Venmo FTC Settlement Highlights Safeguard and Privacy Representation Risks

The FTC alleged in its complaint, which was filed in 2016, that when Venmo notified its users that money has been credited to their Venmo balances and is available to transfer to an external bank account, that it failed to disclose that Venmo may freeze or remove those funds based on a review of the underlying transaction. The FTC said that this sometimes meant that users were unable to pay bills and suffered financial hardship.  This also allowed scammers to purchase goods with fraudulent transactions, leaving sellers with no money and no goods after the transactions were reversed.  Additionally, the FTC alleged that Venmo misled consumers about the extent to which the privacy of their transactions may be protected and misrepresented the extent to which consumers’ financial accounts were protected by “bank grade security systems.”

The settlement prohibits Venmo from misrepresenting any material restrictions on the use of its service, the extent of any privacy settings, and the extent to which Venmo implements or adheres to particular security levels. Venmo is also required to make certain disclosures to consumers about its practices and is prohibited from violating the Privacy and Safeguards Rules.  Venmo is also required to obtain biennial third-party assessments of its compliance with the Privacy and Safeguards Rules for ten years.

Takeaway:  It is important for companies to be sure to comply with all rules regarding notification, privacy, and safeguarding financial information, especially when dealing with consumers' money. 

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