The news: The Consumer Financial Protection Bureau (CFPB) sued Early Warning Services (EWS) and three of its owner banks, claiming they failed to protect consumers from fraud on Zelle, per a press release.

• The CFPB claims that Bank of America, JPMorgan Chase, and Wells Fargo customers have collectively lost more than $870 million over Zelle’s seven-year existence due to the banks’ inaction.
• The agency also argued that Zelle’s limited identity verification made it easy for bad actors to create accounts; that banks didn’t share information with each other about fraudulent transactions; that they failed to investigate fraud; and that they didn’t properly reimburse consumers for fraud and errors.

The bigger picture: This is not the first time Zelle has been under fire for its fraud prevention practices.

• The Securities and Exchange Commission (SEC) looked into JPMorgan’s Zelle complaint process in February and Wells Fargo’s in May.
• And in 2023, Democratic senators asked regulators to strengthen consumer protections against Zelle.

Despite these concerns, the peer-to-peer (P2P) platform’s fraud and scam accusations may overstate the issue. Zelle reports that fraud makes up only about 0.1% of all transactions made on the platform.

Our take: The CFPB has been pushing forward its agenda ahead of President-elect Donald Trump’s inauguration, unlike other financial regulators that paused rulemaking during the transition. It is unlikely the CFPB under Trump will pursue this lawsuit, focusing on a new agenda instead.

But regardless of what happens with this lawsuit, Zelle’s continual fraud concerns may lead to longer-term reputational issues—pushing users to competitors like Cash App or Venmo. We expect the number of Zelle users to total 96.6 million in 2025, per our forecasts.

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