Investing.com -- Today, the Consumer Financial Protection Bureau (CFPB) imposed a penalty on Block, the operator of the Cash App, for its failure to effectively address fraud on its platform. The company has been ordered to pay a total of $175 million, comprising $120 million in refunds and other redress to customers, and a $55 million penalty to the CFPB's victims relief fund.
Block operates from its primary executive offices in Oakland, California, and offers multiple digital payments products for businesses and consumers. The company's offerings include the point-of-sale payment system Square and the consumer payment service Cash App. The latter, one of the largest peer-to-peer payment platforms in the United States, has more than 56 million accounts. In 2023, Block made a gross profit of approximately $7.5 billion, with about $4 billion generated by Cash App.
The CFPB's order comes after it was found that Block had inadequate security protocols for Cash App, thereby putting its users at risk. Despite being legally required to investigate and resolve disputes about unauthorized transactions, the company's investigations were found to be insufficient. Block also directed users who had suffered financial losses due to fraud to seek help from their banks to reverse transactions, which it then denied. The company also used various tactics to discourage Cash App users from seeking help, thus reducing its own costs.
CFPB Director Rohit Chopra said, "Cash App created the conditions for fraud to proliferate on its popular payment platform. When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused."
The CFPB found that Cash App tried to evade many of its investigative obligations by misleading consumers with its Terms of Service. The company also used intentionally poor investigation practices to close reports of unauthorized transactions in its favor.
Furthermore, Block failed to provide meaningful and effective customer service to Cash App users, leaving the network vulnerable to criminals defrauding users. The company's telephone customer support was ineffective, often leading to a pre-recorded message directing consumers to contact support through the app. Consumers were often met with delayed, confusing, or inaccurate responses when they reached out for help.
Additionally, the CFPB order requires Block to establish a 24-hour, live-person customer service and to fully investigate unauthorized transactions, providing timely refunds where appropriate.
This penalty is separate from a $80 million fine imposed on Block by state regulators yesterday for violations of the Bank Secrecy Act and anti-money laundering laws.
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