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Cash App Will Pay $45 Million in New Settlement: Here's Who Qualifies
0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. Cash App parent company Block has agreed to pay $45 million as part of a settlement with 46 states and Washington, D.C.
The settlement is to resolve allegations that the company misled users about fraud protections and failed to adequately safeguard customer funds on its popular peer-to-peer payment platform.
"Cash App told people their money was safe, and millions of Oregonians and Americans believed them, including a lot of people who didn't have other options. When things went wrong, Block left them with nowhere to turn,” Oregon Attorney General Dan Rayfield said in a statement.
For customers, the impact could be minimal though, as the $45 million agreement is primarily between Block and state regulators. Customers who do receive compensation are generally covered by a separate Consumer Financial Protection Bureau (CFPB) order dealing with restitution for affected users.
Cash App is used by millions of Americans to send, receive and store money, including direct deposits of paychecks and even government benefits.
State attorneys general have alleged that Block marketed the platform as a safe alternative to traditional banking while failing to provide the protections consumers expected when fraud or unauthorized transactions occurred.
According to state officials, Block misled consumers about Cash App's fraud protections and security features. The company was also accused of failing to adequately investigate certain unauthorized transaction disputes and allowing accounts to be created with minimal identity verification.
The states also argued Block did not provide sufficient live customer support for users experiencing fraud or account-access issues and generally failed to take adequate steps to combat scams occurring on the platform.
“This Cash App settlement is a significant one, as regulators are essentially saying that when a financial company encourages consumers to treat its product like a bank account, it also assumes a responsibility to protect their money and respond when fraud happens,” Alex Beene, financial literacy instructor at the University of Tennessee at Martin, told Newsweek .
State investigators say that users seeking help often encountered fake customer-service numbers operated by scammers because Cash App lacked adequate phone support for years.
However, Block has denied wrongdoing as part of the settlement.
Customers do not need to file a claim to receive money from the new $45 million settlement because the funds are being paid to participating states rather than directly to Cash App users.
“Silicon Valley’s attempt to democratize finance has left many individuals, particularly those who are unbanked or underbanked, exposed to nefarious actors,” Kevin Thompson, CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek .
“This is especially concerning given that many of these companies want to operate like banks without the same level of regulation. Consumers need to understand that these systems are not traditional banking channels, nor do they necessarily have the same built-in protections.”
Consumers who were harmed by certain fraud-related issues on Cash App may be eligible for compensation under the separate CFPB enforcement action that was previously announced.
That order requires Block to pay at least $75 million in consumer restitution, but total restitution could reach as much as $120 million.
Eligibility generally centers on users who experienced unauthorized transactions or were improperly denied assistance or reimbursement. However, the restitution program could have far reaching impacts in the realm of fintech, experts say.
“It is difficult to say what the long-term impact will be,” Thompson said. “If Silicon Valley continues to remain in the pocket of the government, you will continue to see more of this, while many of these companies receive nothing more than a slap on the wrist through settlements in which they claim no fault.”
Under the settlement, Block has agreed to strengthen its fraud-prevention measures and improve customer support for Cash App users.
The new $45 million settlement does not require a claims application and does not create a new payout fund. Users who believe they were harmed by fraud or unauthorized transactions should instead look for information related to the CFPB restitution program, which is separate from the multistate settlement.
“This could have long-ranging effects that go beyond Cash App,” Beene said. “Fintech companies have spent years competing with traditional banks on convenience, but regulators are increasingly signaling that they will also be expected to compete on consumer protection.”
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