The FTC has announced that it has reached a settlement with PayPal, Inc. over allegations that the company told users of its Venmo peer-to-peer payment service that money credited to their Venmo balances could be transferred to external bank accounts without adequately disclosing that the transactions were still subject to review and that funds could be frozen or removed. A complaint filed by the FTC also charged that Venmo misled consumers about the extent to which they could control the privacy of their transactions.
In addition, Venmo misrepresented the extent to which consumers’ financial accounts were protected by “bank grade security systems,” and violated the Gramm-Leach-Bliley Act’s Safeguards and Privacy Rules. As part of the proposed settlement, Venmo is prohibited from misrepresenting any material restrictions on the use of its service, the extent of control provided by any privacy settings, and the extent to which Venmo implements or adheres to a particular level of security.
Venmo is also required to make certain disclosures to consumers about its transaction and privacy practices, and is prohibited from violating the Privacy Rule and the Safeguards Rule. Consistent with several past cases involving violations of Gramm-Leach-Bliley Act Rules, Venmo is required to obtain biennial third-party assessments of its compliance with these rules for 10 years.
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