Zelle Criticizes CFPB Lawsuit, Warns of Harm to Consumers and Financial Institutions

Zelle, a popular peer-to-peer payment service, has come out swinging against a lawsuit filed by the Consumer Financial Protection Bureau (CFPB). The company has strongly criticized the legal action, claiming that it will have detrimental effects on consumers, small businesses, and community banks.

In a statement, Zelle spokesperson Jane Khodos described the lawsuit as “legally and factually flawed,” and suggested that it is politically motivated. The company emphasized its commitment to fighting fraud and scams, highlighting its industry-leading reimbursement policies that exceed legal requirements.

Zelle, which boasts 143 million users in the United States, reported a significant increase in transaction volume in 2023, coupled with a decrease in fraud incidents. The company argued that the CFPB’s lawsuit could undermine these efforts and lead to increased fees for consumers.

The potential impact of the lawsuit on financial institutions, particularly community banks and credit unions, is a major concern for Zelle. The company warned that these institutions may be forced to stop offering the service or raise fees to cover new liabilities, ultimately shifting the financial burden to consumers.

Small businesses, which rely on Zelle for flexible payments and essential financial tools, could also be adversely affected. Zelle highlighted the significant role that small businesses play on its platform, conducting millions of transactions totaling billions of dollars.

Zelle framed the lawsuit as part of a broader pattern of regulatory overreach by the CFPB, accusing the Bureau of attempting to expand legal obligations beyond what Congress authorized. The company reiterated its commitment to reimbursing customers for fraud and emphasized that its current practices already exceed legal requirements.

Overall, Zelle’s response to the CFPB’s allegations sets the stage for a contentious legal battle with potentially far-reaching implications for the financial industry and consumers.