Venmo Collection Practices Under Scrutiny by Consumer Watchdog

The popular payback app, Venmo, is reportedly under investigation by the Consumer Finance Protection Bureau over its collection practices, including how it pursues consumers who owe money.

The consumer watchdog agency slapped Venmo’s parent company, PayPal, with a Civil Investigative Demand, according to The Wall Street Journal. The filing is seeking information “related to Venmo’s unauthorized funds transfers and collections processes, and related matters.”

While the CFPB investigation is not a class action lawsuit, Top Class Actions works to keep viewers informed about issues affecting consumers, including potentially questionable debt collection practices.

Venmo Collection Practices Called Into Question

Venmo is an app that allows users to request and exchange money electronically. It has quickly soared in popularity, with active Venmo accounts rising by 32% in 2020, driven by the rise in preference for touchless ways to exchange funds, according to The Verge.

In 2020, consumers used the Venmo app to exchange $47 billion in payments – an increase of 60% from 2019, according to Reuters.

The app appears to instantly transfer money between users; however, it may take up to a day for the “Venmo-ed” funds to leave a consumer’s bank account. During this time, Venmo will cover the amount; however, if the user does not have sufficient funds in their bank account to cover the transfer, Venmo will pursue the debt.

The app has gone after users with debts from $7 to $3,000, telling them that by “not paying, you run the risk of being reported to a collection agency”, according to The Wall Street Journal. 

This investigation isn’t the first time Venmo’s collection practices have come under scrutiny. In 2019, the company was accused of pursuing debt collection against those who say they were scam victims. In addition, Venmo has reportedly been criticized for continuing the same collection practices during the coronavirus pandemic.

For its part, PayPal told The Verge that it was working with the CFPB to respond to the agency’s investigation. It reportedly stated that its subsidiary Venmo “remains deeply committed to its compliance obligations and the company works closely with regulators around the world.”

Venmo has also reportedly insisted that its user agreement outlines its collection practices, adding that it stays in line with all state laws when it comes to debt collection.

Have you been subjected to Venmo collection practices? Tell us about your experience in the comment section below.

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