WASHINGTON — Senate Democrats on Thursday urged PayPal and Money App to raised protect users of their peer-to-peer payment applications from fraud.
Sen. Sherrod Brown of Ohio, together with Massachusetts Sen. Elizabeth Warren, Rhode Island Sen. Jack Reed and Latest Jersey Sen. Bob Menendez, requested detailed fraud detection and prevention methods from the PayPal-owned Venmo and Money App, which is owned by Block.
The businesses’ “consumer protection policies haven’t kept pace with the explosion in customer interest within the platform,” the lawmakers wrote, adding that they have not taken sufficient measures to guard users from harm enabled by the services.
The letters were sent to PayPal president and CEO Dan Shulman and Money App CEO Brian Grassadonia.
PayPal, Venmo and Money App didn’t immediately reply to a request for comment from CNBC.
Venmo’s total payment volume outpaced expectations by increasing 9% to $62.7 billion, in keeping with PayPal’s first quarter investor update. Money App transactions also brought in over $203 billion in inflows amongst 51 million monthly users as of December 2022, in keeping with a Block annual report.
PayPal, meanwhile, said in its annual report that it expects users to proceed to try laundering money, sanctions evasions and other illegal activities on Venmo, and that its current fraud reduction measures “will not be effective in detecting and stopping fraud, particularly recent and continually evolving types of fraud or in reference to recent or expanded product offerings.”
Block also said it could not find a way to “prevent or mitigate” identified or possible risks under its risk management procedures in its annual report.
Of their letter, the lawmakers cited a January Consumer Reports survey that found 9% of weekly P2P users had been the victim of a scam and 12% unintentionally sent money to the incorrect recipient. A 2022 Pew Research Center report found that Black and Hispanic P2P users are twice as prone to be scammed in comparison with their white counterparts, they wrote.
The lawmakers requested comprehensive responses to a listing of requests, including consumer reports of fraud for the last five calendar years and fraud detection and elimination policies, by June 30.
“Americans deserve a payments system that gives them with speed and convenience, but above all, that keeps their money secure,” they wrote.
The letter is an element of an ongoing inquiry into P2P platform consumer safety spearheaded by Warren over the past several years. Menendez and Reed joined her in an April 2022 oversight letter to the seven major banks that control the cash transfer application Zelle after reporting revealed rampant fraud and theft on the platform.
