PayPal Settles with FTC over Venmo Disclosure Discrepancies
PayPal reached a settlement with the Federal Trade Commission regarding the questionable disclosure of product features for Venmo. The FTC alleged the peer-to-peer transfer service was not fully transparent with how funds could be transferred to external bank accounts. Transfers like this were subject to review, and the funds could be frozen or removed from the account until the review was complete.
In their initial complaint, the FTC says customers were complaining about delayed withdrawals due to Venmo’s review process. This resulted in late bill payments. They also said some transfers would be reversed altogether, after Venmo said funds were dispersed to their bank accounts.
There was a secondary element of the FTC complaint regarding account privacy. Venmo is partially set up like a social network. Users can see each other’s transactions on their newsfeed, just like Facebook or Instagram profiles. Venmo has a setting to make certain transactions private, but it requires a two-step process. Users who did not adjust the second setting would have information displayed that they originally intended to be private.
Even if a transaction was successfully marked as private, the other person involved with the transaction could override the privacy setting. In other words, if Bill sent money to Sally but marked it as private, Sally could still display the transaction on her feed.
The FTC did not propose a monetary settlement. Instead, Venmo will have to undergo multiple policy changes and be subject to biennial assessments for the next 10 years.
PayPal acquired Venmo in 2013, but has yet to turn a profit on the service. PayPal’s CEO Dan Schulman said, “I have full confidence that we will monetize Venmo. We are clearly seeing the network effects of Venmo.”