Could app cash advance fees lead to a class action lawsuit?

| Jan 28, 2021 | Class Action Lawsuits |

As technology advances, there are new ways to exchange money with a friend through a smartphone or computer. With a few swipes and taps, you can quickly and securely pay a friend through apps like PayPal and Venmo. It is extremely convenient and easy to do once the app is set up for payments.

Recently, it has come to light that some banks have been charging a cash advance fee to their customers without properly warning about it or explaining the charge. 

What is the issue?

Typically, in order to use apps for cash payments, customers link their app account to an outside payment source like a debit card or bank. In most cases, money transfers are possible without a charge. However, a few apps offer customers the option of linking their account to a credit card and choosing to use the credit card for peer to peer transactions for a small fee. This is acceptable as customers are aware of the charge when they choose the option. 

The problem is that there has been a change in the way the transfers process that allows banks to charge their own separate cash advance fees for peer to peer payments made using a credit card. Banks that issue credit cards are legally required to clearly define transactions that result in cash advance fees and it appears that they have failed to do so in this case. This has resulted in charges to the customer for the small fee they agreed to in addition to an often much larger fee that they are unaware of. Cash advance fees do not receive an interest-free grace period, meaning that they begin accruing interest almost immediately as opposed to typical transactions where interest does not apply until the next billing cycle. 

Are you affected?

Not all banks are making these unknown charges. To date, the bank credit cards currently reported to have issued these cash advance charges include Cap One, Citibank, Chase, U.S. Bank, and Wells Fargo. But, this list could change. Transactions involving purchases are not affected by these fees. These surprise fees are strictly incurred on peer to peer cash advance transactions. 

How could this become a class action?

class action lawsuit involves groups of consumers who have had the same bad experiences in dealing with commercial entities. In this case, the claimants in a class action could be all customers who were unknowingly charged these cash advance fees by major banks. 

Class action lawsuits involve large groups of people, but they often start with just one person. If you have noticed unexpected fees regarding cash advance payments through peer to peer payment apps, you are not alone.