PayPal, FTC reach settlement over Venmo deception charges

PayPal reached a settlement with the Federal Trade Commission (FTC) on Tuesday over charges that its subsidiary Venmo had deceived customers about access to funds, privacy settings and data security.

The FTC had alleged that Venmo was misleading consumers by telling them that their balances on the service were available for transfer to external bank accounts but neglecting to inform them that the transfers could be delayed or negated after being reviewed by the company.

Venmo was also accused of misleading its users about how they can make their transaction history private.

“Consumers suffered real harm when Venmo did not live up to the promises it made to users about the availability of their money,” Maureen Ohlhausen, acting chairman of the FTC, said in a statement. “The payment service also misled consumers about how to keep their transaction information private. This case sends a strong message that financial institutions like Venmo need to focus on privacy and security from day one.”

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The regulator said users who changed a setting to limit the audience of their transactions in the app were not informed that they had to take an additional step to tighten their privacy controls.

PayPal spokesman Justin Higgs said the company has taken steps to address the concerns since it purchased Venmo’s parent company in 2013.

“We are pleased to conclude this process with the FTC in a cooperative way,” Higgs said in a statement. “This brings to an end the investigation that included focus on Venmo platform issues and practices prior to acquisition by PayPal. Since then, as a core part of PayPal’s and Venmo’s business and operations, we’ve taken steps to significantly strengthen our privacy and data security practices.”

As part of the settlement, Venmo is forbidden from making any more deceptive claims to its users and must obtain third-party compliance assessments every other year for the next decade.