Sign In  |  Register  |  About Menlo Park  |  Contact Us

Menlo Park, CA
September 01, 2020 1:28pm
7-Day Forecast | Traffic
  • Search Hotels in Menlo Park

  • CHECK-IN:
  • CHECK-OUT:
  • ROOMS:

Money kept in PayPal, Venmo, other payment apps less safe than if stored in banks, CFPB warns

The Consumer Financial Protection Bureau issued an advisory Thursday warning that funds stored in payment apps like PayPal and Venmo are not federally insured, unlike bank deposits.

Funds stored in digital payment apps like PayPal or Venmo may not be covered by federal deposit insurance and are at greater risk during a financial crisis than money held in a bank or credit union account, the Consumer Financial Protection Bureau (CFPB) warned in an advisory Thursday.

"Popular digital payment apps are increasingly used as substitutes for a traditional bank or credit union account but lack the same protections to ensure that funds are safe," CFPB Director Rohit Chopra said in a statement. 

The government agency reported that transaction volume across all peer-to-peer payment apps totaled an estimated $893 billion last year and is expected to reach roughly $1.6 trillion by 2027. It noted that funds received by users on the platforms are not typically sent automatically to recipients' linked bank or credit union accounts, meaning the funds can be held or invested by the app companies.

BANKING CRISIS CAUSED US BANK DEPOSITS TO FALL EVEN AS INSURED DEPOSITS ROSE: FDIC

But those activities are not subject to the same oversight as traditional lenders, the CFPB warned, noting that the funds may not be covered by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA).

The CFPB added that "many Americans were reminded that funds deposited with banks and credit unions enjoy the safety afforded by federal deposit insurance through the FDIC or NCUA" after witnessing the failure of "large systemically important banks such as Silicon Valley Bank, Signature Bank and First Republic Bank" in recent months. 

"These banks experienced a run, but insured depositors could have confidence their money was safe," the agency wrote. "However, similar protection would not be guaranteed to customers that store money on nonbank payment apps."

JPMORGAN CHASE CEO JAMIE DIMON SAYS STATUS OF BANKING SYSTEM IS ‘NOTHING LIKE '08’

More than 90% of the deposits held in Silicon Valley Bank (SVB) were not covered by FDIC insurance at the time it was seized by regulators because they were above the agency's $250,000 limit, which what drove panicked customers to withdraw their funds. 

However, federal bank regulators scrambled to cover all deposits of SVB customers in an effort to restore confidence in the banking system and prevent further contagion.

The CBPB said it would be working with state and federal regulators to keep an eye on the popular payment app sector.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

"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," Chopra added.

Data & News supplied by www.cloudquote.io
Stock quotes supplied by Barchart
Quotes delayed at least 20 minutes.
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
 
 
Copyright © 2010-2020 MenloPark.com & California Media Partners, LLC. All rights reserved.