Today Consumer Action for a Strong Economy (CASE) issued a statement excoriating the Consumer Financial Protection Bureau’s (CFPB) decision to target Zelle, one of the nation’s fastest growing peer-to-peer payment networks, with legal action. Zelle’s parent company, Early Warning Services, along with its owner banks of Wells Fargo, Bank of America, and JPMorgan Chase were also named in the lawsuit.
Said CASE chairman Gerard Scimeca, “The CFPB’s outrageous legal assault against Zelle is yet another salvo in their never-ending campaign against our nation’s banks, but as with nearly all of their “pro-consumer” actions it will be the tens of millions of consumers & small businesses who use the service who will be most hurt in the end. CFPB’s unilateral prosecution of Zelle will either result in raising costs, restricting access, or forcing this FREE & enormously popular banking convenience off the market.
“Aside from the fact that CFPB’s lawsuit is an enormous government overreach and power grab that circumvents the traditional notice and rulemaking process, the bureau’s accusations that Zelle fosters fraud is patently false, given that publicly available data shows that less than 0.1% of transactions on the network are reported as potential scams.
“There is no space in our tech-driven, digital economy that cannot be exploited in some manner by scammers, and Zelle’s exceptionally low rate of reported fraud didn’t happen by accident, but by stakeholders taking the issue of fraud seriously, continuing to innovate to make their platform more secure, enhancing tools that empower users to detect and report potential fraud, and numerous other measures CASE noted earlier this year.”
Scimeca questioned the timing of CFPB’s action as extremely suspicious, given a new administration will be taking power in Washington next month, and further exposed CFPB’s public statement as legally vague and lacking substantive accusations of criminal wrongdoing.
“It’s important to note that most fraud occurs on the phone, through email or text, or on the internet, yet for some reason CFPB lays the entirety of blame at Zelle’s feet, as well as the costs to compensate victims. This would be a big victory for scammers everywhere, knowing that banks will just have to dip into their pockets to pay for their sins. But it won’t be banks picking up the tab, but honest bank customers and businesses who will be writing blank checks for fraudsters if CFPB gets its way.
“As Zelle and other P2P platforms work diligently to prevent and stay ahead of the latest scams, it’s just as important that consumers play their part through vigilance, education, and awareness. No one will bother to develop or keep innovating fintech if the reward is a criminal accusation by the federal government, and consumers will be the big losers in the end if we throttle innovation in the financial services sector.
“The CFPB action against Zelle and its owner institutions is extremely dangerous, not only for its careless blame shifting of the serious problem of financial fraud, but also the impact it would have in setting our banking system back decades as the rest of the world continues to innovate. This anti-tech, anti-consumer action must be put to rest, and so long as they continue to exist, the CFPB should focus their attention on actual scammers and criminals and prosecute them accordingly.”
