In recent years, there has been a growing trend of people using person-to-person (P2P) payment platforms to send and receive money. P2P payments are made directly between two individuals, without the need for a third-party financial institution. This type of payment is often used for personal transactions, such as splitting a bill or sending a gift, but it can also be used for businesses. There are a number of advantages to using P2P payments, including convenience, speed, and security.
Lawyers must really see an opportunity for a windfall in the P2P payments app business. Several class action lawsuits have been filed against banks and credit unions regarding the way that consumer losses are treated when a P2P user authorizes a payment transaction only later to find out that they were defrauded though social engineering or other means. As Bloomberg Law reported, a class action lawsuit now has ensnared PayPal’s Venmo:
Paypal Inc. was accused of failing to inform consumers about the inherent dangers of using Venmo.
San Jose man claims in a proposed class-action lawsuit that Venmo is a favorite of fraudsters because its transactions are “instantaneous and unrecoverable,” making it all but impossible for consumers to recoup their losses after they realize they’ve been scammed
Man claims he lost $2,450 to someone who offered him a job and told him to buy goods and supplies using Venmo, and then disappeared.
From what I have seen in the market, P2P app providers are meeting their obligations under Regulation E and providing recourse to consumers when transactions are unauthorized, meaning someone has stolen account data or broken into the P2P app and have sent money without the account owner’s knowledge.
Consumer authorized transactions are another matter. Most app providers have some mitigation tools in place to educate consumers and get them to consider how they are using the app:
- They warn consumers to send money only to people they know and trust.
- They may put transaction limits in place.
- They may require users to confirm their intentions to send money to an individual if it’s the first time they are sending funds to a particular email or mobile number or if funds are being designated to a number not in the user’s phone contacts.
These are all commonly used tactics that some consumers just ignore and click through.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group