Senators Demand Answers From Venmo and Cash App on Fraud

A quartet of Senate Democrats want Venmo and Cash App to offer better fraud protection.

The four senators — Sherrod Brown of Ohio, Elizabeth Warren of Massachusetts, Jack Reed of Rhode Island and Bob Menendez of New Jersey — wrote to the two companies Thursday (June 15) seeking detailed information about their fraud prevention tactics.

“Americans deserve a payments system that provides them with speed and convenience, but above all, that keeps their money safe,” the letter says.

“In light of these concerns, we would like to understand the specific steps you are taking to detect and prevent fraudulent transactions, including fraudulently induced transactions.”

PYMNTS has reached out to Venmo — owned by PayPal — and Cash App for comment but has not yet received a reply. The senators gave the two firms until the end of the month to respond to their requests, which include the last five years’ worth of fraud reports.

In their letter, the senators argue that the companies’ “consumer protection policies have not kept pace with the explosion in customer interest in the platform,” and said they hadn’t taken proper measures to safeguard users.

The lawmakers also point to a Consumer Reports survey from earlier this year showing that 9% of weekly P2P (peer-to-peer) users had been the victim of a scam and 12% mistakenly sent money to the wrong recipient.

They also cited a 2022 report from the Pew Research Center showing that Black and Hispanic P2P consumers are twice as likely to be scammed compared to their white counterparts.

The senators’ requests come on the heels of recent research by PYMNTS showing that 64% of financial institutions (FIs) reporting an increase in fraud using credit and debit cards.

That study also showed that 32% of FIs saw an increase in fraud rates related to payments made with Venmo, while 51% of firms saw an increase in fraud rates for Zelle payments.

The research also found variances in attacks across more FIs of different sizes, with the targeting of specific payment methods also on the rise.

“Smaller FIs had the highest rates of increased fraud attacks in credit cards, with 66% reporting increased attacks on that payment method, and prepaid or debit cards, with 61% reporting increases,” the study said.

Meanwhile, PYMNTS also recently noted the ongoing cost of fraud to financial institutions, beyond the initial theft.

“This is because customers are far less likely to do business with an organization with a reputation for fraud,” PYMNTS wrote.

Studies show that every dollar lost to fraud ultimately costs companies $3.75, thanks in part to customers choosing to go with to competitors after falling victim to fraud.