Fraud liability on consumer payment apps is starting to look less like a customer service problem and more like a compliance cost with a fixed price tag.
Block has agreed to pay $45 million to resolve a multistate investigation into Cash App, joined by 46 states including New York, California, Texas, and Pennsylvania. The states allege Block marketed Cash App as safe while touting fraud detection technology that did not function as described, ran without a working fraud hotline or phone support until 2021, allowed unlimited account creation because Cash App required no Social Security number or date of birth, and let its “Cash App Fridays” promotion expose user identifiers that scammers then targeted. New York’s Attorney General also cited prolonged account lockouts and a pattern of failing to investigate fraud claims or issue refunds required by law.
The settlement’s real weight is in the operating requirements it imposes rather than the payment itself. Block must staff live phone support at least 13.5 hours a day and live chat at least 18 hours a day, stop marketing claims about safety features it cannot substantiate, drop promotional practices that expose users to fraud, and actually investigate and reimburse unauthorized transactions. Those are the baseline consumer protections banks have carried for decades under Regulation E; a 46-state coalition has now written them into a consent order for a nonbank payment app used heavily by unbanked and underbanked consumers as their primary financial account. That gap between what a “bank-like” app promised and what banking regulation actually requires, closed here by state attorneys general rather than a federal banking regulator, is the same gap regulators are also probing on the reimbursement side of fraud, as seen in the UK’s mandatory scam reimbursement rule.
Source: New York Attorney General
