Carrying cash has become an anomaly for younger generations. Not having cash on hand has made it difficult to pay a friend back after a night out, that is, until Venmo was created. Venmo allows friends to share payments with each other by linking their credit or debit card to their account. Users can initiate a transaction by sending another user a charge request, with a short message, that asks the person to pay a specified amount. According to Statista, Venmo users transferred a staggering $10.4 billion in 2017. But the question is, were they transferred correctly?
Venmo, now operated by PayPal, recently had a complaint filed against them with the Federal Trade Commission (FTC). The complaint alleged that the company used misleading wording such as, “money credited to your Venmo balance. Transfer to your bank overnight” or “someone paid $[X] to your Venmo balance [description of transaction.] – Leave it in Venmo or transfer it to your bank account.” The complaint further states that the wording led users to believe that once they received notification, the money was immediately available to transfer to their bank account. However, that was not the case in some instances. The reason? Venmo waits until a user transfers funds to their bank account to check for fraud or insufficient funds.
To prevent future misleading statements, PayPal has agreed to not make misrepresentations about material restrictions or limitations on the use of any payment service. To settle the case, the company (when representing the availability of transferred funds) will be required to clearly disclose that the transaction is subject to review and that funds could be frozen or removed.
The FTC offers the following tips when using peer-to-peer payment systems:
- “Scammers try to get you to pay them in many ways—including by sending money online—so make sure you know who you’re sending money to. If you use the service to receive money from someone you don’t know personally—maybe as payment for tickets to a concert or a game, or for an item you’re selling—transfer the money to your bank account and make sure the money is there beforeyou send any goods.
- Peer-to-peer payment systems require access to your financial information, so check your account settings to see if you can enable additional security measures that aren’t on by default. Consider turning on multi-factor authentication, requiring a PIN, or using fingerprint recognition like Touch ID.
- Some systems or apps might share information about your transactions on social media. Check social media permissions or settings—some may be set to share your information with everyone by default. Adjust your settings based on what you’re comfortable sharing.”