Cash App Users to Receive up to $120M in Refunds from CFPB Action Against Block

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An order issued by the Consumer Financial Protection Bureau (CFPB) on January 16 requires Cash App operator Block, Inc. to refund consumers up to $120 million, pay a $55 million civil penalty and bring its customer service and dispute investigation practices in line with federal law.

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The 75-page consent order was issued after the CFPB found that Block for years failed to provide effective customer service for Cash App and take proper, timely measures to prevent and address fraud on the payment platform. According to the order, the company also misrepresented that it was adequately protecting consumers from unauthorized transfers while at the same time failing to investigate and resolve disputes appropriately.

By order of the CFPB, Block must pay between $75 million and $120 million in redress to consumers who, as of July 1, 2019, fit the following descriptions:

• Individuals for whom Block failed to initiate or complete an investigation following the receipt of a Notice of Error disputing an unauthorized transfer, and who did not receive a refund, will receive a pro-rated share of the amount of the allegedly unauthorized transaction;
• Consumers who submitted a Notice of Error regarding an unauthorized transfer more than 60 days after the transaction took place, which Block refused to refund on the basis that they had not timely submitted the notice, will also receive a pro-rated portion of the amount of the transfer;
• Users who submitted a Notice of Error regarding an unauthorized transfer for which Block failed to provide a partial refund in compliance with Regulation E of the federal Electronic Funds Transfer Act (EFTA) will receive a pro-rated share of the amount to which the consumer would have been entitled;
• Individuals who had accounts frozen by Block for a period of at least 14 days and then unfrozen, where the balance on the account at the time was at least $25, will receive a pro-rated portion of $50; and
• Consumers who sent a Notice of Error and did not receive a provisional credit in the amount of the alleged error—which must be at least $10—when Block was unable to complete its investigation within 10 business days will receive a pro-rated share of what would have accrued on the full amount of the unauthorized transfer, at a 30-percent annual percentage rate (up to $50), during the period when the customer would have had use of such a credit.

According to the CFPB’s order, consumers do not need to take any action to obtain a refund or payment from Block.

Per the order, the agency found that Block’s security policies do not sufficiently detect or combat fraud on the Cash App platform, putting users at risk of being targeted by scammers and identity thieves.

The CFPB also accused the company of violating the EFTA and Consumer Financial Protection Act (CFPA) by depriving users of meaningful customer service resources. While Block listed a telephone number on the back of its Cash Card and in the Cash App terms of service, the number did not connect users to customer support of any kind until February 2021, the order says.

“Consumers could only contact Block through the app or through U.S. mail and were often met with delayed, inadequate, confusing, or inaccurate responses,” the CFPB stated in a January 16 press release. “Consumers looking for an alternate route to Cash App customer service through web searches were targeted by fraudsters posing as Cash App representatives, who tricked them into giving up their passwords and other personal information.”

Block was aware of the fake Cash App support numbers advertised online and knew that users were being targeted by scammers yet failed to effectively address the problem, the order contends.

The CFPB further asserted that Block had shirked its EFTA duties that require it to promptly investigate and resolve disputes about unauthorized transactions within 10 business days of receiving a Notice of Error from a consumer. The press release calls the company’s investigations “woefully incomplete,” if they are conducted at all.

“When it did conduct investigations, Block used intentionally shoddy investigation practices to close reports of unauthorized transactions in the company’s favor,” the agency said.

In addition, the CFPB said Block has attempted to dodge its investigative obligations by leading users to believe their disputes are the responsibility of the bank linked to their account.

Many of Block’s actions following its investigations are “nonexistent, delayed, or insufficient” and have resulted in scores of consumers being wrongfully denied refunds, the document claims.

Moreover, the CFPB found that the company has misrepresented that it properly protects users from fraudulent activity.

“There were widespread reports that fraud was occurring on the Cash App platform, including account takeovers in which fraudsters exploited the Cash App platform to drain consumer accounts of funds,” the order reads. “But [Block] reassured consumers that it would protect against fraud, encouraged consumers to rely on Cash App as an alternative to a bank, and implied its platform was safe.”

On top of providing refunds to impacted Cash App users, Block must pay a $55 million penalty to the CFPB’s victims relief fund, where such fines are aggregated and used to compensate consumers who have been harmed by companies that violate federal consumer financial protection laws.

The CFPB has also ordered Block to set up 24-hour, live-person customer service and change its dispute investigation and refund practices to ensure they comply with federal laws going forward.

Separately, on January 15 of this year, 48 state financial regulators ordered Block to pay an $80 million fine and undertake corrective action for violations of the Bank Secrecy Act and anti-money laundering laws.

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