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Two recent stories about P2P payments users getting ripped off need the attention of policymakers, industry and users. A thread on the mess in payments law, payments industry practices and how - with effort - you (maybe) can protect yourself 
Recent stories feature P2P app users who lost money to scammers. This Cash app user lost money because he was trying to get help by phone: https://myfox8.com/news/cash-app-scam-could-wipe-out-your-bank-account/amp/
Digital apps generally only offer ppl help thru the app. For example, ever tried to call U**r customer service? Right, because you canât. Scammers exploit the urgency ppl feel to resolve a financial problems by impersonating P2P customer service reps.
When money goes missing, you want to fix the problem NOW. Most P2P payment services donât offer real time in-app help, so it makes sense necessitous users seek a faster route. Like a phone #. If providers offered live contact, scammers could not as easily trick ppl w/fake #s
Another issue: Whoâs on the hook when someone is tricked into sending a scammer money? The victim! If you authorize a payment, even if youâre tricked into it, you have no legal right to get that $ back.
Thatâs whatâs happened here - apparent fraud victims are out their money and PayPal is going after them - the apparent victims of scammers who exploited Venmoâs vulnerabilities - to be made whole. Fraud victims donât have the same right against Venmo: https://www.wsj.com/articles/even-in-a-pandemic-venmo-tells-conned-customers-to-pay-up-11600939826
While fraud victims have no legal rights to reimbursement, the rights that P2P users have to fix ANY errors are under threat. Why? Because PayPal is trying to gut the Prepaid Rule - the rule ensures P2P and other stored value accts have basic protections: https://www.digitaltransactions.net/how-paypals-case-against-the-cfpb-could-spawn-uncomfortable-results-for-payments-players/
Payments protections are already an irrational mess, as I told the House Financial Services Committee Fintech Task Force in January: https://advocacy.consumerreports.org/research/consumer-reports-testimony-before-the-house-financial-service-committees-financial-technology-task-force-on-on-making-mobile-payments-safer/
The policy fixes for all of these issues: Strong, uniform payments protections for all payment types, protections for consumers against fraud - especially fraud in the inducement. That means not only the Prepaid rule but Congress should pass a 21st C EFTA
The industry fixes: multiple means for consumers to get real time help , including phone; embracing sensible regs like the Prepaid rule; and ads and practices that donât confuse people about the appropriate uses for their product/services (more on that next).
How can you protect yourself when using P2P? Enable the most secure and private settings, only transact with people you know & trust, and only use these services for personal transactions. Eg. donât buy stuff on Craigslist and pay by Venmo. More: https://www.consumerreports.org/digital-payments/peer-to-peer-payments-are-generally-safe-but-consumers-must-be-aware-of-risks/ FIN
Adding another story to this thread on how P2P providers and payments law fails P2P users (H/T @AnnaLaitin ) 1/ https://www.nytimes.com/2020/10/11/technology/fraud-payment-apps.html
In this article, as with the others in this thread, fraud victims are losing money to scammers exploiting P2P platforms. The addition here is @nathanielpopper âs analysis of the huge spike in fraud complaints since COVID tied to the rise in use of these services 2/
Note: the fraud problem isnât new, itâs just that no one feels an urgent need to fix it. (Some of us have been warning about faster fraud for YEARS - see this from @lsaundersnclc In 2015: https://www.nclc.org/images/pdf/banking_and_payment_systems/payment-fraud/american-banker-ls-2015.pdf and my remarks at the FTC in 2016: https://www.ftc.gov/system/files/documents/videos/fintech-series-crowdfunding-peer-peer-payments-part-1/ftc_fintech_series_crowdfunding_p2p_-_transcript_segment_1.pdf ) 3/
Provider practices need to catch up to how consumers view these platforms - including robust, real time customer service 4/
And the law needs to ensure that consumers who are tricked into sending money to scammers are made whole. As between, for example, Square and a young mother reliant on every dime she has to care for her kids, who is better positioned to spot and stop fraud? 5/
Itâs outrageous that near instantaneous payments are growing without these basic protections in place, and itâs worse still that the protections these services have (imperfect as they are) are under threat by @PayPal âs lawsuit: https://www.ipa.org/cfpbpaypal.html . FIN
