The Consumer Financial Protection Bureau on Tuesday dismissed a sweeping lawsuit against three of the nation’s largest banks over what the agency had described as shoddy safeguards on their Zelle money transfer network that allowed scammers to steal hundreds of millions of dollars from customers.
The lawsuit, filed in federal court in Arizona in the waning days of the Biden administration, was an example of what the bureau’s critics often denounce as “rule-making by enforcement.” Federal law requires banks to refund customers for unauthorized transactions made on their accounts by someone other than the account holder. But Zelle scams often trick victims into transferring cash themselves.
Banks have said they have no responsibility for reimbursing customers for transactions they made themselves, even if they were deceived into doing so.
Zelle is operated by Early Warning Services, which is based in Scottsdale, Ariz. The consumer bureau sued Early Warning and three of its owners — Bank of America, JPMorgan Chase and Wells Fargo — for allowing transactions that the agency said were fraudulent and totaled more than $800 million.
Rohit Chopra, then the bureau’s director, described Zelle as “a gold mine for criminals — a system that made it easy for fraudsters to move money quickly while making it nearly impossible for customers to get their money back.”
The case had the potential to reshape the steps that banks must take to shield their customers from fraud on payments apps.
But Mr. Chopra was fired last month by President Trump, and many financial industry observers expected the Trump administration to drop the Zelle case.
A spokeswoman for Early Warning said the company was pleased by the decision to end the lawsuit, which she said was “without merit, and legally and factually flawed.”
Trish Wexler, a spokeswoman for JPMorgan Chase, described payments app fraud as “a national security problem that requires a collective effort across the public and private sectors.” She said banks would work together with law enforcement agencies and companies in the technology, social media and telecommunications industries to “effectively address these crimes at their source.”
Spokesmen for Bank of America and Wells Fargo declined to comment on the dismissal. Consumer bureau representatives did not respond to a request for comment.
The Zelle case is one of at least eight enforcement actions that the agency has abandoned in recent weeks, including a lawsuit against Capital One over tactics that the bureau said deprived customers of $2 billion in owed interest payments. Other dismissals include actions against a large student loan service for illegally pursuing borrowers whose debt had been discharged in bankruptcy and against a mortgage firm for making loans to customers it knew could not afford to repay them.
The consumer bureau has been all but shut down by Russell Vought, the White House budget office director, whom Mr. Trump appointed last month as the agency’s acting director.
The bureau’s staff union and other parties have filed several lawsuits aimed at reversing Mr. Vought’s order that employees halt all work.
In a court hearing in Washington on Monday for one of the cases, Liam Holland, a Justice Department lawyer representing the consumer bureau, said that of the dozens of enforcement cases the agency had pending, the new leadership had decided to proceed with at least two.
The consumer bureau will continue pursuing a claim against a Buffalo debt settlement company that the bureau said had cheated its customers, and it will maintain its litigation against the online lender MoneyLion for overcharging members of the military, Mr. Holland said. He did not explain to the judge why the bureau chose to continue pursuing those cases.
MoneyLion previously said it would “vigorously defend against these false allegations.”
