Venmo Urged To Protect Users From Scams — Again

PayPal's Venmo is still not doing enough to protect its users from potential scams, according to several Senate Banking Committee members.

Sherrod Brown (D-OH), committee chair, along with members Jack Reed (D-RI) and Elizabeth Warren (D-MA) sent a letter on December 14 to PayPal President and CEO Alex Chriss raising concerns and urging the adoption of new policies to reimburse consumers who get scammed on Venmo and make it easier for them to report when they have been scammed.

The senators also sent a letter on December 14 to Brian Grassadonia, CEO of Cash App with similar concerns over the company's "ability to keep customers' money safe" and its low reimbursement rate for unauthorized payments.

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The move comes after Zelle began taking new steps to refund its users who fell victim to imposter scams, the senators said in a statement.

It also comes amid the growing popularity of digital wallets and payment apps, a sector that faces federal scrutiny regarding consumer protection.

In their letter, the senators referred to Venmo as a “closed system,” meaning both parties using the service need to be members to issue a transaction and Venmo has visibility into all accounts and in transitions.

”Venmo can both identify and block account holders who commit acts of deception and can take the crucial additional step to unwind these transactions,” they said.

But that apparently is not the case. In fact, this is not the first time the lawmakers have appealed to both Venmo and Cash App. 

“According to Venmo’s response to our June 15 letter, Venmo does not appear to reimburse customers who have been victims to these — or any other — kinds of scams,” the senators said. “Customers remain on the hook and unprotected. It is past time for Venmo to follow industry trends by providing similar reimbursements to wronged consumers.”

Not clear how issues are resolved

At Venmo, there are sections on its website that detail common scams as well as information on how to report suspicious activity or messages, but it is unclear what the company does to solve the issue should it come up.

"We are extremely concerned that instant payment platforms are not taking reasonable, commonsense and proactive steps to protect their customers," the senators said. "Venmo must provide a safe platform for American consumers — who deserve a payments system that provides them with speed and convenience, but above all, that keeps their money safe."

Venmo did not immediately return a request for comment.

In a June 15 letter to Cash App's Grassadonia, the senators said the company's annual report "notes that although Cash App’s peer-to-peer payment services make customers targets for 'illegal or improper uses, including scams and fraud directed at our customers,' the company’s risk management policies and procedures 'may not be sufficient to … prevent or mitigate' the risks of scams and fraud."

They then asked Grassadonia to inform them of the specific steps that Cash App is taking to detect and prevent fraudulent transactions.

Hidden risks

Aside from the risk of scams, keeping cash in apps such as Venmo and PayPal carry hidden risks, as previously reported by Kiplinger. This is because the money in those apps may lack the federal insurance coverage of major financial institutions.

In addition, these and other payment apps and digital wallets are not held to the same standard of consumer protection as their more established banking counterparts, according to the Consumer Financial Protection Bureau, which is calling for greater supervision of such products.

To help avoid getting scammed with a no-cash lifestyle, Kiplinger recommends protecting your account with multi-factor authentication or a pin number, always confirming the identity of a person you are sending money to and setting up notifications for transactions on your account.

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