Friday, June 16, 2023
"Americans deserve a payments system that provides them with speed and convenience, but above all, that keeps their money safe," the senators wrote in June 15 letters to Dan Shulman, president and CEO of PayPal, which owns Venmo, and Brian Grassadonia, the CEO at Cash App.
The letter came a day after Rohit Chopra, director of the Consumer Financial Protection Bureau, appeared before the committee to update members on the bureau's activities. "We are focusing more heavily on supervision of nonbank financial firms, which have not always been subjected to similar oversight as chartered banks and credit unions," Chopra said in prepared remarks.
Asked specifically about fraud and scams on P2P payment platforms, Chopra said the platforms, as well as banks, "have been very slow to take action," according to published reports. And he suggested the proliferation of generative artificial intelligence voice cloning could add to the problem.
The CFPB chief said P2P platforms need to update rules to address the fallout from fraud and scammers. "If not, we're going to continue to have more scams," he added.
In their letter to PayPal CEO Dan Schulman, the four senators complained the company isn't doing enough to protect Venmo users from fraud and scammers, and they quoted the company's annual report as evidence.
"PayPal's annual report notes that although your peer-to-peer payment services are an attractive target for third parties to 'engage in abusive schemes or fraud attacks,' the company's risk management policies and procedures 'may not be effective in detecting and preventing fraud'," they wrote.
While Venmo has not made its own data publicly available, independent reports paint a picture of rampant fraud on P2P networks, the senators noted.
A Consumer Reports survey, for example, found that 9 percent of frequent users of P2P apps were conned into sending money to fraudsters, while 12 percent had accidentally sent money to the wrong person. "In other words, millions of Americans have likely been defrauded or scammed using Venmo without sufficient recourse to recover their lost or stolen funds," the letter complained.
A similar letter was sent to Cash App CEO Grassadonia. The company's annual report notes that the service "makes customers targets for illegal or improper uses, including scams and fraud directed at our customers," the letter stated.
This isn't the first time lawmakers have honed their focus on P2P payment platforms. Last year Sen. Warren took bankers to task for inadequate fraud protection on Zelle, a P2P payment platform owned by many of the nation's largest banks.
The four banking committee members who signed the June 15 letter gave the two CEOs a list of questions, and a June 30 deadline for answers. They want data on numbers of customer-reported frauds over the past five years, as well as specific types of fraud—unauthorized transactions as well as transactions related to scams.
The lawmakers also are seeking information on the number of accounts tied to fraudulent activity, as well as policies and practices each network has put in place to detect and eliminate fraud.
P2P payment platforms have been raising plenty of concerns in regulatory circles, too. Earlier this month, the CFPB issued a warning to consumers that money left in these accounts lack the same protections as money on deposit at federally insured financial institutions. 
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