JPMorgan Chase Weighs Legal Action Against CFPB

JPMorgan Chase announced on Friday that it is considering legal action against the U.S. Consumer Financial Protection Bureau (CFPB) in reply to the agency’s inquiries into the Zelle payment app.

The bank disclosed in a filing that it is currently responding to CFPB queries regarding Zelle. Since its launch in 2017, Zelle has become the leading U.S. peer-to-peer payment network. It is owned by seven major banks, including JPMorgan and Bank of America.

Concerns Over Fraud and Scams:

The rise in fraud and scams on Zelle has attracted attention from U.S. lawmakers, including Democratic Senator Elizabeth Warren, and regulators focused on consumer protection. JPMorgan stated that the CFPB has given it options to pursue a settlement or face an enforcement action. “The firm is evaluating next steps, including litigation,” JPMorgan said in the filing.

A spokesperson for JPMorgan emphasized that the bank already exceeds legal requirements by reimbursing customers for all unauthorized transactions and certain types of scams. “The CFPB is fully aware we already go above and beyond what the law requires,” the spokesperson said. “The CFPB should expect to be challenged to ensure their actions stay within the bounds of the law.” The CFPB declined to comment on the matter.

Reimbursement Rates and Federal Rules:

A U.S. Senate committee report indicated that the percentage of combined consumers reimbursed for disputed transactions as fraud fell to 38% in 2023 across JPMorgan, Bank of America, and Wells Fargo, down from 62% in 2019.

Federal rules mandate that banks reimburse customers for unauthorized payments, such as when their accounts are hacked. However, banks have sometimes resisted reimbursing customers tricked into making the payments themselves.

JPMorgan CEO Jamie Dimon has previously argued that it is unreasonable to require banks to refund transfers resulting from scams in which customers were deceived into approving payments. Banks contend that covering the cost of such scams would encourage more fraud and potentially result in billions of dollars in losses.

Zelle’s Market Presence:

More than 100 million people can access Zelle through their U.S. bank accounts, highlighting the app’s significant market presence. As JPMorgan evaluates its next steps, the potential for litigation against the CFPB underscores the ongoing tensions between major banks and regulators over consumer protection in the digital payment.