By Hank Russell
A payment app developer has been ordered to pay the state of New York $1.6 million in damages as part of a $45 million settlement with Attorney General Letitia James and 45 other attorneys general. The coalition of AGs claimed the company misled its users and failed to protect them from scams and fraud.
An investigation by James and the coalition found that Block misled Cash App users with advertising and falsely implied the app worked like a bank with the same protections for customers’ funds that banks have. Block claimed in its terms of service that it had “cutting edge… fraud detection technology” when the company lacked a consistent fraud detection system. Block also did not have a functioning fraud hotline for users to report scams.
Block knew fraud on its platform was rising sharply, investigators said, but instead of warning users or strengthening protections, it doubled down on marketing. Block focused on drawing in new customers while allowing scam accounts to proliferate.
The investigation also found that Cash App did not require a Social Security number or date of birth to create an account, and there was no limit on how many accounts one person could open, allowing one bad actor to operate an entire network of scam accounts. The AGs also claimed that Cash App limited chargebacks on accounts while incentivizing the creation of new accounts, which caused fraud to go unchecked.
Block made a particular push to reach unbanked and underbanked consumers by promoting direct deposits of paychecks and government benefits into Cash App, the AGs claimed. Users who relied on Cash App as their primary financial account were especially vulnerable to fraud, yet Block grew its user base without introducing security and fraud prevention measures that would protect these customers’ accounts.
While some of Block’s policies failed to stop fraud, others actively enabled it, according to the investigation. Because Cash App had no phone number to call for support, users who got locked out of their accounts searched online for a customer service number and often ended up calling fake numbers run by scammers posing as Cash App customer service. The AGs contended that those scammers would then take over victims’ Cash App accounts or drain users’ other financial accounts. Block knew this was happening and failed to warn users or set up a real phone line until 2021.
Investigators also found that Block also ran a social media promotion called Cash App Fridays, encouraging users to publicly post their unique Cash App identifier for a chance to win a weekly prize. Fraudsters would then contact those users, tell them they had won, and trick them into handing over their login information. James and the coalition’s investigation found that Block was aware of these scams but kept running the promotion, training staff to expect defrauded customers to contact them.
The coalition also claimed that Block’s failures to provide adequate customer service and fulfill its promise to protect users from fraud caused confusion and financial hardship for its users. Cash App users who experienced automated account locks for suspicious transactions were frequently locked out of their accounts for weeks without a way to access their money. Victims of fraud through the app were often left with no recourse. Block’s delays made it impossible to get stolen money back from scammers and Block failed to investigate unauthorized transactions or issue refunds when required by law.
As a result of the settlement, Block must implement responsible practices to resolve these issues, including:
- Maintaining customer support services that can resolve fraud complaints, account lockouts, and other problems.
- Offering live support 24 hours a day, with a real person available by phone at least 13.5 hours a day and by live chat at least 18 hours a day.
- Stopping false or misleading claims about Cash App’s safety and how it protects users from fraud.
- Discontinuing marketing practices known to increase fraud on the platform.
- Directly educating consumers about common types of fraud.
- Fulfilling its legal obligations to investigate fraud claims and reimburse users for unauthorized transactions.
Based in Oakland, California, Block develops and owns CashApp, as well as the following apps: Square, Afterpay, TIDAL, Bitkey and Proto.
“New Yorkers were promised that Cash App was a safe and secure platform to send money, but in reality, the app exposed them to rampant fraud,” James said. “For years, Cash App users lost money to costly scams because Block cared more about profits than protecting its users. I am proud that this bipartisan group of attorneys general came together to hold Bock accountable and ensure Cash App protects its users’ funds.”
Long Island Life & Politics reached out to Block for comment and is waiting to hear back.
Joining Attorney General James in securing this settlement are the attorneys general of Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.