Cash App parent company to pay up to $120 million to fraud victims, feds say

The parent company of Cash App, a peer-to-peer payment platform, has been ordered to pay up to $120 million to fraud victims, in addition to a $55 million penalty, the Consumer Financial Protection Bureau announced this week. 

The financial regulator on Thursday said Block used "weak security protocols for Cash App and put its users at risk."

Here’s what to know:

Cash App ordered to pay up to $120 million to harmed customers

What we know:

The CFPB said Block is required by law to investigate and resolve disputes about unauthorized transactions, and the company’s investigations "were woefully incomplete."

The CFPB said Cash App users who were victims of fraud were allegedly directed by Block to ask their banks to reverse the charges – "which Block would subsequently deny."

"Block also deployed a range of tactics to suppress Cash App users from seeking help, reducing its own costs," the financial regulator said.

What they're saying:

For its part, Cash App said it is "committed to ensuring a safe and secure experience on Cash App, as well as relentless self-assessment to improve our platform." The company said it experienced "unprecedented growth" during the pandemic as millions began using the platform and "rapid growth tested our customer service like never before," and it made investments in customer support and combating scams. 

"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," Cash App said in a statement on its website. 

Dig deeper:

Cash App is one of the largest peer-to-peer payment platforms in the U.S. with more than 56 million accounts. It allows users to send and receive electronic money transfers, accept direct deposits, and use a prepaid card to make purchases and ATM withdrawals. 

Block required to pay refunds

By the numbers:

As part of the agreement with the CFPB, Block is required to pay up to $120 million in refunds and other redress to consumers whose unauthorized transfers were not investigated, consumers who did not receive refunds they were entitled to, and consumers whose accounts were locked for an extended period of time or who were not provided provisional credits during a delayed investigation. 

Block must pay a minimum amount of $75 million in refunds and other redress. 

"The CFPB will enforce the order’s redress requirements to ensure affected Cash App users receive redress," the regulator said. "Consumers will not need to take action at this time to obtain redress."

Block will additionally set up a 24-hour, live-person customer service "to ensure that the misconduct does not recur," the CFPB said. 

Block was also ordered to pay a $55 million fine to the CFPB’s victims relief fund.