Cash App, a popular platform used to transfer money, faces paying out up to $120 million in refunds and other redress to harmed customers, plus $55 million in penalties, relating to its troubling handling of customer service and a spurt in fraud. The Consumer Financial Protection Bureau on Thursday ordered Block, which operates the peer-to-peer payments app, to pay refunds to consumers and pay penalties, which will go into the agency’s relief fund for victims.
Washington regulators charged that Block employed “
weak security protocols for Cash App and put its users at risk.”Consumers do not need to take any action at this time to receive a refund from a pool of $75 million to $120 million in refunds and other redress.
Within 120 days of the order, Block, the parent of Cash App, must submit a comprehensive written plan to the Consumer Financial Protection Bureau for how the company will provide redress. Details will be determined in that process.
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So, we have no specifics yet for how many consumers might expect a refund, who would qualify, when refunds might arrive, or how much money might be expected.
Over the years, I’ve told some troubling stories relating to a lack of customer service with Cash App and how real money was being lost to scammers. Consumers complained that when they contacted the company they received no response.
Lisa Williams, 55, is warning people that Cash App does not have a live customer service phone line. But scammers are listing a number online and were able to drain her community development group’s fundraiser of $335 when she sought technical help. She is pictured standing in front of the boxes of groceries that were given to 100 families on June 27, 2020. She is wearing a 2020 Census t-shirt because the group also did drive-thru census as it gave out groceries.
More than 50 million consumers in the United States now use the Cash App platform to spend money, send it to others, get paid via direct deposit, invest in the stock market, and buy and sell bitcoin.
As part of a response posted through a blog Thursday, Cash App said: “The historical issues raised in this agreement do not reflect the Cash App experience today.”
A customer service number with only a recorded message
Regulators painted a most disturbing picture of some previous practices. Customer service was inadequate for many years, according to the Consumer Financial Protection Bureau, including one roadblock where the company listed a phone number on the back of the Cash App card and in the terms of agreement that 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 pointed out that Cash App failed to provide live customer support from 2016 until February 2021.
“Cash App created the conditions for fraud to proliferate on its popular payment platform,” said CFPB Director Rohit Chopra in a statement.
“When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused.”
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Michigan joins other states in enforcement action
On Wednesday, Michigan joined 47 state financial regulatory agencies in a coordinated enforcement action against Block, Inc., for violations of the Bank Secrecy Act and anti-money laundering laws that safeguard the financial system from illicit use.
The separate action involves a multistate settlement signed this week where Block agreed to pay an $80 million penalty to the state agencies, hire an independent consultant to review the comprehensiveness and effectiveness of its program, and 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. Michigan is set to receive approximately $1.6 million from an $80 million fine designated for enforcement purposes.
“As mobile payment services have become more popular, state regulators must act to protect consumers in these new environments,” said Anita Fox, director of the Michigan Department of Insurance and Financial Services.
State regulators in Arkansas, California, Massachusetts, Florida, Maine, Texas, and Washington led the multistate enforcement effort involving the Block-operated Cash App.
State regulators found that “Block was not in compliance with certain requirements, creating the potential that its services could be used to support money laundering, terrorism financing, or other illegal activities,” according to a statement issued by the Michigan Department of Insurance and Financial Services.
What the CFPB said about Cash App woes
The CFPB order addresses violations of consumer financial protection laws under the CFPB’s purview. The CFPB case raised a variety of issues, including charges that unauthorized transfers of money were not investigated.
Regulators said consumers did not see 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 and other redress to harmed consumers. The CFPB will enforce the order’s redress requirements to ensure affected Cash App users receive refunds and other redress.
The CFPB charges also highlighted how Block used various dead-end strategies to mishandle consumer complaints relating to fraud.
“While Block is required by law to investigate and resolve disputes about unauthorized transactions, the company’s investigations were woefully incomplete,” according to the CFPB.
Block directed those who lost money as a result of fraud to go to their banks to attempt to reverse transactions, which Block would subsequently deny, according to regulators.
“Block also deployed a range of tactics to suppress Cash App users from seeking help, reducing its own costs,” the CFPB stated.
The CFPB noted that consumers who called the customer service number they were given heard a prerecorded message that then told them to contact customer support through the app. Consumers could only contact the company through the app or through U.S. mail.
When they did get through, the CFPB said, customers who were dealing with fraud “were often met with delayed, inadequate, confusing, or inaccurate responses.”
