Cash App ordered to pay $175M for weak security, feds say
- The Consumer Financial Protection Bureau has ordered Block, Cash App’s parent company, to pay $120 million to Cash App users and $55 million to its victim relief fund.
- The Consumer Financial Protection Bureau claims Block failed to investigate transaction disputes, “tricked” users through its Terms of Service and failed to provide effective customer service.
- Block denies the Consumer Financial Protection Bureau’s claims but reached an agreement with the agency last week to make the ordered payments.
- Block has also been ordered to establish a live, 24-hour customer service and fully investigate all unauthorized transactions.
The parent company of mobile banking platform Cash App has been ordered to pay $175 million to users due to weak security procedures, a federal agency says.
The Consumer Financial Protection Bureau (CFPB) an independent federal agency responsible for consumer financial protections, issued an order last week for Block, Cash App’s parent company, to refund $120 million to Cash App users and pay $55 million into the Consumer Financial Protection Bureau’s Civil Penalty Fund. The fund provides money to people who have been “harmed by companies that break federal consumer financial protection laws.”
According to CFPB, Block is required by law to investigate and resolve unauthorized transaction disputes but failed to do so. Block, according to the bureau, directed users who suffered financial losses to ask their banks to attempt reverse transactions, instead of handling the incidents themselves.
The bureau claims Cash App “tricked” customers with its Terms of Service to avoid investigative obligations. In Cash App’s Terms of Service, users are led to believe that disputes are the responsibility of their linked banks.
However, the Electronic Fund Transfer Act requires that peer-to-peer platforms like Cash App investigate disputes and cannot “use fine print to escape these legal requirements,” according to the bureau.
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The Consumer Financial Protection Bureau also claims that Block deprived Cash App users of “meaningful and effective customer service.”
According to the bureau, Block included a telephone number on the back of its Cash Card and in its Cash App Terms of Service that for “many years” led customers to a pre-recorded message, directing them to contact customer service through the mobile app. Customers, during this time, could only contact customer service through the app or U.S. mail, the bureau alleges.
Cash App did not immediately respond when contacted by USA TODAY on Tuesday.
Block denies claims but agrees to pay
Block has repeatedly denied the Consumer Financial Protection Bureau’s accusations, calling them “mischaracterizations” in a news release, but the company decided to settle and pay per the CFPD’s orders.
How can Cash App users redeem their claims?
According to the Consumer Financial Protection Bureau, consumers will not need to take action to get their payout, as the agency will identify and ensure payment to all impacted parties.
Users that qualify include:
- Consumers who did not receive refunds to which they were entitled for fraudulent transactions.
- Consumers whose accounts had unauthorized transfers or transactions not adequately investigated by Cash App and Block.
- Consumers who had accounts locked as a result.
- Consumers who did not receive provisional credits during delayed investigations.
Court documents also outlined at least two preliminary options for Cash App to deliver funds:
- Consumers who have transacted on a Cash App account within the last six months as of the date of the Redress Plan may receive payment in the form of a credit to their Cash App account.
- Consumers who have not transacted on a Cash App account within the last six months as of the date of the Redress Plan or on the date payments are made will receive non-credit payments separate from the app.
What else must Block do?
In addition to the $175 million payout, Block has been ordered to establish live, 24-hour customer service and fully investigate all unauthorized transactions.
“The historical issues raised in this agreement do not reflect the Cash App experience today,” Block shared in a statement.
According to Block’s statement, Cash App offers multiple ways for users to reach customer service, including live phone calls, email, “real-time” in-app messaging and a dispute submission tool through the app.
Cash App also offers “advanced detection systems, (artificial intelligence) and machine learning” to reduce bad activity, educational resources about scams for users and “robust security measures” like facial recognition to unlock the mobile app, Block said in its statement.
What is Cash App?
Owned and operated by Block, Cash App is a peer-to-peer payments platform, commonly referred to as a “digital wallet.” Through Cash App, users can send and receive money, invest in Bitcoin and stocks, apply for loans, and file taxes. Users can also use the platform’s prepaid card, Cash Card, to make purchases and ATM withdrawals.
Greta Cross is a national trending reporter at USA TODAY. Follow her on X and Instagram @gretalcross. Story idea? Email her at [email protected].
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