Cash App parent company Block Inc. has agreed to pay a $255 million settlement fund to state and federal regulators for violations of the Bank Secrecy Act, failure to address the consumer deficiencies, take respective protective measures, and anti-money laundering.
The customers were affected due to the digital payments company violations and failures, which led to the defendants paying the penalties and compensation to the customers. People wondering about the Block Inc. settlement can check every detail here.
Cash App Parent Company Settlement
The Cash App parent company Block Inc. faced a multi-state examination in November 2023 and in the report, it is alleged the company has violated the Bank Secrecy Act and laws related to money laundering under the State regulations.
The company also went under the Consumer Financial Protection Bureau investigation for reported fraud, as the customers allege the defendant failed to protect the customers and had weak security protocols for the Cash app, putting the user at risk for unauthorized transactions, access, and financial loss.
CFPB charged the well-known payment app Cash App for with fostering fraud and breaching its obligations, which has caused issues for local banks. According to the investigation, the Block did not provide the cash app users with effective customer service and left them vulnerable to possible fraud. Now, Block Inc. has agreed to resolve the dispute with State Money Transmission Regulators and CFPB.
As per the settlement, Block Inc. was obliged to pay penalties and compensation to the users. The Cash app parent company will pay the settlement fund of $255 million to settle the dispute with state and federal regulators.
Cash App Parent Company $255 Million Settlement Distribution
According to the Block settlement for their violations of laws and negligence towards customers’ financial protection, Block Inc. a $255 million settlement will be paid to the state and federal regulators. As per the settlement, the defendant will pay the following settlement fund to each regulator:
- Consumer Financial Bureau Protection Bureau settlement with Block Inc.:
- Under the CFPB announcement, Block Inc. will pay a penalty of $55 million to the authority’s relief fund. The relief fund works for the betterment of the system and helps the victims.
- The CFPB has forced Block Inc. to pay a $120 million settlement to customers affected due to violations of laws, money laundering, and unauthorized transactions.
- State Regulator:
- The 48 State Regulators have issued a $80 million penalty for Block Inc. for the violation of BSA and anti-money laundering laws. The multi-state settlement was signed last week and Block has agreed to pay the amount to the respective state agencies.
How much will the States receive under the Cash App Parent company settlement?
The US states Colorado, California, New Hampshire, Texas, Ohio, Kentucky, Washington, and Massachusetts State Money Transmission Regulators have conducted the multi-state Examination and issued a report on Nov 2023. Now, based on the Block Inc. settlement with the State regulators, the 48 state regulators will receive the penalty from the company.
According to the settlement agreement, Block Inc. will pay the $80 million penalty to the regulators, which will be distributed in the following way:
- The Cash App Parent company will pay a penalty of $79,075,000 to all the participant states mentioned in Appendix B of the agreement. The defendant will pay the penalty to the state within 20 days of the payment instructions.
- The Block Inc. will pay the administrative costs of $925,000 to each participating US State mentioned in Appendix C of the agreement.
According to the State Regulators, the order to pay the penalty is effective from 15 Jan 2025, the Cash App Parent company will pay the penalty soon. The regulation department penalty to Block Inc. leads a great example for the industry to not be involved in such activities and work for the betterment of the customers otherwise there are consequences.
Which customers will receive the payout as per the CFPB orders?
According to the CFPB, the consumers who were affected by Block Inc. practices would receive compensation from the $120 million settlement fund. The consumers who meet the following conditions will receive the Block Inc. settlement compensation:
- The consumers who faced unauthorized transfers but whose matter was not investigated;
- Consumers who never received any refund for their loss they were entitled to;
- Block Inc. and Cash App users whose account was locked for an extended period or they did not receive a provisional credit or the inconvenience during the investigation.
According to the CFPB, Block Inc. should at least pay $75 million for refunds and other redressal of the customers. The consumers do not need to do anything at this time to receive the refund and compensation because it will take time for the Bureau to obtain redress.
What are the corrective measures that Block Inc. promises in the settlement?
With monetary penalties and compensation to the affected users, Block Inc. has promised the following corrective measures to the State and federal regulators to improve their system and provide better to the consumers:
- The Block Inc. will hire an independent consultant who will review the legal policies and regularly submit the report to the State and federal regulators.
- Block Inc. will have 12 months to correct the deficiencies found in the investigation and make the possible changes.
- The Block will fix the customer service issues and work on making it better to ensure the misconduct does not happen again with customers. As per the CFPB, the Block will set a 24-hour live-person customer service and they will investigate the unauthorized transfers to provide refunds to the affected users.
The Block Inc. the $255 million settlement is a warning to such entities to conduct under the law otherwise there are serious consequences to deal with and ensures the policies are working in favor of the consumers.