CFPB Lawsuit Forces Cash App To Pay $175 Million To Customers In Refunds As Part Of A Settlement
The popular money transfer phone app Cash App faces paying out up to $120 million in refunds.
They also face other redresses to harmed customers. In addition they will have to pay $55 million in penalties. The penalties relate to the company’s troubling customer service.
The CFPB ordered Cash App owner Block to pay refunds to consumers and pay penalties. These funds will go into the agency’s relief fund for victims.
Washington regulators also charged that Block employed weak security protocols for Cash App. These lack protocols put the app’s users at risk.
Consumers do not need to take any action at this time to receive a refund.
Within 120 days of the order, Block must submit a comprehensive written plan to the CFPB for how the company will provide redress. Details will be determined in that process.
Right now there are no specifics regarding how many consumers might expect a refund. Who would qualify for a refund or when refunds might arrive.
More than 50 million US consumers use the platform to send money or get paid via direct deposit. They also use it to buy and sell stock. In addition, they use it to buy cryptocurrency.
The Cash App Customer Service Number Is Only A Recorded Message
Regulators say Cash App customer service was inadequate for many years. For beginners, this includes the phone number listed on the back of the Cash App card.
The phone number only connected customers to a recorded message. Consumers who called with concerns about fraud did not receive customer service of any type when they called.
The CFPB order also pointed out that Cash App failed to provide live customer support from 2016 until February 2021.
48 state States Attorney Generals Launch A Joint Enforcement Action
Last week, state financial regulatory agencies launched a coordinated enforcement action against Block. They claim Block violated the Bank Secrecy Act and a host of anti-money laundering laws.
The separate action involves a multistate settlement signed this week. In the agreement, Block agreed to pay an $80 million penalty to the state agencies. In addition, they agree to hire an independent consultant to review the comprehensiveness and effectiveness of its program. Then submit a report to the states within nine months.
Block then will have 12 months to correct any deficiencies found in the review after the report is filed.
State regulators found that Block created the potential to support money laundering. In addition to their services being used for terrorism financing, or other illegal activities.
What the CFPB Throws Down The Hammer On Cash App
The CFPB order addresses violations of consumer financial protection laws under the CFPB’s purview.
The CFPB case also raised a variety of issues. The government agency said issues claims that unauthorized money transfers were not investigated.
Regulators said consumers did not receive refunds they were entitled to receive. Some consumers ended up seeing their accounts locked for an extended period of time. And others were not provided provisional credits during a delayed investigation.
The CFPB said Block must pay a minimum amount of $75 million in refunds to harmed consumers. The will enforce the order’s redress requirements to ensure affected Cash App users receive refunds.
The CFPB charges also highlighted how Block used various dead-end strategies to mishandle consumer complaints relating to fraud.
Block told customers who lost money due to fraud to go to their banks to attempt to reverse transactions.
However, Block would subsequently deny these claims according to regulators.
The CFPB noted consumers were greeted with a prerecorded message when they called the customer service number. The message told them to contact customer support through the app. Consumers could only contact the company through the app or through U.S. mail.
Fraudsters Targeted Cash App Customers
CFPB said that customers who claimed they were victims of fraud were often met with delayed, confusing, or inaccurate responses.
Frustrated customers turned to the internet to search for an alternate route to reach customer service. However, regulators say such web searches were targeted by fraudsters who posed as Cash App representatives. The fake employees tricked them into giving up their passwords and other personal information.
Block knew that its customers were being targeted by fraudsters but failed to take timely action to address it.
The CFPB order said some consumers called a fake Cash App customer support phone number who instructed to download malware.
The criminals would then be able to remove or transfer funds out of the consumer’s Cash App account.
Cash App parent Block Responds To The Allegations
Block did not respond to specific questions. However, they sent a statement to the media relating to the $80 million enforcement action. They also referred to a blog relating to the CFPB order titled “Cash App’s Dedication to Customer Service and Protection.”
According to the blog, Cash App said it is committed to “ensuring a safe and secure experience.”
The blog note noted: “While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us.
The blog highlighted several moves to strengthen customer support.
The company said it is working with industry partners to address risks. Risks such as complex scam that happen both on and off financial platforms.
Cash App indicated in its blog that the payment app has multiple ways for customers to contact them directly. This includes live phone support and email. In addition to real-time in-app messaging and a dispute submission tool within the app.
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