The parent company of mobile banking platform Cash App has been ordered to pay $175 million to users due to weak security procedures, a federal agency says.
The Consumer Financial Protection Bureau (CFPB) an independent federal agency responsible for consumer financial protections, issued an order last week for Block, Cash App's parent company, to refund $120 million to Cash App users and pay $55 million into the Consumer Financial Protection Bureau's Civil Penalty Fund. The fund provides money to people who have been "harmed by companies that break federal consumer financial protection laws."
According to CFPB, Block is required by law to investigate and resolve unauthorized transaction disputes but failed to do so. Block, according to the bureau, directed users who suffered financial losses to ask their banks to attempt reverse transactions, instead of handling the incidents themselves.
The bureau claims Cash App "tricked" customers with its Terms of Service to avoid investigative obligations. In Cash App's Terms of Service, users are led to believe that disputes are the responsibility of their linked banks.
However, the Electronic Fund Transfer Act requires that peer-to-peer platforms like Cash App investigate disputes and cannot "use fine print to escape these legal requirements," according to the bureau.
The Consumer Financial Protection Bureau also claims that Block deprived Cash App users of "meaningful and effective customer service."
According to the bureau, Block included a telephone number on the back of its Cash Card and in its Cash App Terms of Service that for "many years" led customers to a pre-recorded message, directing them to contact customer service through the mobile app. Customers, during this time, could only contact customer service through the app or U.S. mail, the bureau alleges.
Cash App did not immediately respond when contacted by USA TODAY on Tuesday.
Block denies claims but agrees to pay
Block has repeatedly denied the Consumer Financial Protection Bureau's accusations, calling them "mischaracterizations" in a news release, but the company decided to settle and pay per the CFPD's orders.
How can Cash App users redeem their claims?
According to the Consumer Financial Protection Bureau, consumers will not need to take action to get their payout, as the agency will identify and ensure payment to all impacted parties.
Users that qualify include:
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Consumers who did not receive refunds to which they were entitled for fraudulent transactions.
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Consumers whose accounts had unauthorized transfers or transactions not adequately investigated by Cash App and Block.
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Consumers who had accounts locked as a result.
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Consumers who did not receive provisional credits during delayed investigations.