US fintech Block Inc has settled over various fraud shortcomings, paying out millions for the second time in as many days.
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The Consumer Financial Protection Bureau (CFPB) today announced it has ordered Cash App’s parent company Block to pay $175 million for allowing fraud to “proliferate” and for closing fraud cases without opening an investigation as required by federal law.
The action comes just one day after Block agreed an $80 million settlement with the Conference of State Bank Supervisors, which brought a multi-state enforcement action against the fintech for anti-money laundering and Bank Secrecy Act compliance failures.
The CFPB has ordered Block to pay redress to consumers up to $120 million and no less than $75 million, alongside a $55 million civil penalty into the agency’s victims relief fund.
The consumer watchdog alleges Block’s investigations into potentially fraudulent and unauthorised transactions were “woefully incomplete” and its security protocols put its users at risk from fraudsters.
Block allegedly directed fraud victims on Cash App to ask their bank to reverse the fraudulent transaction, absolving itself of any investigative responsibility, contrary to federal law. “A company cannot simply use fine print to escape these legal requirements,” the agency said.
The CFPB also alleges Cash App users were deprived of customer service channels, with provided telephone numbers not connecting users to support agents. It also alleges Block knew fraudsters were posing as Cash App customer support personnel yet failed to act.
“Cash App created the conditions for fraud to proliferate on its popular payment platform,” said CFPB Director Rohit Chopra. “When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused.”
By signing the CFPB’s consent order, Block’s chair Jack Dorsey – also the founder of Twitter – has prevented litigation.
“While we strongly disagree with the CFPB’s mischaracterisations, 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,” Cash App said in a statement.
The CFPB says the financial redress will be paid to consumers whose unauthorised transfers were not investigated, who did not receive their entitled refunds, and whose accounts were locked during delayed investigations. Alongside the monetary penalty, the regulator is further demanding Block establishes a 24-hour, live-person customer service.
In its statement, Cash App said: “We live by a simple principle: do right by our customers.”
It said it experienced huge growth during the pandemic, which had tested its customer services “like never before” but that it has invested in better customer support and scam prevention measures. These include live customer support via phone, email and in-app messaging, and the use of advanced detection systems and artificial intelligence to combat scams.
“This work is never done,” the statement concludes. “We remain committed to doing business responsibly while proactively taking initiative and independent action to better serve our customers.”