CFPB Accuses Block Of Slow-Walking Agency Probe

August 25, 2022
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The US Consumer Financial Protection Bureau (CFPB) has told a California judge that payments firm Block, run by Twitter co-founder Jack Dorsey, has unduly delayed submissions in an ongoing investigation into the fintech firm’s fraud handling.

The US Consumer Financial Protection Bureau (CFPB) has told a California judge that payments firm Block, run by Twitter co-founder Jack Dorsey, has unduly delayed submissions in an ongoing investigation into the fintech firm’s fraud handling.

According to the CFPB in court documents, Block has repeatedly failed to provide the agency with sufficient documents in response to two civil investigative demands (CIDs) the agency sent out in 2020 and 2021.

Although other parties that similarly received a CID in the investigation have produced thousands or even tens of thousands of documents to the CIDs, Block submitted fewer than 900 documents, the agency claims.

The company’s response to the CIDs has been late, often “non-responsive”, incomplete, or "otherwise deficient", impairing the agency’s ability to conduct “a meaningful investigation” of Block’s practices, court documents seen by VIXIO say.

“The Bureau cannot sit back while its investigation is stymied by Block’s slow-walking.”

The CFPB said that more than a year since the latest CID was served, Block is still unable to provide a definitive date by which it expects to respond to the requests.

Despite the agency agreeing to numerous delays, Block “continued to miss deadlines that it itself proposed as the dates for which it would ‘endeavor’ or ‘hope’ to produce responses to certain requests. To date, numerous dates that Block ‘endeavored’ or ‘hoped’ to meet have come and gone, with no explanation from Block as to the reasons for its failures to produce,” the agency states.

Commenting on the court action, a Block spokesperson told VIXIO that the firm is "disappointed that the CFPB has decided to file this petition despite our regular communication with the Bureau and our cooperation throughout the CID process”.

According to the spokesperson, Block has been responding to a series of “complex, broad and evolving requests” and it has continuously produced responsive information.

“We have been waiting weeks for the CFPB to respond to our most recent communication, which outlined the scope of our prior responses, set forth a proposed timeline for the remainder of the production of materials, and posed additional clarifying questions for the Bureau.”

Cash App under fire

The court documents also reveal the fact that Block’s mobile payment solution Cash App is under scrutiny by the consumer watchdog.

Cash App, which has around 44m monthly active users, is mostly used to send money between individuals and it allows people to buy, sell and transact in bitcoin using their phone.

Block had total revenue of $17.7bn last year, a significant $12.3bn portion of which was related to gains made on Cash App.

The documents now show that the CFPB is looking at how the fintech firm handled fraud and error disputes related to Cash App.

The CFPB wants to know whether Block “has deprived consumers of access to their funds or failed to adequately address customer concerns regarding fraud and errors in a manner that is [considered] unfair [under] the Consumer Financial Protection Act”.

It is also investigating whether Block “failed to follow the requirements applicable to resolving errors and liability of consumers for unauthorized transfers in a manner that violates [regulations] implementing the Electronic Fund Transfer Act”.

The CIDs are seeking specific information on Block’s chargebacks, its process guiding the freezing and blocking of transactions and fraud-related procedures and training materials. They also ask for certain communications of Brian Grassadonia, the CEO of Cash App, to see whether he had any involvement or understanding of the issues that are now being considered by the agency.

“We understand and respect the CFPB’s role in maintaining fair practices in the industry and protecting consumers, and we have a strong history of maintaining healthy, long-term relationships with regulators,” Block said.

“As always, we’ll continue to work collaboratively with the aligned interest of best serving Cash App customers," the spokesperson added.

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