Venmo Tells Scammed Customers to Pay Up
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What is the Venmo scam problem introduced at the start of the episode?
Here's your money briefing for Friday, September 25th. I'm J.R. Whalen for The Wall Street Journal. People use the payment app Venmo to send small amounts to friends and family or to pay for items online. And to some, Venmo may just seem like an online bank. But there have been cases of fraud, and users of the app who've been duped could be in for a rude awakening. when they find their account in the red.
They usually think that, you know, my bank has my back, my financial institution has my back, Venmo has my back. And not only do they find out that Venmo may seem indifferent to the fact that they were scammed, they actually want to go after the victim of the scam instead of the scammer.
Reporter Peter Rudiger will have more after the break.
Scammers are always looking for their next victim, and online money apps are a perfect hunting ground. Venmo users seem to be new targets on their list. But while other online transactions often have some kind of fraud protection, those who get tricked into sending money to imposters can wind up being held accountable for lost funds. banking and finance reporter Peter Rudiger joins me to discuss. So, you know, Peter, unfortunately, being scammed is a danger to look out for when doing online transactions. But is this something new? The person being scammed is responsible?
Well, a lot of people haven't heard of anything like this happening to them before. Usually they think if you use your credit card, or your debit card to fund something online, you're protected, right? Because it's your bank. Unfortunately, when you use a service like Venmo or a similar P2P, they're called payment service, the protections are slightly different. So you don't really have the same sort of rights or, you know, assistance from your bank when you're doing something to another person like that as you would if you were swiping your card or even entering it in an online shopping form.
So help us understand the cash flow here.
How do payment-app protections differ from bank card protections for victims?
If somebody transfers money to buy something, where does it go? And what would trigger Venmo to then try to force the user to come up with the funds?
JR, if I were to send you $10 on Venmo, you'd probably get a notification on your phone and it says your account balance is green plus 10 and mine is red minus 10. And it looks instantaneous. And you can use that $10 to send it to somebody else on Venmo. You can pay a small fee and move that to your bank account within minutes. What's actually happening is a much slower process, the same process by which checks clear or any money moves out of your bank account for any other transactions. That takes a day or more. So even if it looks like the money's in your Venmo account right away, it takes a day or more to move from my bank to Venmo and then into your bank if you want to move it there. And what can happen is a user can say, after they authorize the payment, maybe they find out they've been a victim of a scam and they want to stop the payment.
So they call their bank, they say, hey, I'm in this one to three day window, the money hasn't left, put a stop payment on that. Venmo, like I said, because it looks like it's instantaneous in your account and you can kind of take it out if you want with a small fee or send it to someone else on Venmo, they advance you the money a lot of the time so you can use it. And they are reimbursed kind of when that one to three day period happens and the money clears. But if that's interrupted, like if you stop a payment on a check, you can end up having a negative balance on your account and Venmo can be holding the bag.
Okay. And so that's when they would start the process of putting some pressure on the user.
Right, that's when they might send you an email saying, you know, you have this negative balance. Effectively, you have a debt, and we would like you to pay this debt. And here are some of the things we might do to make you pay this debt. One of them is, let's say you have $500 just sitting in your Venmo account already.
How does Venmo’s fund-clearing process create negative balances for users?
They might debit that amount and say, okay, we'll take the $10 that...
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Chapters
5 chapters
1
What is the Venmo scam problem introduced at the start of the episode?
0:05–1:55
2
How do payment-app protections differ from bank card protections for victims?
1:55–3:40
3
How does Venmo’s fund-clearing process create negative balances for users?
3:40–6:41
4
When and why does Venmo demand users repay negative balances after a scam?
6:41–10:29
5
What real user scam stories illustrate the financial impact of Venmo claims?
10:29–11:47
Speakers
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