Jack Dorsey's Block Faces Massive $175 Million Settlement Over Cash App Fraud Issues
Jack Dorsey’s company, Block, has been slapped with a $175 million settlement related to fraud management failures within its Cash App platform by the Consumer Financial Protection Bureau (CFPB). This action was one of the last major regulatory decisions of the Biden administration, known for its stringent policies in the crypto and financial sector. The settlement includes up to $120 million in refunds aimed directly at consumers who fell victim to fraudulent activities facilitated by Dorsey and Cash App.
The CFPB's scrutiny of Block stems from claims that Cash App not only allowed fraud to run rampant but also misled its customer base. According to CFPB Director Rohit Chopra, "When things went wrong, Cash App flouted its responsibilities and even burdened local banks with problems that the company caused." This critique highlights a significant oversight in how Cash App managed disputes and unauthorized transactions, essentially shifting the burden onto banks and away from its own responsibility.
Cash App's Fraud Troubles and Block's Response
Cash App, launched in 2013, has grown to become a dominant force in the digital payment landscape, allowing users to buy, store, and send Bitcoin and fiat. Cash App boasts over 56 million accounts and contributing more than half of Block's gross profit in 2023. However, this success has not been without its challenges. Previously, the app was criticized by Hindenburg Research for potentially inflating its user numbers and overlooking rampant illegal activities, claims which Block dismissed as "factually inaccurate and misleading."
In the CFPB's view, Block was legally obligated to investigate unauthorized transactions thoroughly but failed to do so effectively. Instead, the company reportedly advised users to seek transaction reversals through their banks, only to deny these requests later. This practice, according to the CFPB, was akin to "tricking consumers" by exploiting the app’s terms of service. Furthermore, the lack of robust customer support was said to have opened avenues for fraudsters to impersonate Cash App representatives and exploit users.
In response, Block has maintained that the issues highlighted by the CFPB are historical and do not reflect the current state of Cash App's operations. The company emphasized its commitment to customer service, noting significant investments made to enhance support following unprecedented growth during the global health crisis. "While we strongly disagree with the CFPB’s mischaracterizations, we made the decision to settle this matter in the interest of putting it behind us and focusing on what’s best for our customers and our business," stated Block in its official response.
As part of the settlement, Block will not only refund affected consumers but also establish a 24-hour customer service program and pay a $55 million fine. This enforcement comes shortly after a separate action by 48 state financial regulators, accusing Block of money laundering violations, leading to an $80 million penalty and the requirement to hire an external consultant to overhaul its compliance practices.