The CFPB drops its case against payment app Zelle, in another sign of a Trump pivot

The Consumer Financial Protection Bureau has dropped its lawsuit against the operator of payment platform Zelle and three of its parent banks, in the latest move by the Trump administration to undo actions of the bureau’s prior leadership.

The bureau had filed the lawsuit in late December against the operator of Zelle, Bank of America, JPMorgan Chase and Wells Fargo “for failing to protect consumers from widespread fraud.” Customers of the top three banks lost more than $870 million over seven years due to the banks’ failures to protect them, according to the CFPB.

“This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses,” then-CFPB Director Rohit Chopra said at the time. “These banks broke the law by running a payment system that made fraud easy, and then refusing to help the victims.”

However, that was then. On Tuesday the administration dropped its case against Zelle, according to a filing in U.S. District Court in Arizona.

Zelle and its parent banks are just the latest enforcement target to be abandoned by the CFPB, which is currently led by acting director Russell Vought. Last week the bureau dropped cases it was litigating against five companies including Capital One, Rocket Homes and others. It had earlier dropped its case against online lending platform SoLo Funds.

The CFPB has also been decimated in a matter of weeks, with agency’s employees ordered to stop essentially all work, while some 150 employees have been fired. The bureau’s D.C. headquarters has also been shuttered.

“Dismissing this lawsuit against the big banks that own Zelle is another troubling sign that the CFPB’s new leadership is dramatically pulling back from enforcing the law and protecting consumers who have been mistreated by banks and other financial firms,” said Chuck Bell, advocacy program director at Consumer Reports, in a statement.

“Fraud has become increasingly common on payment apps like Zelle and consumers have little chance of recovering their money from their bank if they get tricked into sending a payment to scammers,” Bell added.

Meanwhile, the Consumer Bankers Association CEO Lindsey Johnson said the banks had followed the law.

“In a time when fraud and scam activity is surging across industries and government alike, we look forward to moving past finger pointing and political grandstanding and, instead, working constructively with policymakers to counter the root causes of these threats,” Johnson said in a statement.

The bureau long been unpopular with Republicans, Wall Street, and Silicon Valley who say it is too heavy-handed in its regulation. When President Trump was asked last month whether his goal was to have CFPB totally eliminated, Trump said yes. Elon Musk has tweeted “CFPB RIP.”

The bureau was created by Congress as part of the Dodd-Frank Act, in the wake of the 2008 financial crisis.