Block, the parent company of popular online payment service Cash App, has been ordered to pay up to $175 million in damages by federal agencies after the financial services provider repeatedly failed to protect customers from fraud.
Block has agreed to pay up to $120 million in restitution to consumers harmed by deceptive transactions and unfair business practices, the Consumer Financial Protection Bureau (CFPB) detailed in a consent order filed Thursday. The company also must pay a $55 million fine to the CFPB's Victim Relief Fund.
"Cash App created the conditions for fraud to flourish on its popular payments platform," CFPB Director Rohit Chopra said in a statement. "When things go wrong, Cash App floutes own responsibility and even burden local banks with problems caused by the company.”
Bullock disputed the CFPB's findings.
"While we strongly disagree with the CFPB's mischaracterization, we have decided to resolve this matter so we can put it behind us and focus on what is best for our customers and business," the company said in a statement.
The company also said it uses a variety of ways to support customers and ensure they are protected when using Cash App. These include providing customers with multiple ways to contact Block, such as a dispute submission tool within Cash App; using artificial intelligence to detect and stop fraud; and using advanced technology to warn customers of potential scams about their transactions.
Peer-to-peer platforms such as Cash App are generally required by law to investigate unauthorized transaction disputes under the Electronic Funds Transfer Act. But Cash App customers, many of whom have bank accounts linked to the app, were misled by the terms of service into believing that transaction disputes were the responsibility of their banks, the CFPB said.
In one example cited in the agency's consent order, Cash App directed a customer who reported an unauthorized debit card to contact that person's bank, thus evading its statutory duty to investigate possible fraud.
“In many cases, respondents failed to conduct investigations in a timely manner or, in some cases, did not conduct investigations at all based on erroneous notifications provided by consumers,” the CFPB said.
The consumer agency added that when Block did investigate disputes, it "deliberately used shoddy investigative practices to end reports of unauthorized transactions in the company's favor".
According to the CFPB, blockchain also makes it difficult for Cash App customers to receive helpful customer service. For years, the phone number listed on the back of the app's cash card and in its terms of service connected users to a prerecorded redirect to contact customer support through the app. The agency said those who contacted Cash App customer service through the app or, in some cases, by mail often received "delayed, inadequate, confusing or inaccurate responses."
In addition to $175 million in refunds and penalties, the consent order also requires Block to provide 24-hour on-site customer service. It also requires Block to promptly and thoroughly investigate unauthorized transactions and "promptly provide refunds where appropriate."
Block is required to pay at least $75 million and up to $120 million in refunds to consumers who did not receive the refunds they were owed for fraudulent transactions and whose unauthorized transfers were not adequately investigated by Cash App. Consumers whose accounts were locked or who did not receive provisional credits during a delayed investigation are also entitled to a refund.
According to the CFPB's latest guidance, consumers do not need to take action to receive a refund. The agency said it will enforce the order's requirements to ensure affected Cash App users receive refunds and other remedies.
With more than 56 million accounts, Cash App is one of the largest peer-to-peer payment platforms in the country. The service allows consumers to send and receive electronic transfers, accept direct deposits, and use prepaid cash cards for purchases and ATM withdrawals.
According to the CFPB, Block's gross profits in 2023 will be $7.5 billion, of which about $4 billion will come from Cash App.