CFPB Drops Another Lawsuit Against Payment App and Banks
Created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Consumer Financial Protection Bureau (CFPB) has spent the past 15 years acting as a watchdog against scams and fraud. It has returned over $17 billion in financial fraud to victims.
However, the Trump administration and DOGE have targeted the CFPB particularly hard in their moves to reduce federal government employment. Led by Russell Vought in his role as the White House budget office director, and also acting director of the CFPB, Vought fired 150 CFPB employees and issued a stop-work order in February. Vought also shuttered CFPB headquarters in the District of Columbia.
Several of the remaining employees and their bureau union have filed a lawsuit against Voight's no-work order. Meanwhile, most ongoing CFPB investigations have been ended. The latest is a lawsuit against Zelle.
To Zelle With It
The CFPB filed a lawsuit on December 20, 2024, against Zelle, Early Warning Services (which operates Zelle), and three of its parent banks: Bank of America, JP Morgan Chase, and Wells Fargo. The agency accused Zelle of offering an unfinished product to compete with other payment acts before a fully tested and effective protective safeguard system was developed.
CFPB charged that this failure had cost consumers over $870 million in fraud over Zelle's seven-year existence. In addition to seeing consumers reimbursed by the companies and financial institutions, the CFPB wanted security upgraded to prevent further losses.
At the time of the filing, CFPB Director Rohit Chopra referred to Zelle as a "gold mine for criminals," noting that it had a system that made it easy to fleece victims but difficult for them to recover their fraud losses.
The defendants accused the CFPB of "rule-making by enforcement" and argued that they were not responsible for losses suffered by the victims. While banks must refund transactions made on a person's account by someone else, they insisted that since the victims were coerced into making the transfers themselves, neither the banks, Zelle, nor Early Warning Services were responsible.
The dismissal of the Zelle lawsuit was expected. The CFPB didn't release a statement to coincide with the filing in a district court in Arizona on March 4, 2025.
Is There a CFPB Anymore?
Ending the CFPB has long been an objective of Congressional Republicans. With the CFPB being funded by the Federal Reserve, they complained about the lack of Congressional oversight and argued the CFPB over-regulated financial institutions and companies.
Last month, a federal judge enjoined Vought and DOGE from laying off any more workers. As an agency created by Congress, only Congress has the legal authority to end it.
However, it's unclear if the CFPB is currently doing any of its work. For example, while CFPB Chief Operating Officer Adam Martinez filed a declaration in court promising that the CFPB was still forwarding complaints to companies as they were received, Bloomberg Law reports that the vendor responsible for doing so had their contract ended and the majority of complaints filed during that time were never forwarded (about 150,000 of the 163,000 total complaints).
As the CFPB ends its enforcement actions, it's worth monitoring how the lawsuit against Vought proceeds.
Related Resources
- Proving Securities Fraud (FindLaw's Consumer Protection Law)
- What Is the Consumer Financial Protection Agency? Will It Survive? (FindLaw's Law and Daily Life)
- Crypto Firms Bullish as SEC Drops Lawsuits and Investigations (FindLaw's Law and Daily Life)
