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Report: Consumer Protection
Virtual Wallets, Real Complaints
Consumers are increasingly using digital payment apps -- Venmo, Cash App and Zelle are a few -- for convenience. A 2020 Nerdwallet survey found that “[r]oughly 4 in 5 Americans (79%) use mobile payment apps.” The apps were originally marketed as a way for friends to split expenses. However, the ease of opening peer-to-peer (P2P) accounts, the ease of obtaining information about other users and a variety of ways to trick consumers have created new fraud risks to users.
The use of payment apps has been driven higher over the last year, as the pandemic has also led more people to use “contactless” transactions, in which a consumer taps a phone or payment card to a payment terminal, rather than using cash.
Digital app payments are generally “instantaneous” and the app companies generally take the position that transactions are not reversible. Customer service for payment apps is minimal, sometimes lacking contact phone numbers or human interaction at all. In the absence of regulatory action, customer service improvements or security features appear to ratchet up only in response to reputational threats.
For example, despite complaints from privacy experts over the years, the Venmo app gave consumers the right to hide their friend lists only after President Joe Biden’s network of contacts, including his grandchildren and other family members, was exposed by an investigative reporting site. The default, however, is that the friend list is “public.”
This report examines complaints to the Consumer Financial Protection Bureau since the CFPB began collecting them in the “mobile or digital wallet” category four years ago. The report also makes recommendations to consumers and to policymakers to help consumers keep their money safe.
Digital wallet complaints are on the rise
The CFPB received 9,277 complaints in the product category of “mobile or digital wallet” since it began accepting such complaints in 2017, through April of 2021. The CFPB includes complaints about peer-to-peer (P2P) payment apps in the digital wallet category.
Complaint volume has steadily increased over time. In the first year of accepting complaints, the CFPB received slightly more than 1,000 complaints about digital wallets. Over the year preceding April 2021, the CFPB received more than 5,200 complaints. And in April 2021, there were 970 digital wallet complaints — almost double the previous complaint peak in July 2020.
The three most common complaints involving digital wallets are problems managing, opening or closing accounts; problems with fraud or scams; and problems with transactions (including unauthorized transactions).
 Erin El Issa, “Most Americans Go Mobile With Payment Apps — Here’s How They Roll,” 26 February 2020, available at https://www.nerdwallet.com/article/banking/mobile-payment-app-survey, last visited 15 June 2020.
 For example, payment app account opening requirements are not generally subject to strict “Customer Identification Programs,” commonly known as “Know Your Customer” rules, that more-strictly-regulated banks must follow, FDIC, February 2021, available at https://www.fdic.gov/news/financial-institution-letters/2021/fil21012b.pdf, last visited 14 June 2021.
 Nathaniel Popper, “When Your Last $166 Vanishes: ‘Fast Fraud’ Surges on Payment Apps,” New York Times, 11 October 2020, available at https://www.nytimes.com/2020/10/11/technology/fraud-payment-apps.html, last visited 14 June 2021.
 Nathaniel Lee, “The coronavirus pandemic has caused a surge in demand for contactless payments, accelerating the shift from cash to digital options,” CNBC, 3 December 2020, available at https://www.cnbc.com/2020/12/03/covid-19-pandemic-accelerating-the-shift-from-cash-to-digital-payments.html, last visited 14 June 2021.
 “The moment you send a payment in Venmo, we send a request to your bank/card company to debit the funds and make them available to your friend. This means we cannot cancel a payment once it’s been initiated,” undated Venmo Help Page, available at https://help.venmo.com/hc/en-us/articles/235170748-Payments-Requests-FAQ, last visited 14 June 2021.
 "Live phone support is generally not available at this time," said the recorded message when Tom's Guide called the number at 3 p.m. Eastern time on a Monday,” in Luke Wilson, “Cash App fraud up over 300% — what you need to know,” Tom’s Guide, 22 March 2021, available at https://www.tomsguide.com/news/cash-app-fraud-up-over-300-what-you-need-to-know, last visited 14 June 2021.
 News Release, “EFF and Mozilla to Venmo: Clean Up Your Privacy Settings, Popular Payment App Reveals Sensitive Data by Default,” 28 August 2019, available at https://www.eff.org/press/releases/eff-and-mozilla-venmo-clean-your-privacy-settings, last visited 14 June 2021.
 Ryan Mac and Katie Notopoulos, BuzzFeed, “Venmo Will Now Let You Hide Your Friend List Because We Found Biden’s Account,” 1 June 2021, available at https://www.buzzfeednews.com/article/ryanmac/venmo-private-friends-list, last visited 14 June 2021.
 Mariella Moon, “Venmo now lets users hide their friends lists following Biden discovery
But friends lists are still public by default,” 29 May 2021, available at https://www.engadget.com/venmo-hide-friends-lists-154600508.html, last visited 14 June 2021.
 Based on complaints from: Consumer Financial Protection Bureau, Consumer Complaint Database, downloaded from https://www.consumerfinance.gov/data-research/consumer-complaints/search/ on 19 May 2021, with date counter set to 4/1/2017--5/1/2021.
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