There was cash in the PayPal account â but it mysteriously disappeared.
In another account, PayPal put the funds of a small business on hold â for six months â because it mistakenly thought the company was selling weight-loss products.
More than $3,000 in a Venmo account was lost in translation between the app and the holderâs bank account.
And one anguished user pleaded for government help after Square, which owns CashApp, left the owner unable to access money. âI will possibly be out on the street because of this and am just asking for what is rightfully mine,â the user complained. âI desperately need it.â
About four of every five American consumers use a mobile payment app, and hundreds of bereft Californians â and thousands of others around the nation â have pleaded for official intervention to the Consumer Financial Protection Bureau since 2018, with an enormous spike in complaints during the pandemic.
âThe apps were originally marketed as a way for friends to split expenses. However, the ease of opening peer-to-peer (P2P) accounts, the ease of obtaining information about other users and a variety of ways to trick consumers have created new fraud risks to users,â said an analysis of mobile wallet complaints by the California Public Interest Research Group Education Fund.
âDigital app payments are generally âinstantaneousâ and the app companies generally take the position that transactions are not reversible. Customer service for payment apps is minimal, sometimes lacking contact phone numbers or human interaction at all. In the absence of regulatory action, customer service improvements or security features appear to ratchet up only in response to reputational threats,â its report said.
The CFPB was created in the wake of the financial crisis of 2007-08 to protect the little guy from the machinations of big banks and Wall Street, and the agency has endured partisan warfare ever since. But CALPIRG said it needs to live up to the ideals of its mission and do more to protect consumers from woes plaguing the digital wallet sphere.
Consider the plight of Tiara Nourishad, a student at UC San Diego. She tried to repay a friend $100 for a series of ride-shares via Venmo, but she mistyped a letter in her friendâs username. Her money sped off to someone else, who never responded to entreaties to return it. She asked Venmo to intervene, but got no response.
âI still had to pay my friend back, so I was just out $100,â Nourishad told CALPIRG.
President Joe Biden had troubles of his own: It took only minutes for BuzzFeed News to find the presidentâs secret account, ârevealing a network of his private social connections, a national security issue for the United States, and a major privacy concern for everyone who uses the popular peer-to-peer payments app,â BuzzFeed reported.
CALPIRG wants policymakers to do two things: Ensure that consumers are protected when theyâre defrauded into sending money, and require app providers to investigate errors and fraud, even when the consumer made the mistake or sent the money. Thatâs an existing duty thatâs not being enforced, CALPIRG said.
âWe really think itâs time for the CFPB to force these payment apps to provide better protection and customer service,â said Jenn Engstrom, state director of the CALPIRG Education Fund. âPeople use these P2P apps for convenience â but thereâs nothing convenient about not being able to access your money.â
The pandemic has been good for mobile pay apps, as locked-down consumers bought essentials online and paid with âcontactlessâ transactions. That surge is reflected in complaints to the Consumer Financial Protection Bureau.
Since the CFPB started collecting complaints in the âmobile or digital walletâ category in 2018, there have been more than 10,000 complaints logged, according to its database through June. Nearly 7,000 of them have come since March 13, 2020, when the pandemic bore down.
The three most common complaints are problems managing, opening or closing accounts; problems with fraud or scams; and problems with transactions, including unauthorized activity, CALPIRG found.
Three companies â PayPal (which also owns Venmo), Square11 (which owns Cash App) and Coinbase, popular for cryptocurrencies â accounted for more than two-thirds of all digital wallet complaints.
âSomehow an individual was able to hack into my CashApp account which was linked to my bank account and fraudulently transfer $450 to themselves, also disable my phone notification so that I was unaware,â said one user, illustrating how easy it is for scammers to access usernames and phone numbers to take over accounts.
Stopping âbad actorsâ
The companies said they are unwavering in their commitment to protect consumers and are constantly improving their services.
âWeâve always made preventing bad actors from using our platform a top company priority,â said a statement from PayPal and Venmo.
âPayPal combines technology expertise with enhanced manual investigatory work to help detect and stop these bad actors, as well as partners and collaborates with law enforcement to help prevent customer and platform exploitation. If users believe they have been the target of potentially unauthorized activity, we encourage them to reach out to our customer service teams.â
For Venmo specifically, itâs important to point out that some fraud occurs when customers violate the user agreement, such as not purchasing from an authorized merchant, the statement said.
A statement from CashApp stressed ongoing efforts on customer education, user profiles that can be checked to ensure money goes to the proper person, and fraud and scam monitoring and reporting. âThese efforts are ongoing, and weâre constantly investing in new processes, applying machine learning to improve our systems, and incorporating customer feedback,â it said. Cash Appâs phone number is 1-800-969-1940.
Coinbase said it strives to be the most trusted and easy-to-use platform for accessing the cryptoeconomy.
âWe understand how frustrating it is when our customers experience issues such as the inability to access their account or make transactions,â the company said in a statement. âImproving our customer support experience remains a top priority. In the past few months, we have quadrupled our capacity across our support team, and have delivered new technology and methods to resolve our customersâ most pressing issues faster. For example, we have recently updated our two-factor authentication and improved our identity verification process to reduce friction for account recovery while maintaining our security standards.â
The Consumer Financial Protection Bureau didnât comment on CALPIRGâS suggestions for action, but said this by email: âThe law provides important protections for consumers who use peer-to-peer apps and the CFPB takes complaints about peer-to-peer payments seriously.â
Engstrom, from CALPIRG, wants more from the federal regulator.
âWe think the CFPB can do more to enforce the inadequate (Electronic Funds Transfer Act) law when companies donât comply with their reinvestigation responsibilities, but we also think Congress needs to fix the law,â she said. âThe law doesnât protect consumers against fraud-induced payments when initiated by consumers to scammers.â
When a consumer is tricked by a scammer into pushing âsend,â itâs not considered an unauthorized charge as defined in the law. You can sometimes stop payment on a check, dispute a credit card charge or cancel a bill payment â but new mobile payment services generally donât have a recall feature, the CALPIRG report said.
So whatâs a consumer to do? Proceed with caution. CALPIRG offers these tips:
- Using a P2P app is like spending cash. Use only for friends and others you both know and trust.
- Review and set all your app privacy settings to the most secure available options. Know that some apps make information about your transactions and your friends public by default.
- Check security settings. If you can turn on text notifications of transaction activity, do it. If you can choose two-factor authentication, use it.
- Itâs more expensive to link a P2P account to a credit card, but credit cards have more protections. Think about using them instead of your bank account.
Engstrom is currently planning a wedding, and has been paying her vendors with P2P apps. On her to-do list this week: Link the apps to a credit card, not her bank account.