Cash App Scam Victim Alleges Square, Sutton Bank Had ‘No Legitimate Reason’ for Denying Dispute Help

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A proposed class action alleges Square, Inc. and Sutton Bank’s error resolution procedures violate the federal Electronic Funds Transfer Act (EFTA).

The plaintiff alleges the fintech company and Ohio-chartered bank have wrongfully refused to refund $3,000 that was fraudulently drained from her account after she fell victim to an apparent scam involving Square’s Cash App, used to send and receive money online.

According to the lawsuit, many Cash App users pay for purchases by way of a prepaid debit card, known as the Cash Card, offered by Square and partner Sutton Bank. Per the case, Square controls the “central and basic aspects” of the Cash Card, including all consumer-facing functions and the process of handling disputes and fraudulent transactions. For its part, Sutton directs customers to contact Square in the event their card is stolen or lost, or if an unauthorized party has transferred funds without permission, the suit says. 

“Indeed, Sutton Bank refers Cash Card users to Square for all customer service, account, IT, fraud, and technical issues,” the complaint reads. “And according to Sutton Bank’s website, Cash App transaction history and bank statements are available through the Cash App and not Sutton Bank.” 

Crystalizing the dispute process between the defendants, the lawsuit says Square does not, at any point, direct customers to Sutton Bank or to any alternative dispute process. 

With regard to the plaintiff, the complaint says the woman used her Cash App account to buy a dress from a known women’s clothing boutique, Shane Justin Collections, on Instagram. The case alleges, however, that the account from which the plaintiff made the purchase turned out to be a fraudulent Instagram page constructed to deceive consumers into believing they were buying items from the real Shane Justin Collections.  

The plaintiff, who paid $120 for what she believed to be a legitimate product, was told by the fraudulent Instagram store that they were experiencing “technical difficulties” with the Cash App and asked the woman if they could “request” the funds from her account, the lawsuit says.  

Once the woman agreed, the fraudulent store promptly withdrew $3,000 from the plaintiff’s Cash App/Cash Card account, according to the suit. 

After the plaintiff initiated a dispute with the defendants on the same day the fraudulent charge was made, the entities responded via email that to open a Cash Card dispute, the plaintiff was required to provide a laundry list of information, which she immediately gave to Square and Sutton Bank, the lawsuit says.

According to the suit, the defendants gave the plaintiff a form response in which they thanked her for providing the information yet “demanded still more information,” with particular regard to “the security settings on her phone, whether anyone else had access to her device, etc.” Square said they could not review the plaintiff’s claim unless she provided this additional information, the case claims. 

Square responded to the plaintiff on July 9, 2020, denying the plaintiff’s dispute claim without offering a reason or disclosing the woman’s right to copies of the documents used during the investigation, the lawsuit alleges. Though the plaintiff sent along the additional information requested by the defendants, the companies responded again on July 10, relaying that, “we do not have enough evidence to determine the activity was unauthorized and have denied your claim.”

“The Burden-Is-On-The-Consumer Form Denial does not provide a legitimate reason for denying the dispute and does not provide notice of Plaintiff’s right to investigatory materials,” the suit contends.

In all, the case charges the defendants’ “pattern and practice” with regard to handling fraud disputes, which includes “common policies and automated, boilerplate communications,” is unlawful and impacts thousands of Cash App and Cash Card users. 

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