The Consumer Financial Protection Bureau is investigating the debt collection practices of Venmo, the digital money transfer service operated by PayPal, the company announced on Friday in a regulatory filing. Venmo has received a Civil Investigative Demand from the CFPB on January 21, the day after former director Kathleen Kraninger resigned from the agency.
While transactions appear instantly in Venmo, allowing the recipients of funds transfers to access the cash, the transaction can sometimes take a couple of days to be finalized, and in some cases, the funds are not in the sender’s account, leaving Venmo on the hook. Media reports have alleged that Venmo has threatened to send debt collectors to individuals who owe the company money, a practice it has reportedly continued during the COVID-19 pandemic.
Venmo processed $159 billion in volume during the 2020 fiscal year, for more than 70 million accounts, according to data released by PayPal. As of December 31, there were $270 million in negative customer balances on the platform, which is up from $221 million as of last June. That total represents money that PayPal has written off as uncollectible debt. PayPal writes off a negative balance when it goes unpaid for more than 120 days.
PayPal said it is cooperating fully with the investigation, which included a request for documents and questions about its policies and procedures. It made the announcement in its annual report filed with the Securities and Exchange Commission.
Some targets of Venmo’s collection efforts have claimed that the company is going after the wrong people. Individuals who were duped into sending money to a fraudster or those who had their accounts taken over by scammers should not be subject to collection actions, they claimed in a published media report that spotlighted Venmo’s debt collection efforts.