Online payment service provider Cash App’s parent company, Block, has been directed by a federal agency to pay up to $175 million due to its recurrent negligence in safeguarding customers against fraudulent activities.
Block has reached an agreement to compensate consumers who have been affected by fraudulent transactions and unfair business practices. The Consumer Financial Protection Bureau (CFPB) has outlined these concerns in a consent order filed on Thursday. As part of the agreement, Block has committed to paying up to $120 million to the affected consumers. In addition, the company will be required to contribute a fine of $55 million to the CFPB’s victims relief fund.
“In a statement, CFPB Director Rohit Chopra criticized Cash App for enabling the widespread occurrence of fraud on its widely used payment platform. He pointed out that Cash App failed to fulfill its obligations and instead shifted the responsibility onto local banks, burdening them with the problems caused by the company.”
Block disputes the findings of the CFPB.
“We strongly disagree with the CFPB’s mischaracterizations; however, we have decided to settle this matter to move forward and prioritize the best interests of our customers and our business,” stated the company.
The company emphasized its commitment to customer support and protection while using Cash App. They utilize various methods to ensure customer safety, including offering multiple channels for customers to reach out to Block, such as a dispute submission tool within Cash App. Additionally, they employ AI technology to detect and prevent fraud, as well as advanced technology to alert customers about potential scams related to their transactions.
Failure to investigate potential fraud
According to the Consumer Financial Protection Bureau (CFPB), peer-to-peer platforms like Cash App are legally obligated to investigate unauthorized transaction disputes under the Electronic Fund Transfer Act. However, many Cash App customers, who have their bank accounts linked to the app, were misled by the terms of service into thinking that their banks were responsible for handling transaction disputes.
In a specific case mentioned in the consent order of the agency, Cash App told a customer who reported an unauthorized debit card to reach out to their bank, neglecting its legal obligation to investigate potential fraud incidents.
The Consumer Financial Protection Bureau (CFPB) has stated that in many cases, the respondent did not conduct investigations promptly or, in some instances, failed to conduct investigations at all when consumers provided the necessary information in Notices of Error.
The consumer agency stated that when Block conducted investigations into disputes, it employed deliberately flawed investigation methods in order to resolve reports of unauthorized transactions in the company’s favor.
Unreachable customer service
According to the CFPB, Cash App clients faced challenges in accessing reliable customer service due to Block’s practices. The app’s Cash Card and terms of service provided a telephone number for customer support. However, upon calling, users were redirected to a pre-recorded message instructing them to contact customer support through the app. Unfortunately, those who reached out through the app or by mail often encountered delayed, inadequate, confusing, or inaccurate responses from Cash App customer service.
In addition to refunding $175 million and paying fines, Block is now obligated to offer round-the-clock customer service with live representatives. The company is also required to promptly and thoroughly investigate any unauthorized transactions and provide refunds in a timely manner, as necessary.
How do I get my refund?
Block must pay a minimum of $75 million and up to $120 million in refunds to consumers who were victims of fraudulent transactions and did not receive the refunds they were entitled to. Additionally, those whose unauthorized transfers were not adequately investigated by Cash App, as well as consumers whose accounts were locked or who were not provided provisional credits during a delayed investigation, are also eligible for a refund.
According to the latest guidance from the CFPB, consumers will not have to take any action in order to receive a refund. The agency has stated that it will enforce the order’s requirement to ensure that Cash App users who have been affected will receive the necessary refunds and other forms of redress.
Cash App, boasting over 56 million accounts, stands as one of the leading peer-to-peer payment platforms in the nation. This platform provides users with the convenience of sending and receiving electronic money transfers, accepting direct deposits, and utilizing a prepaid Cash Card for purchases and ATM withdrawals.
According to the CFPB, Block generated $7.5 billion in gross profit in 2023, with around $4 billion of that amount originating from Cash App.
Anne Marie D. Lee, a seasoned editor for CBS MoneyWatch, covers an array of engaging topics in her writing. From personal finance to the workplace, travel, and even social media, she provides insightful perspectives and valuable information for her readers.
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