US Financial Watchdog: Money Stored in Venmo/PayPal/CashApp Isn't Federally Insured (apnews.com) 62
The Associated Press reports:
Customers of Venmo, PayPal and CashApp should not store their money with those apps for the long term because the funds might not be safe during a crisis, the [U.S.] Consumer Financial Protection Bureau warned Thursday...
The Federal Deposit Insurance Corporation insures bank accounts up to $250,000. But money stored in Venmo or CashApp or Apple Cash is not being held in a traditional bank account. So, if there is an event similar to a bank run with those payment apps, those funds may not be protected. Some of the funds may be eligible for pass-through insurance coverage if customers do certain activities with the apps, the CFPB said, but generally by default the apps are not covered by deposit insurance.
For example, if a customer opened a PayPal Savings account, it would have deposit insurance through PayPal's partner bank, Synchrony Bank. But the general PayPal account is not covered by insurance. For Apple Cash, which can be insured through Green Dot Bank, it requires a user to verify their identity to get deposit insurance. "We find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the nonbank payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage," the CFPB said in its report.
"Consumers may not fully appreciate when, or under what conditions, they would be protected by deposit insurance," the agency added in its report.
The Federal Deposit Insurance Corporation insures bank accounts up to $250,000. But money stored in Venmo or CashApp or Apple Cash is not being held in a traditional bank account. So, if there is an event similar to a bank run with those payment apps, those funds may not be protected. Some of the funds may be eligible for pass-through insurance coverage if customers do certain activities with the apps, the CFPB said, but generally by default the apps are not covered by deposit insurance.
For example, if a customer opened a PayPal Savings account, it would have deposit insurance through PayPal's partner bank, Synchrony Bank. But the general PayPal account is not covered by insurance. For Apple Cash, which can be insured through Green Dot Bank, it requires a user to verify their identity to get deposit insurance. "We find that stored funds can be at risk of loss in the event of financial distress or failure of the entity operating the nonbank payment platform, and often are not placed in an account at a bank or credit union and lack individual deposit insurance coverage," the CFPB said in its report.
"Consumers may not fully appreciate when, or under what conditions, they would be protected by deposit insurance," the agency added in its report.
Yeah.. (Score:2)
until when they collapse and go crying to the Uncle Joe.
Sure (Score:5, Insightful)
Taxpayers didn't spend a dime bailing out those Banks. We did spend hundreds of billions bailing out Banks under Bush Jr. Obama got a good chunk of the money back though when he threatened to regulate them if they didn't pay back the loans.
Get over yourself kid (Score:2)
Water wet, Sunrise in the east, etc. (Score:3)
The pickle jar of singles buried in my backyard is also not FDIC insured. Things that aren't banks or credit unions don't have all the features of a bank or credit union.
Re: (Score:2)
Well, the thing is if many people are going to be burned by the collapse ... politicians might bail them out (not with their own money of course). It's a matter of how many votes they would lose. I think they might be "insured" by the fact that they're too big to fail.
Re:Water wet, Sunrise in the east, etc. (Score:4, Interesting)
No in this case water is not wet. At least it claims not to be. This is no where near as obvious as you make it out to be. A significant portion of people do not understand that these financial apps are not covered by the safeharbour of other banking regulations.
What is Paypal? It's a company that holds money. It's a company that processes payments. It's a company that has a Mastercard you can use to pay. It's home grown American U S of Fuckin A.
The details of what does and doesn't constitute a FDIC insured bank account is lost on many people in this case.
Begs the question... (Score:3)
Customers of Venmo, PayPal and CashApp should not store their money with those apps for the long term because the funds might not be safe during a crisis, the [U.S.] Consumer Financial Protection Bureau warned Thursday.
These apps have been doing direct payment processing for years, so why is the Consumer Financial Protection Bureau warning us now? The timing of this, as well as the specificity of mentioning "a crisis", seriously makes me think the US Government expects another financial collapse is imminent.
But as long as no major financial CEOs are dumping stock, we shouldn't be too worried, right? Oh wait... [yahoo.com]
Re: (Score:2)
Several banks failed recently. And the government inappropriately protected larger deposits.
Money in paypal is more difficult for them to seize tho.
Probably best to have some in paypal, some in banks, some in a pickle jar, some in a retirement account, some in bonds.
So kinda depends.
Re: (Score:2)
Several banks failed recently. And the government inappropriately protected larger deposits.
Yes, and I am sure the same will happen depending upon *who* loses their deposits in this case. Over and over again the Gov proves who really matters, the ultra rich. What happened in 2008 is a glaring example. No one was brought to justice. And the working class and espically the poor bared the brunt of the damage, while the rich was getting richer.
