June 2nd, 2023 7:00am PDT
(PenniesToSave.com) – It’s recommended to avoid leaving funds in your Venmo and PayPal accounts for extended periods, including days, weeks, or even months.
The federal government agency has officially advised users of popular payment apps like Venmo, PayPal, and Cash App to be cautious about keeping large amounts of money on these platforms due to potential risks.
Unlike traditional banks, these apps do not fall under federal regulations and may not provide the same level of deposit insurance protection, as stated in a report and consumer advisory released by the Consumer Financial Protection Bureau on Thursday.
Payment apps have gained immense popularity, with a recent survey showing that around 76% of Americans have used these apps at least once. Among individuals aged 18-29, an impressive 85% have utilized payment apps. However, it’s important to note that the Consumer Financial Protection Bureau (CFPB) has raised concerns about the accumulation of funds within these platforms.
In a report by the CFPB, it was revealed that these apps facilitated an astonishing $893 billion in transactions last year. It’s projected that this figure will almost double to $1.6 trillion by 2027. With such a significant amount of money being exchanged through these apps, the CFPB has expressed concerns about the lack of federal regulation and oversight that traditional banks are subjected to.
The Consumer Financial Protection Bureau (CFPB) has pointed out a major drawback: without deposit insurance, there is a risk of permanently losing funds if they become inaccessible due to factors like a bankruptcy filing. This means that users may not have any possibility of reimbursement. Deposit insurance has been a hot topic in the finance industry, especially following the collapse of three regional banks. This event has sparked discussions and raised concerns about the security of bank deposits insured by the federal government.
According to CFPB Director Rohit Chopra, the Consumer Financial Protection Bureau (CFPB) is increasing its scrutiny of tech companies entering the banking and payments industry. This is due to concerns that these companies may bypass the established safeguards used by traditional local banks and credit unions.
Additionally, the Consumer Financial Protection Bureau (CFPB) found that user agreements for payment apps often lack important information about insurance coverage for funds stored in the app. These agreements also fail to disclose whether the company can use these funds for investments or other purposes while they are being held in the app.