The Consumer Financial Protection Bureau (CFPB) revoked its lawsuit against Zelle operator Early Warning Services and the three major banks that use the peer-to-peer payments network. The regulator dismissed the lawsuit with prejudice, freeing Early Warning Services, Bank of America (BAC), JPMorgan Chase (JPM), and Wells Fargo (WFC) from further legal action over the alleged failure to protect consumers.
Zelle and the banks involved in the lawsuit have praised the decision to dismiss it. The dropped lawsuit also elicited a statement from Consumer Bankers Association President Lindsey Johnson, who said it looks “forward to moving past finger-pointing and political grandstanding and instead working constructively with policymakers to counter the root causes of these threats.”
Why Did the CFPB Drop the Zelle Lawsuit?
The lawsuit was levied by former CFPB Director Rohit Chopra. However, acting Director Russell Vought dropped the lawsuit after taking over the role following President Donald Trump’s inauguration. Under Vought’s leadership, the agency has dismissed several lawsuits introduced by the previous administration.
It also bears mentioning that the CFPB was the target of massive layoffs when President Trump took office. Elon Musk’s Department of Government Efficiency (DOGE), which cut jobs across several government sectors, attempted to gut the regulator before being postponed by a union lawsuit.
How Does This Affect Bank Stocks?
Reduced regulation will likely benefit bank stocks as the companies will spend less time fighting legal battles. This could benefit banks during Trump’s presidency, so long as the ongoing trade war doesn’t do too much damage to them.
Turning to the TipRanks comparison tool, traders will notice Bank of America and Citigroup (C) offer analysts consensus Strong Buy ratings. They also both have high upside potential with BAC stock at 24.28% and C stock at 25.34%
