The Consumer Financial Protection Bureau sued JPMorgan Chase (JPM+1.00%), Bank of America (BAC+0.84%) and Wells Fargo (WFC+1.76%) on Friday over its handling of fraud on the peer-to-peer payment network Zelle.

The regulator alleged in its lawsuit filed in U.S. District Court in Arizona that the failure to stop fraud by some of the nation’s largest banks through Zelle resulted in millions of dollars in fraud losses for customers.

“The country’s largest banks felt threatened by competing payment apps and rushed to exclude Zelle,” CFPB Director Rohit Chopra said in a statement. “By failing to provide adequate security, Zelle became a goldmine for fraudsters, while victims were often left to fend for themselves.”

Zelle was founded in 2017 by Early Warning Services – a company jointly owned by seven major US banks, including JPMorgan, Wells Fargo and Bank of America – as a competitor to Venmo (PYPL-0.31%) and CashApp (square+1.22%). Early Warning was also named in the lawsuit.

“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,” company spokeswoman Jane Khodos said in a statement.

Khodos said the lawsuit will “empower criminals, cost consumers more fees, stifle small businesses and make it harder for thousands of community banks and credit unions to compete.”

JPMorgan declined to comment. Bank of America and Wells Fargo did not immediately respond to requests for comment.

More than 2,200 banks and credit unions offer access to the Zelle network. In the first half of 2024, Zelle had 143 million registered users Money sent 1.7 billion timesThis makes it one of the leading payment platforms in the country.

The lawsuit alleges that “significant fraud” occurred throughout Zelle’s network and that the company “failed to take adequate fraud prevention measures.” As a result, the CFPB alleges that failure to implement basic security precautions resulted in hundreds of thousands of complaints and fraud losses of over $290 million from Bank of America customers, more than $360 million from Chase customers, and over $220 million Dollars at Wells Fargo have led customers.

“The network was set up to make it easy for criminals to access the system,” the lawsuit says. “And once these malicious actors had access, EWS failed to take the basic steps to detect or remove them from the network.”

Several banks announced in August that the CFPB was investigating their handling of customer funds on Zelle. John Breyault, vice president of the National Consumers League, called the level of fraud on the platform “unacceptably high.” Transcript at a hearing in May. It is estimated that Zelle could be a total scam over $1 billion per year until next year.

In recent months, Early Warning has emphasized its anti-fraud efforts as part of regulatory control of scams on its network. Despite the increase in Zelle’s transaction volume last year (total $806 billion), reports of scams and scams fell by nearly 50%, the company said. According to Early Warning, 99.95% of payments were sent without a fraud report.