A federal regulator sued JPMorgan Chase, Wells Fargo and Bank of America last week, claiming the banks failed to protect hundreds of thousands of consumers from rampant fraud on the popular payments network Zelle, in violation of consumer financial laws.

In the federal civil complaint, the Consumer Financial Protection Bureau asserts that the banks rushed to get the peer-to-peer payments platform to market without effective safeguards against fraud and then, after consumers complained about being defrauded on the service, largely denied them relief.

The CFPB claims that the banks violated federal consumer financial laws governing electric funds transfers, which require banks conduct “reasonable investigations” when consumers report transaction errors, and the agency’s prohibition on unfair acts or practices by failing to take steps to prevent and address fraud on Zelle.

“Customers of the three banks named in today’s lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures,” the CFPB said.

Also named as a defendant in the lawsuit is Early Warning Services, a fintech company that operates Zelle and is owned by seven U.S. banks, including JPMorgan, Wells Fargo and Bank of America.

Bank of America said it strongly disagreed with the lawsuit, which it said would add “huge new costs” on banks and credit unions offering the free Zelle service to clients. It said more than 99.95% of transactions across the Zelle network go through without incident.

In a statement, JPMorgan said the CPFB was “overreaching its authority by making banks accountable for criminals.”

Early Warning called the lawsuit “legally and factually flawed.”

Since its launch in 2017, Zelle has become one of the most widely used peer-to-peer payment networks in the U.S., with more than 143 million users. In the first half of 2024, Zelle users transferred $481 billion across more than 1.7 billion transactions, according to the CFPB.