Security & Fraud

New Class Action Lawsuit Alleges Plaid Violated User Privacy

Plaid is facing a lawsuit which alleges that it has violated users’ privacy and used customers’ private data in inappropriate manners for years, affecting over 200 million individual accounts, according to a court filing with the northern district of California.

The California-based financial services company, founded in 2012, works to build products to power digital finance and FinTech issues through its own data transfer network.

But the lawsuit alleges that Plaid has made a practice of taking that information for itself through log-ins to customer accounts, and then selling the information or “otherwise highly misusing” it without disclosing anything to customers.

Plaid, according to the court document, describes itself as an infrastructure company, according to co-founder Zach Perret. But the lawsuit alleges that this does not capture the full picture of what the company’s “true purpose,” which it claimed is “invading consumers’ privacy for profit.”

Plaintiffs allege that the company has been able to glean information via software from well-known platforms like Venmo or CashApp under the pretense of helping customers access easy online banking.

However, Plaid denied the allegations in a statement to PYMNTS.

“This copycat lawsuit is baseless and Plaid will vigorously defend itself,” a company spokesman said. “Plaid does not sell or rent consumers’ personal information and personal information is only obtained with consent. We firmly believe that consumers should have permission-based access to and control over their financial data, and embody these principles in our practices.”

Visa agreed earlier this year to buy Plaid for $5.3 billion. The payments giant also participated in a funding round in 2018 that helped value Plaid at $2.6 billion.

In addition, Microsoft has teamed with Plaid for a financial management solution called Money in Excel, which allows users a secure integration of their financial account, imported data and sharper insights into financial health overall.

(This article has been updated with a statement from Plaid denying the lawsuit’s allegations.)

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New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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