The Consumer Financial Protection Bureau advised Americans against storing money in payment apps.
Surveys have found that about 76% of all Americans have used an app like Venmo at least once.
Money stored in apps is often not insured, unlike deposits at larger banks insured by the government.
You should probably stop leaving money in your Venmo and PayPal accounts for days, weeks, or even months at a time.
That's the official view of a federal government agency that is warning users of popular payment apps like Venmo, PayPal, Cash App, and more that they should avoid keeping large amounts of money on the app because it could be at risk.
Considering they are just apps and not federally regulated banks, deposits held in payments apps may not be federally insured like they are in a normal bank, the Consumer Financial Protection Bureau said in a report and a consumer advisory published Thursday.
While the apps are massively popular, with a 2022 survey finding about 76% of Americans, and a staggering 85% of people aged 18-29, have used a payment app at least once, the CFPB warned that too many Americans are stashing money in them.
The apps saw a collective $893 billion in transactions last year, per the CFPB's report. That's expected to nearly double to $1.6 trillion by 2027. Given the massive amounts of money passing through the apps, the CFPB said the lack of federal regulation and oversight on the apps comparable to what banks have to face is concerning.
Without deposit insurance, if money is no longer accessible because of something like a bankruptcy filing, that money could be gone forever with little to no chance for the user to be reimbursed, the CFPB said. Deposit insurance has been a popular topic across the finance industry this year with the collapse of three regional banks sparking discussion and questions about bank deposits that are insured by the federal government.
"As tech companies expand into banking and payments, the CFPB is sharpening its focus on those that sidestep the safeguards that local banks and credit unions have long adhered to," CFPB Director Rohit Chopra said in a statement.
The CFPB also found that user agreements for the payment apps often contain little to no information about whether a user's money can be insured in a given app, or whether their money may be used for other investments or purposes within the company while it is held in the app.
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