How to recognize money app scams and protect yourself when using Venmo, Paypal, Cash App
Quick and easy isn't always painless when it comes to moving money via apps and digital wallets. Sometimes, you even can lose more money than you'd imagine.
Several things can go haywire, based on a list of complaints from consumers, according to the latest U.S. PIRG Education Fund analysis.
And the risks skyrocket if you're tricked into sending money to a scammer.
“Customer service is sorely lacking with payment apps," said Ed Mierzwinski, PIRG Education Fund’s senior director of federal consumer programs.
Consumers often complain, he said, that when they contact the company, they get no response.
How one woman lost $200 with Venmo
Priscilla Wagner, 32, says she's out $200 after an incident with Venmo a few years ago.
Her roommate sent her $200 via Venmo to cover bills and expenses. Then, Wagner tried to transfer that money to her bank account. She had done that in the past. But this time, somehow, the money never hit her bank account.
She arranged a call where she talked with both the bank and Venmo at the same time to resolve the issue. She sent emails.
"It took dozens of back and forth emails," Wagner said.
Nothing. The money wasn't in her Venmo account and it wasn't in her bank account. It was gone.
"Eventually, I just gave up and I never used Venmo again," said Wagner, who is a project manager in Portland, Oregon.
She considers herself "app savvy"; she even once had a job where she tested financial apps as part of a financial-literacy program.
She had plenty of experience and knew how to transfer money to her bank. She doesn't believe she talked to a fake customer service department, set up by scammers to steal money. She used information on the app to contact customer service. She has no idea what went wrong – or why her money essentially disappeared.
Now, she gets her paycheck directly deposited into a Chime account. But she uses Cash App for splitting checks with friends.
And she doesn't attempt to transfer money out of Cash App. Instead, she uses a Cash App debit card to cover small purchases, what she calls wants and not needs, like eating out. The card is free and connected to her Cash App balance.
Venmo didn't comment on Wagner's problem. But Caitlin Girouard, senior manager of media relations for PayPal, which owns Venmo, responded in an email: "PayPal and Venmo are unwavering in our commitment to protect consumers, and we will continue to put consumers first in everything that we do."
She said the company works to help customers resolve their questions and issues, providing several ways for customers to contact support teams, including live phone support.
"The security of users and their account information is always a top priority, and we take all the necessary steps to protect our customers," she said.
How another woman lost $355
A consumer in Detroit told me in June 2020 that she ended up losing money when she hit a technical snag trying to get $355 out of a Cash App account that was set up for donations to buy groceries for families on Detroit's east side.
She ended up connecting with someone on a fake customer support line who engineered a way to steal money out of her account.
At that time, Cash App didn't have a live customer service phone line.
Currently, Cash App's phone number is 800-969-1940, and customers and non-customers can contact the company at any time.
The company said those who believe they have fallen victim to a scam should contact Cash App Support through the app or website immediately.
Sometimes, the scam can start when you want to buy something you see promoted on social media.
Say someone is selling concert tickets, for example, but wants you to pay them only via Cash App.
One victim, according to an alert last September by the Better Business Bureau, lost $350 to such a scam after trying to buy tickets and sending the money through Cash App, and then being immediately blocked.
Be extra careful when looking up customer-service numbers
Another common con is the fake customer service department.
Consumers often search online for a phone number for customer service when they run into a problem. Makes some sense. But the fraudsters have figured out ways to promote fake customer support numbers online.
So a consumer might think that they're calling a representative of the actual company, but they're talking to a scammer.
"Under the guise of helping fix an issue with the app," the BBB notes, "the con artist will trick callers into sharing their login information. Then, the con artist can log in and drain the victim’s Cash App account. In other cases, the scammers trick victims into sending them money or installing malware on their smartphone."
The BBB noted that one victim dialed what turned out to be a fake Cash App support phone number she found online to deal with processing a refund.
But the crooks claimed that the consumer had to “set up a dummy account” in Cash App and send them the balance of the other account. That's how the system worked, according to the crooks.
Of course, that's how things work when someone is trying to steal your money.
The victim had her doubts but did as told and ended up losing more than $300.
The pandemic pushed up digital dealing
The pandemic, of course, drove more consumers and businesses away from using cash as people ordered everything from groceries to furniture online. Many deposited their stimulus checks into digital wallets.
“People use peer-to-peer apps for convenience, but there’s nothing more inconvenient than having your money inaccessible – or even worse, going to the wrong person,” Mierzwinski said.
Complaints involving payment apps are skyrocketing in 2021. In April alone, the Consumer Financial Protection Bureau received 970 complaints from consumers, or almost double the previous complaint peak in July 2020.
