CFPB Investigating Venmo for Debt Collection Practices
The Consumer Financial Protection Bureau is probing PayPal’s Venmo app over alleged unauthorized fund transfers and aggressive collections processes. PayPal Holdings said it was cooperating with the U.S. consumer watchdog regarding the civil investigation, Reuters reports.
Venmo is a popular mobile app for person-to-person payments. Transactions in the app seem instantaneous, but it can actually take a day or two for the money to leave the sender’s bank account. So it’s actually Venmo who provides the money for the payment to the recipient until the transfer clears.
If a user sends money over Venmo to a scammer who immediately withdraws it for a fee, or if a sender’s bank or the sender himself stops a transaction before it is settled, Venmo takes its money back. Sometimes that results in customers ending up with negative balances, which means they owe Venmo money.
The company has threatened to dispatch debt collectors on users who overdraw their accounts. That happens even when those users are victims of scams. Venmo continued its aggressive collection efforts during the coronavirus pandemic as well.
As of Dec. 31, there were $270 million in negative customer balances that PayPal didn’t expect to be repaid, up from $221 million on June 30, according to a securities filing reported by Fox Business. However, it is not clear what share of that is due to Venmo customers.
Lower Spend - Chase Ink Business Preferred® 100K!
Chase Ink Business Preferred® is a powerful card that earns 3X Ultimate Rewards points in a broad range of business categories on the first $150K in spend per year. Right now earn 100K Chase Ultimate Rewards points after Learn more about this card and its features!
Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
