Can I Sue a Money Transfer App Like Venmo or Cash App?

Yes, you can 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 the small claims court handles, you may submit it to arbitration.

Although arbitration is supposed to be easy, quick, and less expensive than going to court, it can get complicated in practice. It may involve many complex legal issues that depend on the laws of your state. If you are thinking about arbitrating a claim against a money transfer app, 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 must 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 possible). What are your options?

Turns out you have several. Using your mobile device, you can choose different payment apps that allow you to send or receive money (called peer-to-peer payment).

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 discuss how to take action against them should you get into a dispute.

Popular Money Transfer Apps

For transferring money, you have some options. Some of the more popular apps include:

• Venmo (a corporate cousin of PayPal)
• Square's Cash App
• PayPal
• Apple Pay (for iOS devices)
• Google Pay (for Android devices)
• Zelle

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 your Cash App account, it's called your $Cashtag) and provide an email address.

Money transfer is straightforward as long as the recipient has an account on the same payment platform. All you need to do is plug in the amount, choose a payment method (some apps even let you transfer Bitcoin or some other crypto), 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 that allow you to link credit card accounts, Zelle transfers money directly from one bank account to another bank account. This means almost instant transfers, which we discuss below. Otherwise, money transfer apps have similar functionality.

Pros and Cons of Money Transfer Apps

Money transfer apps make payments simple. There are upsides:

• Touchless payments (which have been good during the pandemic)
• Ease of use
• More people have accounts you can exchange money with
• Convenience

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)
• 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 the apps' best efforts)
• You can make mistakes (e.g., send money to the wrong person, send the wrong amount, or get caught by a scammer, 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 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 gets repossessed. What can you do?

Not Going to Court

One option is to work out your dispute with the app informally. When you created your account, you had 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 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. 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 financial institution 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 like 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 action promptly.

If you're unhappy with the app but choose not to fight it, consider filing a complaint with the Better Business Bureau or the Consumer Financial Protection Bureau. They might not help you recover anything, but it feels good to vent and can help prevent similar issues from happening in the future.

If That Doesn't Work, Try Legal Action

Suppose you have tried to work it out informally with the app without luck. Maybe you disputed the transaction with the bank or credit card company, but that doesn't work either.

You could decide to take legal action against the app. Your rights are in your user agreement. Those agreements are usually very specific.

Legal Action: Small Claims Court

Some agreements allow you to bring a claim, but only in small claims court individually. That means a few things:

• You can recover the amount the small claims court can handle (it varies from $2,500 in a couple of states to $50,000 in 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 use a lawyer
• You can't group your claims with those of other people into a class action

Some of the user agreements place restrictions on 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 file it in New York City. 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 must go through an alternative dispute resolution process called arbitration.

Arbitration involves the parties to a dispute hiring someone (often a former judge) to resolve it. Your user agreement will define the specifics of how to conduct your arbitration.

In an arbitration, the parties tell the arbitrator their stories. They submit papers and evidence. The arbitrator hears their arguments and then comes to a binding decision. Generally, you do not get to appeal. And you generally can't file a class-action lawsuit.

Some lawyers believe arbitration is cheaper, simpler, and faster than court proceedings. Other lawyers believe it can be as expensive, lengthy, and complicated. It depends on the case. But because the rules and the facts can be complex, most arbitrations get handled by experienced lawyers.

If You Get Into a Dispute With a Money Transfer App, Consult a Lawyer

Money transfer apps can be great, but users sometimes encounter problems. If you get into a legal dispute with an app, 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 cases, but your user agreement will often require arbitration.

If you think about arbitrating a dispute, you should consider getting legal advice from an experienced lawyer who can help you better understand your legal rights.