The Consumer Financial Protection Bureau fined fintech Block $175 million after finding it allowed fraud to multiply on its financial services platform Cash App.
The CFPB ordered the Oakland-based company to pay up to $120 million to consumers while issuing a separate $55 million fine, which will go into the bureau’s victims relief fund.
According to the CFPB, Cash App avoided investigating disputes of unauthorized transactions as required for peer-to-peer platforms. Many Cash App users link their bank account to the app, so that at the time of the transaction, the money is taken from the user’s bank account and sent to the recipient. Cash App’s terms of service allegedly led customers to believe that disputes are the responsibility of the linked bank.
The telephone number Block included on the back of its Cash Card and in its Cash App terms of service allegedly did not connect consumers to customer support for many years, instead leading to a pre-recorded message telling them to contact customer support through the app.
Consumers seeking an alternate path to customer service through web searches were allegedly targeted by criminals posing as Cash App representatives, who fooled them into giving up their passwords and other personal information. Block was allegedly aware that its customers were being targeted by criminals but didn’t take urgent action to address the problem.
“While Block is required by law to investigate and resolve disputes about unauthorized transactions, the company’s investigations were woefully incomplete,” according to the bureau. “Block directed users — who had suffered financial losses as a result of fraud — to ask their bank to attempt to reverse transactions, which Block would subsequently deny. Block also deployed a range of tactics to suppress Cash App users from seeking help, reducing its own costs.”
CFPB Director Rohit Chopra said Cash App “flouted its responsibilities and even burdened local banks with problems that the company caused.”
Considered one of the largest peer-to-peer platforms in the United States, Cash App has more than 56 million accounts. Of the $7.5 billion in gross profit Block made in 2023, an estimated $4 billion was generated by Cash App.
“While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business,” Block wrote in a press release following the settlement.
“The historical issues raised in this agreement do not reflect the Cash App experience today. We are committed to continually investing to ensure we uphold industry-leading standards.”
The CFPB fine came the same week that 48 state financial regulators fined Block $80 million for alleged violations of the Bank Secrecy Act and anti-money laundering requirements. As part of the settlement, Block agreed to hire an independent consultant to review its BSA/AML program and submit a report to the states within nine months. Block will then have 12 months to correct deficiencies outlined in the review.