From January to April, the consumer watchdog agency received 2,756 complaints involving digital wallets, that's up significantly from 630 such complaints in the same period in 2020, according to the PIRG analysis.
Three popular names – PayPal, which owns Venmo; Square, which owns Cash App; and Coinbase – rang up more than two-thirds of the of the 9,277 digital wallet complaints made to the Consumer Financial Protection Bureau from 2017 through April 2021, according to the PIRG analysis.
More usage, of course, can lead to more complaints. In the first quarter, Venmo processed $51.4 billion of total payment volume, up 63% year over year, with more than 70 million active users.
The report also noted that consumers also complained about peer-to-peer experiences involving banks, such as PNC Bank, Chase and Bank of America. The report noted that some of the banks are co-owners of Early Warning Systems, the parent of Zelle, a leading P2P app.
What's bugging consumers
Consumers reported three top trouble spots: managing, opening or closing accounts; getting hit by fraud or scams; and discovering unauthorized transactions or other problems.
Will Britt, 24, said he was double charged for the $55 he was trying to send to his roommate. First, the payment didn't go through in November, but it did with a second try.
Then, somehow, two charges showed up on his bank account. His bank was able to straighten things out. But he said he's been locked out of his Venmo account because they claim he owes them $55. He's not sure why he owes them any money because only $55 ultimately ended up being taken out of his Venmo account, not $110.
He's given up trying to fix the problem and just won't use Venmo.
"It's a little frustrating," said Britt, who works as a lab assistant at the cancer center at the University of North Carolina in Chapel Hill.
Consumers run up against all sorts of challenges, as detailed in online narratives supplied to the Consumer Financial Protection Bureau.
One New York consumer complained to the CFPB after making a purchase online but being scammed and never able to recover any money.
Con artists, not surprisingly, are following the money.
Last summer, for example, consumers complained that they were receiving fake invoices via email related to their PayPal accounts, including one demanding $50 supposedly from the World Health Organization for a COVID-19 relief fund.
What are some warning signs
Many times, financial apps warn of potential fraud at their online sites. And companies say they're working to pinpoint new scams.
"We take every instance of potential fraud scheme scenarios very seriously and we proactively work with law enforcement agencies and industry partners, as well as use our own sophisticated systems to detect fraud and mitigate the issue," according to Girouard, of PayPal.
"We’ve always made preventing bad actors from using our platform a top company priority."
Even so, consumers still take on a good deal of risk when it comes to fraud. Con artists may trick them with emails, phone calls, deceptive links and phony customer service numbers.
Scammers might suggest that you send them a small amount of money, according to a Venmo alert, as part of a sweepstakes or pyramid scheme, in order to receive more money later. Such as: “Send me $100, and in a week you’ll get $1,000.”
Cash App notes that its employees are often impersonated by scammers circulating fake phone numbers online. But its team will never ask customers to send them money or solicit a customer’s PIN or sign-in code outside of the app.
Many can't get their money back after a scam
What many consumers do not realize is that they're not going to get their money back when they give a scammer money via these financial apps, Mierzwinski said.
While federal regulations protect peer-to-peer users from some unauthorized transactions, the protections don’t extend to payments initiated by consumers, and they are not treated as an “unauthorized charge," the report noted.
Mierzwinski called the issue a loophole in the law and noted that the watchdog group plans to lobby Congress to change to fix that problem.
“I would never send money to anybody who asks me for it,” Mierzwinski said.
You need to know that you're sending money to a friend, and confirm that you both have the correct usernames and passwords.
► Scammed: How Detroit woman lost hundreds of dollars from Square's Cash App
3 ways to protect your money
Consumer watchdogs and industry leaders say there are some steps to take to protect yourself. They include:
1. Treating money in peer-to-peer payment apps as cash. It's often best to only hand it over to friends. "Venmo," according to the company, "should only be used to transact with people you know and trust."
Remember, once you send money, it's sent. "Transactions are instantaneous and generally not reversible," according to PIRG.
2. If you have a good deal of savings, do not link a peer-to-peer payment app to a bank account that has a lot of money in it. "If possible, keep one, separate bank account to link to P2P accounts," according to PIRG.
Send a test amount to someone first, say $1, to make sure you have the correct account. "There are so many accounts that have similar names such as BobSmith1 and BobSmith02. The accounts can have photos, but the photos are so small, it's difficult to tell whether it's the correct person," according to a warning from PIRG.
3. Link your money transfer app to a credit card, if possible. There is often a fee for that service. The PIRG report noted: "Apps will generally charge you for this greater piece of mind to cover merchant fees. Venmo, for example, has a 3% fee for sending funds from your credit card instead of your bank account."
But using a credit card will can offer some more protection than linking to a debit card or bank account if you don't get the goods or services you ordered.
Contact Susan Tompor via stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.