The woman from thernos(?) was brought to justice as she should have been. But I have to wonder what would have happened if she was part of the "0.1%".
Re: (Score:2, Insightful)
That's what Holmes did wrong. She fucked with the money of people that actually matter, like Kissinger and Schultz. And since it was very public and embarrassing for people who had juice, someone has to take the fall in this case.
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Companies who receive money from customers via Paypal will generally empty their Paypal account every morning as part of their normal accounts routine.
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On the other hand, since i pay with Paypal, I keep a small working fund in it. It would sting if I lost it but it's less than 0.1% of my net worth.
It's because a ton of kids (Score:4, Insightful)
And CEOs are always dumping stock. So relax. Republican party was trying to cause a recession with the dead ceiling negotiations and they failed spectacularly. So we've got at least another four years of financial stability before they get to try again.
Re: (Score:2, Insightful)
Republican party was trying to cause a recession with the dead ceiling negotiations and they failed spectacularly.
Let us know when the thousands of layoffs per week stop.
Re: (Score:2)
Where are all these people that have been laid off? There are plenty of companies who are looking for employees who still cannot get them. Sure, one reason is they don't pay enough, but when you're a company with fewer financial resources than the FAANGs, you have to control your spending. Assuming thousands of people are flooding the job market, those jobs should be filling up fast.
cancel this bitches (Score:1)
wah wah wah cancel culture DOWNMOD
The hypocrisy is so tedious.
Re: (Score:2)
I just got karma and I'm itchin' to spend it
Re:Begs the question... (Score:5, Insightful)
Several high-profile crypto scams imploded within the past year. With them came cries for the customers to be bailed out. CFPB probably wants to run a public service announcement highlighting the distinction between internet money-holders and an FDIC-insured bank account. Given the organized effort that has been made to blur that distinction, and encourage people to move all their money out of banks, it's kind of their job to warn about the dangers.
It's not just crypto scammers either, there are tons of people who use Cash App cards, Paypal, etc the same way they'd use a regular bank account. None of those companies are going to discourage that type of usage out of the kindness of their hearts. They may have been operating for years, but that hardly makes them immune to collapse. And there's a bunch of ways for them to *poof* your money besides collapsing. There are decades of PayPal horror stories to read, if you're not familiar. Stuff that would be illegal for a bank to do.
"Imminent collapse of the financial system" sounds like something being pushed on a low-end YouTube channel, next to the latest hypecoin and definitive proof the Earth is flat. Sometimes, things are just normal and boring. This is one of those times.
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Maybe in response to more people using such services as primary banking? Ie, younger people confusing these services with banks.
Re: (Score:2)
These apps have been doing direct payment processing for years, so why is the Consumer Financial Protection Bureau warning us now? The timing of this, as well as the specificity of mentioning "a crisis", seriously makes me think the US Government expects another financial collapse is imminent.
Or maybe when the question of FDIC came up due to the collapse of a bank it becomes something that people are interested in given that it has dominated the news cycle.
No need for some conspiracy. This is not a harbinger of doom. This is just an opportunity to educate people about something topical.
Re: (Score:2)
Not Safe? (Score:3)
I don't know about the other two companies, but I've heard and read several times that with PayPal your money isn't safe even in the short term.
Re: (Score:2)
> I've heard and read several times that with PayPal your money isn't safe
The money is very very safe and PayPal will hold it. Even if you have a claim to it. It's not YOUR money since you gave it to them.
PayPal's money is very safe.
If you'd like o "invest" don't buy "crypto" or "NFTs."
If you'd like to "save" get a savings account.
If you'd like to "quickly transfer money" and hopes it gets from point A to point Z don't use third parties known for holding your money under the flimsiest excuses. Google
Re: Not Safe? (Score:3)
Yeah at one point they were playing with the idea of "fining" users engaging in the spread of "misinformation."
Which in English means stealing from people whose politics they didn't like. I hadn't used them in over a decade, but I deleted my account after that.
Re: (Score:3)
I've had no choice but to use PayPal a few times over the years because my seller wouldn't take anything else but I only used it via my CC. Never hooked up my bank nor kept any money there.
They can steal my $0.00 balance if they like and good luck tapping my CC. The one they have doesn't even exist anymore.
Re: (Score:2)
I have been using PayPal for many, many years without a problem. I have a PayPal line of credit, a bit of crypto and a savings account with them. The savings account is FDIC insured. I put a portion of my paycheck into the regular (uninsured) PayPal account to pay off the line of credit every month and I automatically transfer $10/week into the savings account. The line of credit is 0% interest on almost everything I buy with it if paid of within 6 months and the savings account is at 4.1% interest right no
Re: (Score:2)
Say it ain't so! (Score:3)
What about my money stored in Magic: The Gathering cardboard and CS:GO pixel art?!
