WASHINGTON – Democrats in the Senate called on Thursday PayPal and Cash App to better protect users of their peer-to-peer payment apps from fraud.
Sen. Sherrod Brown of Ohio, along with Sen. Elizabeth Warren of Massachusetts, Sen. Jack Reed of Rhode Island, and Sen. Bob Menendez of New Jersey, have called for detailed fraud detection and prevention methods from PayPal-owned Venmo and Cash Block.
“These companies’ consumer protection policies have not kept pace with the explosion of customer interest in the platform,” the lawmakers wrote, adding that they failed to take sufficient measures to protect users from the harm the services enable.
Cash App did not immediately respond to a request for comment from CNBC. PayPal said it “proactively” uses fraud detection tools and manual investigations “to mitigate any potential fraudulent activity and to protect our customers,” a company spokesperson said.
Venmo’s total payment volume beat expectations, rising 9% to $62.7 billion PayPal Q1 Investor Update. Cash app transactions also generated more than $203 billion in inflows among 51 million monthly users in December 2022, according to the bloc Annual Report.
Meanwhile, PayPal stated in its Annual Report that it expects users to continue to attempt money laundering, penalty evasion, and other illegal activities on Venmo, and that its current fraud reduction measures “may not be effective in detecting and preventing fraud, particularly new and evolving forms fraud or in connection with new or expanded product offerings.”
Block also said it may not be able to “prevent or mitigate” identified or potential risks within its risk management practices in its annual report.
The lawmakers cited January’s Consumer Reports in their letter survey that 9% of weekly P2P users fell victim to fraud and 12% accidentally sent money to the wrong recipient. Pew Research Center in 2022 message found that black and Hispanic P2P users were twice as likely to be scammed compared to their white counterparts, they wrote.
Lawmakers demanded comprehensive responses to a list of requests, including consumer fraud reports for the past five calendar years and fraud detection and remediation policies, by June 30.
“Americans deserve a payment system that gives them speed and convenience, but above all, keeps their money safe,” they wrote.
The letter is part of an ongoing investigation into consumer safety of P2P platforms that Warren has led over the past few years. Menendez and Reed joined her in April 2022 supervisory letter to seven large banks which control the money transfer app Zelle po reporting exposed rampant fraud and theft on the platform.