WASHINGTON — Senate Democrats on Thursday urged PayPal and Cash App to better protect users of their peer-to-peer payment applications from fraud.
Sen. Sherrod Brown of Ohio, along with Massachusetts Sen. Elizabeth Warren, Rhode Island Sen. Jack Reed and New Jersey Sen. Bob Menendez, requested detailed fraud detection and prevention methods from the PayPal-owned Venmo and Cash App, which is owned by Block.
The companies' "consumer protection policies have not kept pace with the explosion in customer interest in the platform," the lawmakers wrote, adding that they haven't taken sufficient measures to protect users from harm enabled by the services.
The letters were sent to PayPal president and CEO Dan Shulman and Cash App CEO Brian Grassadonia.
Cash App did not immediately respond to a request for comment from CNBC. PayPal said it "proactively" uses fraud detection tools and manual investigation "to mitigate any potential fraudulent activity and to protect our customers," according to a company spokesperson.
Venmo's total payment volume outpaced expectations by increasing 9% to $62.7 billion, according to PayPal's first quarter investor update. Cash App transactions also brought in over $203 billion in inflows among 51 million monthly users as of December 2022, according to a Block annual report.
PayPal, meanwhile, said in its annual report that it expects users to continue to attempt laundering money, sanctions evasions and other illegal activities on Venmo, and that its current fraud reduction measures "may not be effective in detecting and preventing fraud, particularly new and continually evolving forms of fraud or in connection with new or expanded product offerings."
Block also said it may not be able to "prevent or mitigate" identified or possible risks under its risk management procedures in its annual report.
In their letter, the lawmakers cited a January Consumer Reports survey that found 9% of weekly P2P users had been the victim of a scam and 12% accidentally sent money to the wrong recipient. A 2022 Pew Research Center report found that Black and Hispanic P2P users are twice as likely to be scammed compared to their white counterparts, they wrote.
The lawmakers requested comprehensive responses to a list of requests, including consumer reports of fraud for the last five calendar years and fraud detection and elimination policies, by June 30.
"Americans deserve a payments system that provides them with speed and convenience, but above all, that keeps their money safe," they wrote.
The letter is part of an ongoing inquiry into P2P platform consumer safety spearheaded by Warren over the past several years. Menendez and Reed joined her in an April 2022 oversight letter to the seven major banks that control the money transfer application Zelle after reporting revealed rampant fraud and theft on the platform.