WASHINGTON–The CFPB has dropped an expansive lawsuit against three of the largest banks in the country over what the Bureau had alleged were poor safeguards related to the Zelle money transfer network that allowed thieves to steal hundreds of million of dollars from Zelle users.

The lawsuit, which had been filed in federal court in Arizona under the Biden Administration, had been criticized as an example of “rule-making by enforcement,” according to the New York Times analysis.

As the report noted, federal law requires financial institutions to refund customers/members for unauthorized transactions made on their accounts by someone other than the account holder. 

But many scammers have tricked victims in transferring cash to them, which has led to some litigation against financial institutions, including against Navy FCU.

“Banks have said they have no responsibility for reimbursing customers for transactions they made themselves, even if they were deceived into doing so,” the Times report states. 

About the Suit

The CFPB had filed the suit against Early Warning Services, Scottsdale, Ariz., which owns and operates Zelle, and three of its bank owners–Bank of America, JPMorgan Chase and Wells Fargo — for allowing transactions that the agency said were fraudulent and totaled more than $800 million.

The suit was dropped at the same time the CFPB has been largely shut down by the Trump administration.