A federal regulator sued JPMorgan Chase, Wells Fargo and Bank of America on Friday, claiming the banks failed to protect hundreds of thousands of consumers from rampant fraud on the popular payments network Zelle, in violation of consumer financial laws.
In the federal civil complaint, the Consumer Financial Protection Bureau asserts that the banks rushed to get the peer-to-peer payments platform to market without effective safeguards against fraud and then, after consumers complained about being defrauded on the service, largely denied them relief.
"Shortly after Zelle’s launch, significant problems, including fraud being perpetrated on consumers using Zelle, quickly became apparent. But defendants did not take meaningful action to address these clear defects for years,” according to the complaint.
The CFPB claims that the banks violated federal consumer financial laws governing electric funds transfers, which require banks conduct “reasonable investigations” when consumers report transaction errors, and the agency's prohibition on unfair acts or practices by failing to take steps to prevent and address fraud on Zelle. The agency seeks an unspecified amount of money to cover refunds, damages and penalties.
“Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures,” the CFPB said.
Also named as a defendant in the lawsuit is Early Warning Services, a fintech company based in Scottsdale, Arizona, that operates Zelle. EWS is owned by seven U.S. banks, including JPMorgan, Wells Fargo and Bank of America. Those three banks are the largest financial institutions on the Zelle network, accounting for 73% of activity on Zelle last year.
Bank of America said it strongly disagreed with the lawsuit, which it said would add “huge new costs” on banks and credit unions offering the free Zelle service to clients. It said more than 99.95% of transactions across the Zelle network go through without incident.
"When a client has an issue, we work directly with them," the bank based in Charlotte, North Carolina, said.
In a statement, New York-based JPMorgan said the CPFB was “overreaching its authority by making banks accountable for criminals.”
San Francisco-based Wells Fargo declined to comment on the lawsuit.
Early Warning called the lawsuit “legally and factually flawed.”
“Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law,” the company said.
Since its launch in 2017, Zelle has become one of the most widely used peer-to-peer payment networks in the U.S., with more than 143 million users. In the first half of 2024, Zelle users transferred $481 billion across more than 1.7 billion transactions, according to the CFPB.
Options to use the Zelle payments network are seen on a Chase mobile banking app in New York on Friday, Dec. 20, 2024. (AP Photo/Patrick Sison)
NEW YORK (AP) — U.S. stocks rose to turn what would have been one of the market’s worst weeks of the year into just a pretty bad one. The S&P 500 rallied 1.1% Friday to shave its loss for the week down to 2%. The Dow Jones Industrial Average jumped nearly 500 points, and the Nasdaq composite gained 1%. A report said a measure of inflation the Federal Reserve likes to use was slightly lower last month than expected. It’s an encouraging signal after the Fed shocked markets Wednesday by saying worries about inflation could keep it from cutting interest rates in 2025 as much as earlier thought.
THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below.
NEW YORK (AP) — U.S. stocks roared back on Friday to nearly halve their losses from what was tracking to be one of the market’s worst weeks of the year.
The S&P 500 rallied 1.4% toward its best day since Election Day and shaved its loss for the week down to 1.7%. The Dow Jones Industrial Average was up 602 points, or 1.4%, with about 40 minutes remaining in trading, and the Nasdaq composite rallied 1.4%.
Superstar stock Nvidia and other Big Tech companies led the market, which got a lift after a report said a measure of inflation the Federal Reserve likes to use was slightly lower last month than economists expected. It’s an encouraging signal following recent reports suggesting inflation may be tough to get all the way down to the Fed’s 2% goal from its peak above 9%.
The threat of higher inflation was one of the reasons Fed Chair Jerome Powell gave this week when the central bank hinted it may deliver fewer cuts to interest rates next year than it earlier expected.
That warning sent a shock through the stock market, which had run to all-time highs amid the widespread assumption the Fed would deliver a string of cuts to rates in 2025. Now traders are largely betting on one, two or perhaps even zero, according to data from CME Group.
“When optimism is rising and market multiples are expanding, it just takes a little fear to take the veneer off a market rally,” according to Brian Jacobsen, chief economist at Annex Wealth Management.
Friday’s better-than-expected inflation data pushed traders to trim their bets for zero cuts in 2025, which they now collectively see a 16.5% chance of. Easier interest rates can goose the economy by making it cheaper for households and businesses to borrow, but they can also provide fuel for inflation.
Critics had been warning stock prices were vulnerable to drops after running so high and that the market likely needed everything to go correctly to justify its stellar gains for the year. Besides the diminished hopes for several rate cuts next year, Wall Street got another reminder late Thursday that everything may not go as expected.
The House of Representatives resoundingly rejected President-elect Donald Trump’s plan to keep the U.S. government fully running ahead of a potential shutdown. It’s unclear what the next steps will be, but the failure indicates Washington may not run smoothly even with Republicans in full control of the House, Senate and White House.
The U.S. stock market has lost a chunk of its gain since Trump’s win on Election Day raised hopes for faster economic growth and more lax regulations on companies, which would boost corporate profits. Worries have risen that Trump’s preference for tariffs and other policies could lead to higher inflation, a bigger U.S. government debt and difficulties for global trade.
“Next year will be a time of huge challenges to the world economy,” High Frequency Economics’ Carl B. Weinberg wrote in a note to clients, citing U.S. political uncertainty, expected global trade wars and geopolitical uncertainty. “We do not look forward to these changes.”
On the losing end of Wall Street was U.S. Steel, which sank 4.9% after saying its fourth-quarter results will likely come in below its earlier forecast. CEO David Burritt said steel prices remain depressed.
Danish company Novo Nordisk saw its stock that trades in the United States tumble 17% after giving an update on a potential weight-loss treatment that analysts said fell short of expectations.
Nike’s stock slipped 0.1% despite reporting a better profit for the latest quarter than analysts expected.
Analysts said changes by Nike’s new CEO, Elliott Hill, to turn around the company will likely cut into financial results in the near term to drive better long-term growth. The company is likely to cut prices to clear its warehouses of old products, for example, and open space for a new wave of innovation.
They were the exceptions. Nearly every stock in the S&P 500 rose, at 93%.
Eli Lilly climbed 2.5% following Novo Nordisk’s update on its potential treatment for adults with obesity. A stumble for its rival could benefit Eli Lilly, whose Zepbound helps treat obesity.
Cruise lines also climbed after Carnival steamed past analysts’ expectations for profit in the latest quarter.
CEO Josh Weinstein said it’s seeing strong demand and expects growth to continue into 2025 thanks in part to higher fares. Carnival climbed 6.9%, and rivals Norwegian Cruise Line rose 6.6%.
In the bond market, Treasury yields eased. The yield on the 10-year Treasury sank to 4.51% from 4.57% late Thursday.
In stock markets abroad, indexes fell modestly across much of Asia and Europe.
AP Writers Matt Ott and Zimo Zhong contributed
Trader John Romolo works on the floor of the New York Stock Exchange, Wednesday, Dec. 18, 2024. (AP Photo/Richard Drew)
People walk in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Dec. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Dec. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
A person walks in front of an electronic stock board showing Japan's Nikkei index at a securities firm Friday, Dec. 20, 2024, in Tokyo. (AP Photo/Eugene Hoshiko)
