Cash App ordered to pay $255 million in fines for fraud

Cash App, the mobile payment tool that allows instant money transfers and is popular with young people, has made billions in profits for Block, the tech conglomerate run by billionaire Jack Dorsey. .

One way they’ve been able to do that, according to a deal the company reached with federal and state regulators this week, is to make sure users can’t recover money lost in fraudulent transactions.

The Consumer Financial Protection Bureau said the company delayed refunds and misled its 50 million consumers about their responsibility to pay their claims. When users reported fraudulent transactions on the Cash App, instead of investigating the matter, the company referred them to their bank.

Federal officials also said the company made it difficult for fraud victims to report claims, redirecting them between its website and phone numbers with recorded messages telling them to visit the site. The goal, the regulator said, was to wear out the customer and give up.

The company encouraged its customer service agents not to resolve claims related to user fraud, and used two internal metrics — “win rate” and “failure rate” — to measure the proportion of refund requests. credit that he could leave, according to the agreement with the consumer office on Thursday.

Cash App, along with Venmo and Zelle, is part of a collection of peer-to-peer payment apps that allow individuals and businesses to transfer money. Cash App is particularly popular with black and Hispanic users, as well as those under 50. Along with similar payment tools, it has long been plagued by complaints of fraud and scams. .

This week’s action was taken by 48 state attorneys general and the Consumer Financial Protection Bureau, a federal agency that took action in the final week before President-elect Donald Trump’s inauguration. J. Trump.

Cash App will pay $80 million in fines to the state, up to $120 million to fraud victims and $55 million to consumer bureaus. Federal authorities have also introduced new measures for the Cash App to make it easier to deal with fraudulent claims, including setting up a 24-hour hotline, which it previously told its users. Authorities said that was not the case.

Lena Anderson, a spokeswoman for Block, confirmed that the company had reached an agreement with state regulators but did not comment on the state’s allegations against the company, which included failure to counter illegal activities. on the platform. Ms Anderson said the cases were related to “an old compliance program”. He also said that the company did not agree with the statement of the consumer office but “decided to settle this case to get it back.”

The company, said Ms. Anderson, currently operates multiple channels for customer support and “industry leading fraud methods.”

Separately, Cash App agreed to pay up to $2,500 last year to each user whose personal data was stolen. Cash App made $1.3 billion in revenue in the third quarter, according to Block.

Following the consumer bureau’s recent legal action against an affiliate payment app, two technology groups, TechNet and NetChoice, are suing the agency in federal court. on Thursday for what they called an “unlawful usurpation” of industry oversight. An agency spokesman did not respond to a request for comment on the allegations.