Can I Sue a Money Transfer App Like Venmo or Cash App?
Yes, you may be able to sue a money transfer mobile app like Venmo, Cash App, or Zelle, but probably only on an individual basis in small claims court. If your claim is larger than what the small claims court handles, then you would probably need to submit it to a process called arbitration.
Although arbitration is supposed to be easy, quick, and less expensive than going to court, in practice they can be complicated and may involve many complex legal issues that may depend on the laws of your state. If you are thinking about arbitrating a claim against a money transfer app, you should strongly consider getting legal advice from an attorney skilled in alternative dispute resolution.
What Are Money Transfer Apps?
Sometimes you get stuck at a restaurant and need to split a tab with a friend. Few people carry much cash nowadays, and fewer friends accept credit cards (although with the Square app it's perhaps possible). What are your options?
Turns out you have several. You have your choice of different apps that allow for you to send or receive money (called peer-to-peer payment) using your mobile device.
Let's start by identifying and briefly discussing a few of the more popular payment services. Then we will talk about some of the pros and cons of using them. Finally, we will conclude with a discussion of how to take action against them should you get into a dispute.
Popular Money Transfer Apps
When it comes to transferring money, you have a number of options. Some of the more popular apps include:
- Venmo (a corporate cousin of PayPal)
- Square's Cash App
- Apple Pay (for iOS devices)
- Google Pay (for Android devices)
They all basically work the same way. You set up an account with the app and link at least one bank account, credit card, or debit card to your app account. You choose a username (on Cash App it's called your $Cashtag) and provide an email address.
So long as the recipient has an account on the same payment platform, money transfer is straightforward. All you need to do is plug in the amount, choose a payment method (some apps even let you transfer bitcoin), and put in the username or email address of the recipient. Then you press the button that sends the money (it could be “send," “pay," “transfer," or something like that). Simple.
Zelle is a little different. Unlike other apps which allow you to link credit card accounts, Zelle transfers money directly from one bank account to another bank account. This makes for almost instant transfers, which we discuss below. Otherwise, money transfer apps pretty much have similar functionality.
Pros and Cons of Money Transfer Apps.
Money transfer apps make payments simple. There are a number of upsides:
- Touchless payments (which has been good during the pandemic)
- Ease of use
- More and more people have accounts you can exchange money with
As with everything, however, there are some downsides. Those include:
- For most (except notably Zelle), your money may not be instantly available (transactions typically take a couple of business days to process)
- Both the sender and the recipient must have an account on the app you want to use
- Most apps limit the amount and frequency of money transfers
- Your account information may be subject to hacking (despite best efforts on the part of the App)
- You can make mistakes (e.g., send money to the wrong person, send the wrong amount, or get caught by a scam, etc.)
- Most apps (except notably Apple) may share at least some of your data with third parties
What Do You Do if You Get Into a Dispute With a Money Transfer App?
As useful as money transfer apps are, you can nonetheless get into problems. Suppose you send too much or send money to the wrong account.
Suppose it's more serious than that. Perhaps you are paying a bill and the app goes down in the middle of the transaction. You don't realize the payment didn't go through until your car is repossessed. What can you do?
Not Going to Court
One option is to try to work out your dispute with the app informally. When you created your account you were required to accept the app's user agreement. Each app's user agreement has a claims resolution process that you can follow. But start with a call to customer support. You can get the number in-app (it may be listed on the home screen) or from the app's website.
This can take time, but it's less expensive than bringing in a lawyer and you may be happy with the resolution you get. Who knows? Apps want to do business and have an incentive to keep their customers happy. They may be willing to work with you.
Another choice is to notify your bank or credit card company that you dispute the transaction. Most, if not all, will then start a fraud investigation, which ultimately may lead to a chargeback. Again, it may take time, but you may be satisfied with the result.
In either case, you may have a limited amount of time in which to report the problem. So check your user agreement and take any action promptly.
If you're not happy with the App, but choose not to fight them, consider filing a complaint with the Better Business Bureau. They might not help you recover anything, but it may feel good to vent and can help prevent similar issues from happening in the future.
If That Doesn't Work, Try Legal Action
You may have tried to work it out informally with the app without luck. Maybe you did dispute the transaction with the credit card company but that doesn't work either.
You could decide to take legal action against the app. Your rights are defined by your user agreement. Those agreements can be very specific.
Legal Action: Small Claims Court
Some of those agreements allow you to bring a claim, but only in small claims court on an individual basis. That means a few things:
- The amount you can recover is limited to the total amount the small claims court can handle (it varies from $2,500 in a couple of states to $50,000 in a couple of others, with many landing around $10,000).
- You typically do not get to have your claims tried before a jury
- In some states, you can't be represented by a lawyer
- You cannot group your claims with those of other people into what is called a class action
And some of the user agreements place restrictions on even going to small claims court. For example, Venmo's user agreement only lets you bring a court claim if it's under $500 and requires you to bring it in New York City — nowhere else. That may be fine if you live in New York, but it may not be worth it if you live in Nebraska.
Legal Action: Arbitration
Most agreements don't allow you to recover larger amounts in court. If your dispute involves more than what your small claims court handles or the user agreement permits, you have to go through an alternative dispute resolution process called arbitration.
Basically, arbitration involves the parties to a dispute hiring someone (often a former judge) to resolve it for them. Your user agreement will define the specifics of how your arbitration will be conducted.
In an arbitration, the parties each tell the arbitrator their side of the story. They submit papers and evidence. The arbitrator hears their arguments then comes to a binding decision. Generally, you do not get to appeal.
Some lawyers believe that arbitration is cheaper, simpler, and faster than court proceedings. Other lawyers believe it can be just as expensive, lengthy, and complicated as a court case. It depends on the case. But because the rules and the facts can be complicated, most arbitrations are handled by experienced lawyers.
If You Get Into a Dispute With a Money Transfer App, Consider Consulting a Lawyer
Money transfer apps can be great, but users sometimes encounter problems. You may get into a legal dispute with an app. If you do, try to work it out through whatever informal processes your user agreement permits.
If you're unsatisfied with what they are willing to do for you, you may need to take legal action. Small claims court may be an option in some situations, but in many cases, your user agreement will require arbitration.
If you find yourself thinking about arbitrating a dispute, you should strongly consider getting legal advice from an experienced lawyer who can help you better understand what your legal rights are.