Worse yet, the system only opened the door for more fraud.
Frustrated customers turned to the internet to search for an alternate route to reach customer service. But such web searches, according to regulators, were targeted by fraudsters posing as Cash App representatives, who tricked them into giving up 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 address the issue,” the CFPB stated in its release.
The CFPB order said some consumers called a fake Cash App customer support phone number and were instructed by the fake Cash App customer service representatives to download malware described as a “remote support application” or “remote access tool.”
After the consumer followed the instructions, the criminals would be able to remove or transfer funds out of the consumer’s Cash App account and into their own account.
How one Detroit woman was hit in 2020
Back in July 2020, I wrote a column about a Detroit woman who had no trouble signing up for Cash App in late June for collecting cash donations to buy groceries to feed struggling families on Detroit’s east side during the COVID-19 recession.
She received up to $335 in early donations. But Lisa Williams hit a big-time technical snag. She was unable to access the money to use for the grocery giveaway. And then she went online to track down a number for customer service.
“I googled Cash App Customer Service to get the number that I dialed for assistance, only to connect with scammers,” she said.
Cash App — which some analysts then said was say the fastest-growing digital wallet with more than 24 million monthly users at the end of 2019 — didn’t have a live customer service phone line.
There was no one to talk to directly.
And no surprise, the crooks figured that one out, set up their own online number and found a way to drain accounts to access other people’s money.
Williams told me more than four years ago that she didn’t hold Cash App responsible for the fraudulent activity, where $335 went to crooks. But she did believe they were responsible for not having adequate customer service and support. And she had a hard time getting a response via the app’s email and Twitter account. She only got a response after she contacted the Better Business Bureau.
Williams summed up her experience as: “It’s just this moneymaking thing that they’re kind of detached from.” At the time I wrote the column, she did not have her money back. I was unable to reach Williams on Thursday morning.
The Better Business Bureau warned in 2020 that it had received several reports from consumers who lost thousands of dollars after speaking with an alleged Cash App customer support person, whose real job was to trick people and steal cash.
The CFPB order requires Block to set up 24-hour, live-person customer service. The order also requires Block to fully investigate unauthorized transactions and to provide timely refunds, where appropriate.
What the Cash App parent firm has to say
Block did not respond to specific questions but sent a statement relating to the $80 million enforcement action and referred to a blog relating to the CFPB order that the company had posted online Thursday titled “Cash App’s Dedication to Customer Service and Protection.”
“We’ve reached an agreement with a multistate group of money transmission regulators led by Arkansas, California, Florida, Maine, Massachusetts, Texas, and Washington to resolve a previously disclosed matter principally related to Cash App’s past compliance program,” according to a Block spokesperson.
“As Cash App has grown, we’ve significantly increased our investment in compliance and risk management, while serving millions of customers with critical, affordable financial services. We share our regulators’ commitment to addressing industry challenges and will continue to invest across our operations to help promote a safe and healthy fintech ecosystem.” 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 and focusing on what’s best for our customers and our business.”
The blog highlighted several moves to strengthen customer support, including an “Innovative Payment Warnings tool, which leverages our AI models to warn customers that their peer-to-peer transaction may be part of a scam.”
The company said it is working with industry partners to address risks, such as complex scam operations 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 us directly, including live phone support, email, real-time in-app messaging, and a dispute submission tool within the app.”
FAQs
1. Why is Cash App issuing refunds to customers?
Cash App is refunding customers as part of a $175 million settlement related to a legal dispute or regulatory action. The settlement aims to compensate affected users for any financial losses or unfair practices.
2. Who is eligible for a refund from Cash App?
Eligibility depends on the terms of the settlement. Typically, users who were directly impacted by the issue leading to the settlement—such as unauthorized transactions, overcharges, or service disruptions—may qualify for a refund.
3. How can I check if I am eligible for a Cash App refund?
Cash App or the settlement administrator will likely notify eligible users via email, app notifications, or official website updates. You can also check by visiting the official settlement claims page if one is available.
4. How much money will each eligible customer receive?
The refund amount varies depending on the number of claims filed and the specific circumstances of each user’s case. Some users may receive full compensation, while others could get a partial refund.
5. How do I claim my Cash App refund?
If you are eligible, you may need to submit a claim form through the settlement website or Cash App’s official platform. Instructions for claiming refunds should be provided in official communications.