Consumer complaints about paymentA transfer of funds which discharges an obligation on the part of a payer vis-à-vis a payee. More apps such as PayPal, Venmo, and Square have surged during the pandemic year. There were 970 digital wallet complaints in April — almost double the previous peak from July 2020. PIRG Education Fund analysed this growing problem in the report Virtual Wallets, Real Complaints, a new analysis of the Consumer Financial Protection Bureau’s (CFPB’s) Consumer Complaint Database.

Scammers Have an Open Door to Payment Apps

“People use peer-to-peer apps for convenience but there’s nothing more inconvenient than having your moneyFrom the Latin word moneta, nickname that was given by Romans to the goddess Juno because there was a minting workshop next to her temple. Money is any item that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular region, country or socio-economic context. Its onset dates back to the origins of humanity and its physical representation has taken on very varied forms until the appearance of metal coins. The banknote, a typical representati... More inaccessible — or even worse, going to the wrong person,” said Ed Mierzwinski, PIRG Education Fund’s senior director of federal consumer programs. “We’re seeing as more people turn to payment apps, more people are getting burned by related problems, including scams and fraud. And, more people are experiencing problems bad enough that they’ll go to a government website to registerSee See-through register. More their complaints. It’s time for the CFPB to force the payment apps to provide better customer service.”

The three most commonly complained-about issues in the PIRG Education Fund report are problems managing, opening, or closing accounts, fraud or scams, and problems with transactions (including unauthorised transactions).

A Privacy Nightmare

In May, after The New York Times reported President Joe Biden had used Venmo to send his grandchildren money, Buzzfeed reporters located his account. They accessed his list of contacts, including his children and other family members.

The report found that the top 10 most-complained-about companies accounted for 90% of all 9,277 digital wallet complaints, led by PayPal (which owns the Venmo app), Square (which owns the Ca$h App), and Coinbase, a cryptocurrency trading platform. Americans also complained a lot about several big banks, including PNC Bank, Chase, and Bank of America (some of the co-owners of Early Warning Systems, the parent of Zelle, a leading P2P app).

Apps Offer Fewer Rights and More Threats

When you use a peer-to-peer payment (P2P) app, you have fewer rights by law and more threats from scammers. The report recommends:

• Using a P2P app is like spending cashMoney in physical form such as banknotes and coins. More. Only use it with friends and other people you both know and trust.

• If possible, keep one separate bank account to link to P2P accounts. Do not link P2P accounts to all your funds.

• Ensure all your security settings are set to “most private;” the default is often “most public.”

• If you send money to a new recipient through a P2P payment app, even to a person you know, you should either initially send $1 as a test or ask the person to request the money. There are so many similar accounts like BobSmith01 and BobSmith02. The accounts can have photos, but the images are so small that it’s difficult to tell whether they’re the correct person.

“Don’t use these apps to pay people you don’t know and, even if it’s your best friend or your mom, confirm you’re set up correctly and using the right user name,” said Mierzwinski. “Consumers don’t realise these online transfer payments are instantaneous and treated like cash, so when fraud strikes, you’re likely without recourse.”

The report recommends that policymakers strengthen consumer protections on payment apps. Consumers should be protected when they are defrauded into sending money, even when they “initiated the payment.” App providers should be required to investigate errors and fraud even when the consumer makes a mistake or sends the money. This is an existing duty not being enforced.

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