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Might outlast many other forms of wealth storage.
This should have been from the "No shit Sherlock D (Score:2)
If it's not an FDIC insured bank, then why would one expect it would be Federally insured? ðYðYââ(TM)ï
Re: (Score:2)
Always a generational problem. In my day it was people being joyful at "buy now, pay later" then dismay later at their stuff being repossessed. It was a high school graduation requirement for me to have a civics class, and that included teaching about money and credit and the like. Maybe they don't teach this anymore.
Aw..next they'll be saying Itchy and Scratchy (Score:2)
Dollars aren't legal tender. Buzzkills.
But RightwingNutjobCoins running through RightwingNutjobX in the Caymans is still legit, right?
Re: (Score:2)
RWNJCoin is super legit. Everyone who doesn't get in now on the ground floor is gunna miss out when these things take off!
I have occasionally used Venmo and CashApp (Score:2)
I have occasionally used Venmo and CashApp for paying friends and family members for small things. And infrequently some big things too. It is very convenient. Big banks have tried to compete with Zelle. But Zelle stinks. It is cumbersome to use. Lots of extra steps. And the user adoption isn't there, so people just ask to be not paid by Zelle.
Zelle does help you solve the lack of FDIC insurance problem. However, it introduces another. Big banks have reporting requirements. Venmo doesn't. Not for
Re: (Score:3)
The reporting requirement is 10K, not 4K. So either you're lying, or you made a smart ass answer and pissed the teller off.
And if you think that PayPal etc wouldn't tell the feds everything they wanted to know, you're kidding yourself. They're even more likely to, as they don't have privacy protections written into law.
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> The reporting requirement is 10K, not 4K.
The reporting requirement is not just 10K transactions. *Any* suspicious activity is required to be reported. For example, try making a whole lot of $9.5K transactions without doing anything illegal. That activity by itself will trigger an alert and you'll get a visit from the Feds.
> So either you're lying, or you made a smart ass answer and pissed the teller off.
Please google Suspicious Activity Reports (SAR) to enlighten yourself. In my case, I was run
Re: (Score:2)
Here in the UK, I use my own bank's app for that. The recipient gives me their sort code and account number, I enter those in my app along with the amount I want to send, and they receive the money about 3 seconds later in their bank account, even if they are with a different bank to me. And there's no fees to pay on either side.
Maybe it's time.. (Score:4, Insightful)
Apple cash (Score:3)
Re:Apple cash (Score:5, Informative)
And that's why it's important for you to read and understand what is going on here. Apple is not a bank. The money in this account is not tied to their business, and their cash on hand or company value is not used to underwrite the value for your "deposits".
If Green Dot Bank has an issue, you will lose your Apple Cash regardless if Apple remains the wealthiest company with the largest cash reserves in the world or not. At least unless you follow the process talked about in TFS.
Re: (Score:2)
And that's why it's important for you to read and understand what is going on here. Apple is not a bank.
No, but Goldman Sachs is the bank that Apple publicly partners with for many of their financial products, including Apple Card and Apple Savings. And, confusingly enough, the latter of those covers some of the same functionality as Apple Cash and actually is FDIC insured.
To be clear, I'm not disagreeing with your point. These companies have made it difficult to distinguish which products are insured vs. which aren't, and they're doing so under the guise of "helping you" simplify your financial situation by
Re: (Score:2)
No one, not even TFS claimed your funds aren't insured. The claim was that to get your money in a disaster you will need to follow a typical bank's complex verification process since Apple hasn't gone through the motions to do so itself.
But in any case, whether your money is insured wasn't the point. The OP showed wonderfully that people really have no clue when it comes to these modern non-banks who or how the money is controlled. Is your money safe? Most probably. But if something were to happen, Apple is
Re: Apple cash (Score:3)
Paypal... (Score:3)
Basically, these intermediary bank transfer services are just that, should only be used transiently & certainly can't be trusted with anything we can't afford to lose. In other words, don't use them as banks.
Don't worry, the Feds will bail them out anyway (Score:2)
Re: (Score:2)
If they will bail out irresponsible banks well above regulatory limits, why shouldn't they also bail out tech companies?
I take it you're looking for some regulatory standard on how the Government corruptly determines who is, and who is not Too Big To Fail?
Good luck with that.
At what cost? (Score:1)
paypal protection of money (Score:1)
Wow, I better move out my $5 in paypal.
Banks, aren't even Federally insured. (Score:2)
Not sure what leg some Federal regulator has to stand on regarding insured back balances when they can't even guarantee you have access to "your" money.
Go ahead. Walk up to your bank and tell them you'd like to withdraw the insured maximum amount from your account in cash. See what they tell you. I dare you.