Recently, the CFPB released the complaint that it filed against a peer-to-peer payment service (P2P) and three large banks, alleging widespread fraud on the P2P platform. The Bureau filed the complaint in the U.S. District Court for the District of Arizona, asserting that the defendants prioritized rapid market entry over consumer protection, resulting in over $870 million in losses for banking customers.

According to the CFPB, the defendants did not have sufficient measures for: (i) authenticating, verifying, and registering users; (ii) providing information to consumers about recipients’ identities; (iii) providing certain risk-related information to financial institutions when pausing or blocking suspicious transfers; (iv) suspending or restricting fraudsters from using the network; (v) requiring financial institutions to report timely and accurate information about fraud; and (vi) monitoring and enforcing network rules. The Bureau alleges that these issues led to financial losses for users that the service did not take appropriate measures to prevent, detect, limit and address fraud.

The complaint includes ten counts against the defendants, alleging violations of the CFPA, and the EFTA/Regulation E. It seeks a permanent injunction against the defendants, as well as monetary relief, for consumers, and civil money penalties. In response to the CFPB’s complaint, the P2P service issued a formal statement disputing the allegations in the complaint, and a trade association representing the three large banks issued a press release asserting that the CFPB’s allegations “have no basis in law.”

As previously covered by InfoBytes, the U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing in February 2024 on the increasing use of P2P apps by scammers.