FOR IMMEDIATE RELEASE: Dec. 20, 2024
CONTACT: Carter Dougherty, carter@ourfinancialsecurity.org
CFPB Lawsuit Highlights Need For Safeguards on Digital Transactions
Also highlights the need for more comprehensive action against abusive bank practices
Americans for Financial Reform applauds today’s announcement of action against the nation’s three largest banks, Bank of America, JPMorgan Chase, and Wells Fargo, for failing to protect consumers from widespread fraud and risky activity on Zelle, the most widely available peer-to-peer payment network.
“Payment apps like Zelle should bring safety along with the convenience of transferring funds digitally,” said Christine Chen Zinner, senior policy counsel at Americans for Financial Reform. “As traditional large financial institutions seek to offer advanced technology and so-called fintech products, these banks must meet their obligation to be both sound and meet federal consumer protection standards.”
Peer-to-peer payments are digital transactions made through an application or “app” that sends money directly to a person with a bank account and debit or credit card. These payments allow for quick transactions to either send or receive funds. These funds can be used for a variety of purposes, and consumers often use these networks to cover household expenses.
Of the several payment networks, the three financial institutions rushed their payment product to market to compete against other payment networks or apps without implementing effective safeguards and usage standards to protect consumers.
The actions announced today call attention to how the institutions left Zelle users vulnerable to identity fraud due to a lack of verification standards, allowed scammers to use more than one platform to deceive users, ignored complaints of fraudulence and inaccuracy, and failed to support consumers after the harm had transpired. The CFPB’s action follows continuing problems with these fintech products that have occurred at all three named banks that have led to the CFPB imposing penalties for excessive fees and discriminatory practices previously.
The banks’ failure to effectively protect consumers for these digital payment products spotlights how fintechs present a newly emerging barrier to safe and affordable banking for Black, Latine, and other consumers of color. A Pew Research study found that communities of color have had more negative experiences with these platforms than their white counterparts.
“The failure of not regulating these networks isn’t just the overlooking of a feature of an app,” said Amanda Jackson, director of consumer campaigns at AFR. Today’s CFPB action demonstrates the continued experience and shameful legacy of financial institutions’ longstanding and ongoing failure to protect all of their consumers. Tackling the wayward activity of peer-to-peer payment networks will lead to greater transparency and increased consumer confidence.”
###