CFPB dismisses enforcement action as Senate prepares to vote on repeal of Bureau’s rule to supervise digital payment apps offered by big tech
WASHINGTON DC – The Consumer Financial Protection Bureau dismissed its lawsuit today against the operators of Zelle and Bank of America, JP Morgan Chase, and Wells Fargo for failing to protect consumers from fraud on the payment app jointly owned by the banks. The decision to drop the lawsuit is just the latest enforcement case the CFPB has walked away from in recent weeks as its new leadership halts much of its work
“Dismissing this lawsuit against the big banks that own Zelle is another troubling sign that the CFPB’s new leadership is dramatically pulling back from enforcing the law and protecting consumers who have been mistreated by banks and other financial firms,” said Chuck Bell, advocacy program director at Consumer Reports. “Fraud has become increasingly common on payment apps like Zelle and consumers have little chance of recovering their money from their bank if they get tricked into sending a payment to scammers.”
Bell continued, “Consumers who have been treated unfairly by banks, paycheck advance companies and other lenders stand to lose billions of dollars in potential relief if the CFPB continues to abandon its pending lawsuits against other financial industry wrongdoers.”
The CFPB’s decision to drop its case against the banks that own Zelle comes on the eve of an expected Senate floor vote to repeal a rule adopted by the CFPB that gives it the authority to supervise digital payment apps offered by Apple, Google and other big tech companies, just like it already does with large banks, credit unions and other financial institutions. The Senate is expected to vote as early as Wednesday on the Congressional Review Act resolution, which Consumer Reports urged its members to reject in a letter today.
“Repealing the CFPB’s rule would be a huge gift to big tech that will leave consumers largely unprotected from payment app fraud and privacy risks,” said Bell. “We need to preserve the CFPB’s authority to conduct regular examinations of digital payment app providers to make sure they are following the law and to protect consumers from unfair practices before they become widespread.”
In 2023 alone, consumers reported losing $210 million to scams on peer-to-peer payment apps, a staggering 62 percent increase from 2021. In addition, users who accidentally send a payment to the wrong person find it nearly impossible to get their money back.
Consumer Reports evaluated P2P apps in 2022 and found that their policies for resolving fraud and errors left users at risk of losing their money. In most cases, consumers are left unprotected when they are scammed into sending payments to crooks on payment apps. Last September, CR published a blog post summarizing an updated review of the policies of 11 P2P app providers and found little improvement since its previous evaluation.
CR’s 2022 evaluation also found that consumers using P2P apps face privacy risks because app providers share their personal information widely and make it difficult for users to delete their data. In addition, CR found that Apple Cash, Cash App and Venmo require users to meet sometimes confusing conditions to ensure their funds held in the payments portion of the app are protected by Federal Deposit Insurance Corporation insurance. Users could lose money if they haven’t completed additional app or product registration requirements, and the P2P companies suffer financial losses or declare bankruptcy. This is unlike banks which are required to maintain fund insurance.
Media Contact: Michael McCauley, michael.mccauley@consumer.org