Zelle Pushes Back Against CFPB Lawsuit, Calling Claims “Meritless”

Zelle has strongly criticized a lawsuit filed by the Consumer Financial Protection Bureau (CFPB), arguing that the legal action will harm consumers, small businesses, and community banks. The peer-to-peer payment service described the lawsuit as “legally and factually flawed,” asserting that it undermines efforts to combat fraud and scams while burdening financial institutions with unfair liabilities.

Zelle’s Response to CFPB Allegations

In a statement attributed to Zelle spokesperson Jane Khodos, the company expressed its intention to fight the lawsuit vigorously.

“The CFPB’s attacks on Zelle are legally and factually flawed, and the timing of this lawsuit appears to be driven by political factors unrelated to Zelle,” Khodos said. “Zelle leads the fight against scams and fraud and has industry-leading reimbursement policies that go above and beyond the law. The CFPB’s misguided attacks will embolden criminals, cost consumers more in fees, stifle small businesses, and make it harder for thousands of community banks and credit unions to compete.”

Zelle claims to be a trusted payment platform used by 143 million Americans, emphasizing its role in reducing fraud and protecting consumers. In 2023, Zelle reported a 27% increase in transaction volume while claims of scams and fraud dropped by nearly 50%, with 99.95% of payments processed without incident.

Potential Impact on Financial Institutions and Consumers

Zelle warned that the CFPB’s lawsuit could have wide-ranging consequences for the financial industry and the consumers it serves.

The company criticized the CFPB for failing to recognize Zelle’s fraud prevention measures and reimbursement policies, which it says exceed legal requirements under the Electronic Funds Transfer Act and Regulation E. Zelle also argued that the lawsuit would create new legal obligations not authorized by Congress, forcing banks and credit unions to absorb costs for transactions that consumers authorized.

Thousands of financial institutions, particularly community and minority-owned banks, could face difficult choices if forced to comply with these new standards. Zelle stated that these institutions might need to stop offering the service or increase fees to cover the additional liabilities, shifting the financial burden to consumers.

Challenges for Small Businesses

Small businesses, which Zelle says conducted nearly 244 million transactions totaling $129.5 billion in the first half of 2024, would also face significant challenges. According to Zelle, small businesses rely on the platform for flexible payments, employee bonuses, and last-minute expenses. Removing access to Zelle could disrupt operations and limit essential financial tools for Main Street businesses.

Broader Legal and Regulatory Implications

Zelle framed the lawsuit as part of what it calls the CFPB’s “pattern and practice of regulatory overreach.” The company accused the Bureau of attempting to expand legal obligations beyond what Congress authorized, particularly concerning reimbursement for transactions that consumers knowingly authorized.

Zelle reiterated its commitment to reimbursing customers for fraud under existing laws and emphasized that its current practices exceed legal requirements by covering certain scams where consumers authorized transactions.