JPMorgan Threatens Litigation Against Consumer Financial Protection Bureau #

JPMorgan Chase recently disclosed that the Consumer Financial Protection Bureau (CFPB) could punish the bank for its role in Zelle, the peer-to-peer digital payments network. In response, JPMorgan issued a veiled threat, stating it was “evaluating next steps, including litigation.”

This potential legal action against a regulator marks a significant shift in the relationship between banks and their overseers. Policy experts note that such a move would have been unthinkable in earlier times, particularly given the banking industry’s reliance on taxpayer bailouts during the 2008 financial crisis.

Several factors have contributed to the growing divide between banks and regulators:

1. Banks feel targeted by populist attacks from regulatory agencies.
2. Financial institutions increasingly use courts in conservative districts to resist reforms.
3. The disparity between ambitious regulatory proposals and conservative court rulings has widened.

The banking industry faces multiple regulatory challenges, including:

• Efforts to reduce fees on credit card late payments, debit transactions, and overdrafts.
• The Basel Endgame proposal, which could require big banks to hold more capital.

JPMorgan’s disclosure about the CFPB probe into Zelle follows years of scrutiny over financial crimes on the platform. While most Zelle transactions are problem-free, concerns have been raised about fraud and reimbursement practices.

The bank has been at the forefront of several regulatory disputes, with CEO Jamie Dimon leading efforts to weaken the Basel proposal. JPMorgan argues that increased regulation would result in higher costs for consumers, including more expensive mortgages and credit card rates.

The financial industry has achieved some victories in its regulatory battles:

• The Federal Reserve offered a revised Basel Endgame proposal with reduced capital requirements.
• Implementation of the CFPB credit card rule was delayed following legal action by industry groups.

Banks have employed strategies such as filing cases in conservative jurisdictions to challenge regulations. This approach, known as “venue shopping,” has become a common corporate tactic.

Critics argue that the current environment, characterized by weakened federal agencies and conservative courts, ultimately benefits large corporations. This situation may hinder the adoption of new regulations necessary to address changing realities in the financial world.