Attorney General Ken Paxton has secured a $45 million settlement with Block, Inc., the company behind Cash App, resolving allegations that the company misled customers about platform safety and failed to provide lawful protection from fraud.
Cash App, which was launched by Block, Inc. in 2013, allows users to transfer money to other users. The company has more recently been promoting direct deposit for paychecks and government benefits through Cash App, which “specifically targets” consumers who have come to rely on the app as their primary financial account, according to a press release from Paxton’s office.
Paxton co-led the multistate investigation into Cash App, joined by 45 other states.
It was found that though Cash App marketed its platform as a safe, banklike alternative, fraud on the app was rising sharply, and its consumer protections were failing to keep pace with those in the broader banking industry.
It was reported that “lax verification standards, a year-long absence of phone support and deceptive social media promotions left users exposed to scammers.”
Despite these issues, it was discovered that Cash App delayed internal fraud investigations and set unwarranted account lockouts that prevented victims from being able to recover stolen funds. It also failed to investigate unauthorized transactions and issue refunds as required by law.
Under the settlement, Cash App must now maintain 24-hour customer support and retract misleading safety claims, as well as discontinue marketing practices known to increase fraud.
The company claims it will begin fulfilling its legal duty to investigate and reimburse users for certain unauthorized transactions and has also agreed to begin educating users on common types of fraud.
From the settlement, Texas is set to receive nearly $5 million of the $45 million, with Paxton claiming the settlement will ensure “that Texans who were harmed can recover what they are owed” and send “the clear and unmistakable message that exploiting consumers is not a business strategy - it’s a liability.”
“When Texans trust a financial platform with their paychecks, savings and family’s security, they deserve to be protected as promised. I will make sure that they are,” he adds.