’s running the CFPB after the next election. But for now? Zelle’s PR team is probably wishing fraudsters weren’t their most loyal power users.

Milli Vanilli, if you know you know… (Source: Giphy) 

In the meantime, while these big banks figure their messes out (all at the expense of peasant consumers like you and I), keep snapping necks and cashing checks—just don’t do it on Zelle. As always, stay safe and stay frosty, friends! Until next time… 

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Stocks.News holds positions in Netflix and McDonalds as mentioned in the article.