CFPB Orders Cash App Operator to Pay $175 Million, Fix Fraud-Related Failures

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) ordered Block, the operator of the peer-to-peer payments app Cash App, to refund and pay other relief to consumers until to $120 million and pay a $55 million penalty to the CFPB. victim relief fund. Block used weak security protocols for Cash App and put its users at risk. Although Block is required by law to investigate and resolve disputes regarding unauthorized transactions, the company’s investigations were woefully incomplete. Block directed users – who had suffered financial losses as a result of fraud – to ask their bank to attempt to reverse the transactions, which Block would subsequently refuse. Block has also deployed a series of tactics to prevent Cash App users from seeking help, thereby reducing its own costs.

“Cash App has created the conditions for fraud to proliferate on its popular payments platform,” said CFPB Director Rohit Chopra. “When things went wrong, Cash App ignored its responsibilities and even blamed local banks for the problems the company caused.”

Block, Inc. (NYSE: SQ) is a publicly traded company with its principal executive offices in Oakland, California. Block offers several digital payment products for businesses and consumers, including point-of-sale payment system Square and consumer payments service Cash App. Cash App is one of the largest peer-to-peer payment platforms in the United States, with over 56 million accounts. It allows consumers to send and receive electronic money transfers; accept direct deposits; and use a prepaid card, Cash Card, to make purchases and ATM withdrawals. Block made approximately $7.5 billion in gross profit in 2023, of which approximately $4 billion was generated by Cash App.

Cash App attempted to avoid many of its investigative obligations by misleading consumers with its terms of service. For example, many Cash App users link their bank account to the app. When a transaction takes place, money is withdrawn from the user’s bank account and sent to the recipient of the transaction. In Cash App’s terms of service, consumers are led to believe that disputes are the responsibility of their related bank. The Electronic Fund Transfer Act generally requires peer-to-peer platforms, including Cash App, to investigate disputes over unauthorized transactions, and a company cannot simply use fine print to escape these requirements legal. When conducting investigations, Block used intentionally shoddy investigative practices to close reports of unauthorized transactions in favor of the company.

Block also deprived Cash App users of meaningful and effective customer service and left the network vulnerable to criminals who defraud users. Although Block included a phone number on the back of its Cash card and in the terms of service for its Cash app, for many years this phone number did not connect consumers to customer support of any kind. Instead, it led to a pre-recorded message directing consumers to contact customer service through the app. Consumers could only contact Block through the app or by U.S. mail and often received delayed, inadequate, confusing, or inaccurate responses. Consumers looking for an alternative way to access Cash App customer service through web searches were targeted by fraudsters posing as Cash App representatives, who tricked them into disclosing their passwords and other personal information. Block knew that its customers were being targeted by fraudsters in this way, but failed to take timely action to resolve the problem.

Coercive measures

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions that violate consumer financial protection laws, including those that engage in unfair, deceptive or abusive. The CFPB also has the authority to enforce the Electronic Fund Transfer Act. The CFPB order requires Block to:

• Pay $120 million to injured consumers: Block is required to pay up to $120 million in refunds and other relief to consumers whose unauthorized transfers were not investigated, to consumers who did not receive the refunds they were due law and consumers whose accounts have been locked for an extended period or who have not been locked. granted interim credits during a delayed investigation. Block must pay a minimum amount of $75 million in reimbursements and other relief. The CFPB will enforce the order’s relief requirements to ensure that affected Cash App users receive relief. Consumers will not need to take action for relief at this time.
• Repair customer service and investigate disputes: To ensure that the misconduct does not recur, the order requires Block to establish 24-hour in-person customer service. The order also requires Block to fully investigate unauthorized transactions and provide timely refunds. appropriate, if applicable.
• Pay a $55 million fine: Block will pay a $55 million fine to the CFPB’s Victim Relief Fund.

The CFPB’s order only addresses violations of consumer financial protection laws within the CFPB’s jurisdiction. Yesterday, state regulators separately ordered Block to pay $80 million for violations of the Bank Secrecy Act and the Anti-Money Laundering Act.

Read today’s order.

The CFPB has taken a series of steps to ensure that popular payment apps and services, including those offered by big tech companies, comply with federal law. In November, the CFPB finalized a rule that will subject large non-bank payment platforms to similar oversight as large banks. Last month, the CFPB sued Early Warning Services, JPMorgan Chase, Bank of America and Wells Fargo for allowing fraud to fester on Zelle.

Consumers can file complaints about financial products and services by visiting the CFPB’s website or calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistblower@cfpb.gov. To learn more about how to report potential industry misconduct, visit the CFPB website.

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The Consumer Financial Protection Bureau is a 21st century agency that implements and enforces federal consumer finance law and ensures that markets for consumer financial products are fair, transparent, and competitive. For more information, visit www.consumerfinance.gov.