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A trio of Democratic senators has called on Venmo and Cash App to start reimbursing customers for losses to scams and offer new tools for easier reporting of fraud.
On Thursday (December 14), senators Sherrod Brown (D-OH), Jack Reed (D-RI) and Elizabeth Warren (D-MA) wrote to Venmo and Cash App to demand action on rising losses to scams.
“We are extremely concerned that instant payment platforms are not taking reasonable, common sense and proactive steps to protect their customers,” the senators said, writing separately to each platform.
“We write to ask you to adopt new policies to reimburse consumers who get scammed, and that you make it easier for users to report when they have been scammed.
The Venmo letter is addressed to Alex Chriss, president and CEO of Venmo owner PayPal, and the Cash App letter, which is almost identical, is addressed to CEO Brian Grassadonia.
Brown is the chair of the Senate Banking Committee, and Reed and Warren are both majority members of the committee.
In each letter, the senators included further questions related to the two platform’s handling of scams and fraud cases, and asked for responses by January 31, 2024.
Alongside commitments to reimburse scam victims, the senators asked both platforms to provide information on how they “detect and eliminate” inducements to fraudulent payments.
In previous correspondence, both Venmo and Cash App noted that their policy is to block the accounts of users who engage in illicit conduct.
The senators asked how many accounts each platform has blocked and why the focus is on blocking accounts rather than users “who may open another account”.
Arbitration and bans on class actions
In May 2022, Venmo amended its user agreement to include an arbitration clause, which prevents customers from participating in class action lawsuits.
Moreover, to opt-out of this arbitration clause, customers must physically mail an opt-out letter to Venmo within 30 days of accepting the user agreement.
Cash App, likewise, already included an arbitration clause in its user agreement and the same opt-out conditions.
The senators said they are “concerned” about these arbitration clauses and the “onerous” requirements for customers who wish to opt out.
They also asked for more information on how many arbitration claims have been initiated, alongside information on outcomes and payouts (if any) over the last five years.
Senators praise Zelle’s anti-fraud commitment
Though Zelle was not mentioned by name, the senators gave praise to one “very large instant payments platform” that has taken an “important step” towards reimbursing victims of imposter scams.
An imposter scam is when a fraudster impersonates a representative of a business, utility company or public agency to trick a consumer into sending money. In the UK, this is known as authorised push payment (APP) fraud.
“Though the competitor has not fully released details on the new policy, or provided any public information about how effective it has been at reimbursing customers, its policy changes could represent an improvement in consumer protections,” the senators wrote.
Throughout 2023, the senators have been in regular correspondence with America’s three largest peer-to-peer (P2P) payment apps — Zelle, Venmo and Cash App — gathering information on responses to fraud.
In June, the senators wrote to Venmo and Cash App to investigate whether the two platforms offer any protection as standard to customers who fall victim to scams.
In their latest letters, the senators confirmed their suspicions that both Venmo and Cash App offer no standard protection to these victims.
“It is past time for Venmo [and Cash App] to follow industry trends by providing similar reimbursements to wronged consumers,” they said.
The senators added that, unlike banks and other payment service providers (PSPs), Venmo and Cash App are in a “unique position” to track and prevent these scams.
Both are closed systems, they said, in which both senders and receivers are customers. The platforms therefore have visibility of both sides of every transaction — whether legitimate or fraudulent.
Although Venmo does not publish data on the volume or value of scams on the platform, both are thought to be high, based on third-party research.
In January 2023, a Consumer Reports survey found that 9 percent of frequent users of P2P apps have been victims of fraudulently induced transactions, and 12 percent have accidentally sent money to the wrong person.
At present, more than 100m Americans have access to Zelle via a mobile banking app; Venmo has almost 90m accounts; and Cash App has more than 51m monthly active users.
In other words, the survey indicates that millions of Americans may have been defrauded with no way to recover their funds.
In Venmo’s case, the senators added that the platform should make it easier for customers to report fraudulently induced transactions.
At present, Venmo allows scams to be reported through its website, but this process is “unduly cumbersome” for consumers and should be improved, the senators said. Instead, customers should be able to report scams directly through the Venmo app.
