On January 16, the Consumer Financial Protection Bureau (CFPB) ordered the payment company Block to pay a penalty due to fraud and inadequate security measures on its mobile payment service Cash App.
The CFPB stated that Block, led by Twitter Co-founder Jack Dorsey, instructed Cash App users facing fraud losses to contact their banks for transaction reversals, which Block then denied.
Moreover, the CFPB accused the company of using various tactics to hinder Cash App users from seeking assistance to reduce its own expenses.
Cash App, a major peer-to-peer payment platform in the U.S., enables users to send and receive electronic fund transfers, accept direct deposits, and make purchases with a prepaid card.
CFPB Director Rohit Chopra criticized Cash App's actions, stating, "When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused."
In response, Block deemed the mentioned issues as "historical" and not indicative of the current Cash App experience. The company mentioned they settled the matter to focus on their customers and business despite disagreeing with the CFPB's claims.
This regulatory action marks one of the final moves under the Biden administration before the inauguration of President-elect Donald Trump. Elon Musk, slated to co-head a new government agency focused on reducing government spending, has advocated for the elimination of the CFPB.
The order requires Block to pay up to $120 million in compensation and a $55 million penalty to the CFPB's victim relief fund. The CFPB mandated Block to establish a 24/7 live customer service for investigating unauthorized transactions and providing prompt refunds as part of the enforcement action. Additionally, Block agreed to pay $80 million to a group of 48 state financial regulators on Wednesday.
In the third quarter ending September 30, Block's gross profit increased by 19% to $2.25 billion, with Cash App contributing $1.31 billion to the total income. The company reported 57 million active customer accounts.