Cash App agrees to $45 million settlement over shoddy account security and customer service

MANHATTAN (CN) — The company behind Cash App on Wednesday entered into a $45 million settlement with a coalition of 46 state attorneys general, who accused the peer-to-peer payments app of misleading its users and failing to protect them from scammers.

The deal comes amid an investigation by dozens of states that ultimately found Block, Inc. — Cash App’s parent — provided inadequate customer service to users victimized by fraud.

For instance, its longtime lack of a call-in number led to bad actors setting up fake help lines of their own to gain access to others’ accounts. According to the states, Block was aware of this issue as early as 2018, but didn’t set up a live customer support line until 2021.

Instead of security, the states say Block went all-in on marketing, pushing for rapid growth through aggressive ad campaigns that misleadingly promoted Cash App’s safety.

“Block claimed in its terms of service that it had ‘cutting edge … fraud detection technology’ when the company lacked a consistent fraud detection system,” New York Attorney General Letitia James, one of the state leaders in the coalition, said in a press release.

James says the company made a targeted push to reach underbanked customers by promoting direct deposits of paychecks and government benefits into Cash App. In doing so, it exaggerated its safety features by likening them to that of banks.

“With a Cash App Card, your money is FDIC-insured through our partner banks for up to $250,000 per person,” the company wrote in 2023 promotional material on Cash App’s website, according to the states in their complaint.

Small text below that statement indicated that Cash App is “a financial services platform, not a bank.”

“These representations are deceptive and misleading,” the states continued. “FDIC pass-through insurance applies only if Cash App’s partner bank fails — not Cash App itself.”

In some instances, the states claim Cash App didn’t just fail to stop fraud, it actively promoted it. They point to a 2017 promotion on social media called “Cash App Fridays,” which encouraged users to enter cash giveaways by responding to a post with their Cash App account tag.

Those giveaways made it easy for fraudsters to contact entrants and swindle them into providing their log-in credentials. This was often done by pretending to be a Cash App employee and telling the victim that they had won the giveaway.

“Cash App knew at least as early as 2019 that these promotions led to increased fraud and account takeovers,” the states claimed. “Instead of halting this promotion to bring an end to this known fraud, Block continued the promotion for years and simply trained its staff to expect to receive communications from Cash App users who were subjected to this fraud.”

Block has agreed to address these issues in the settlement. In addition to the $45 million payout, which will be split among the suing states, Block will maintain customer support services for Cash App to resolve fraud complaints and account lockouts.

The company will also offer live support for 24 hours a day, stop making false and misleading claims about Cash App’s safety and discontinue practices that have been proven to increase fraud on the app.

Block does not have to admit wrongdoing, however.

“Block denies any wrongdoing and the allegations in the complaint, and no part of this judgment shall constitute evidence of any liability, fault or wrongdoing by Block,” the parties wrote in the 25-page judgment. “Block is entering into this judgment solely for the purpose of concluding this matter, and nothing contained herein may be taken or construed to be an admission or concession of any alleged violation of law, rule or regulation, or of any other matter of fact or law, or of any liability or wrongdoing.”

In a statement to Courthouse News, a spokesperson for Block said the settlement “resolves a previously disclosed legacy matter that primarily relates to historical aspects of our business.”

“Cash App has made significant investments in consumer protection, customer service, and compliance in order to safeguard and serve the tens of millions of Americans who rely on Cash App to meet their banking and credit needs,” the spokesperson added. “We share the commitment of the attorneys general to addressing industry challenges and continue to invest in operations and technology to promote a safe and healthy financial ecosystem.”

Block launched Cash App, previously known as Square Cash, in 2013. It’s since become one of the largest peer-to-peer money transfer services in the United States, boasting a monthly user base of more than 50 million.

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