The new less restrictive stance on federal enforcement of financial laws since President Donald Trump took office on January 20 is already resulting in dramatic changes, as federal agencies have pulled back from pursuing legal actions that were already underway in the banking and finance sectors. Notably, the Consumer Financial Protection Bureau (CFPB) announced that it is dropping its federal lawsuit against three US banks and Early Warning Services, the company that runs the popular payment platform Zelle owned and used by these same banks and others.

The CFPB was created by Congress in the Dodd-Frank Act following the 2008 US financial crisis to stem fraud in financial institutions.

This lawsuit and others were filed in 2024 under the auspices of CFPB’s then-director, Rohit Chopra. Under Trump’s direction, Mr. Chopra was fired a few weeks ago. After the director was fired, the Trump administration ordered the CFPB to immediately halt all of its work. The White House administration closed the CFPB’s offices and fired many workers on its staff. Over 150 CFPB employees were fired.

The recently dismissed federal civil lawsuit by CFPB was filed in December 2024. A federal regulator sued three banks, JPMorgan Chase, Wells Fargo and Bank of America, for allegedly failing to protect “hundreds of thousands” of bank account holders from “rampant fraud” while using Zelle. These practices, as of December 2024, allegedly violated federal consumer laws.

In legal documents, the CFPB claimed that the three banks fast-tracked the “peer-to-peer” Zelle payment platform to go live and did not do their due diligence to ensure the platform had robust safety measures in place against fraud. The CFPB also alleged that after many consumers filed complaints about being victims of fraud while using Zelle, they were mostly denied financial assistance.

Customers using the Zelle services at the three banks apparently lost more than $870 million because the banks did not protect them from fraud, alleges CFPB.

"This is about financial institutions fulfilling their basic obligations to protect customers' money and help fraud victims recover their losses," past CFPB Director Chopra said in December. "These banks broke the law by running a payment system that made fraud easy and then refusing to help the victims."

Early Warning Systems, based out of Arizona, is a fintech company that runs Zelle. The company is co-owned by seven US banks, including the defendants in the case, who are the major and largest banks on the Zelle platform. It is reported that JPMorgan, Wells Fargo, and Bank of America use 73 percent of Zelle’s financial payment platform services.

The list of CFPB lawsuits that have been voluntarily dismissed is noteworthy.

A week ago, the CFPB dropped another of its pending claims against Rocket Homes and Capital One due to the less aggressive enforcement of federal financial laws ordered by the Trump administration. The CFPB also voluntarily dismissed a lawsuit against Vanderbilt Mortgage and Finance, which is owned by Berkshire Hathaway, a large business owned by Warren Buffet. In yet another instance, the CFPB dismissed its claim against the lending platform SoloFunds.

President Trump said publicly that the CFPB was “set up to destroy people.”

CFPB supporters disagree, saying that the agency protects US consumers by offering financial safety oversight that can stop predators from harming them.

Chuck Bell, advocacy program director at Consumer Reports, warned the public that the desiccation of the CFPB is harmful to consumers.

“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 Mr. Bell. "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."