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Venmo Scams and Consumer Protection: The Limits of Fraud Protection and What You Can Do

John Breyault talks about Venmo scams and consumer protection.

Scammers want to get at your money. It’s no surprise that they’ve started using payment apps like CashApp, Venmo, and Zelle to trick you out of your money. Venmo scams, Zelle fraud, and other shady dealings with similar apps actually has many benefits for scammers. Read on to learn how to protect yourself – and how better consumer protections would help.

See Fighting Against Fraud with John Breyault for a complete transcript of the Easy Prey podcast episode.

John Breyault is the Vice President of Public Policy Telecommunications and Fraud at the National Consumers League, where he spends most of his time working on a campaign called’s mission is to educate and empower consumers to spot the warnings signs of fraud and avoid becoming a victim. In addition, John advocates for stronger consumer protection against fraud. He has been advocating for policies that protect consumers for over two decades, including testifying before Congress, state legislatures, and federal regulatory agencies about the dangers of fraud.

Understanding Peer-to-Peer Payment Platforms

If you’ve ever Venmoed someone to split a bar tab, you’re already familiar with peer-to-peer payment platforms. Venmo, Cash App, PayPal, and Zelle are some of the more well-known ones. Whichever one you prefer, the goal is the same: Make it easy to transfer money between people.

These payment apps have seen explosive growth over the past five years. The coronavirus pandemic assisted with this growth, as people wanted to avoid exchanging cash and needed contactless payment options. Even businesses are starting to accept payment on these apps. These apps are free, nearly instant, and easy to use, which makes them popular with consumers. But unfortunately, that makes them popular with scammers, too.

The very things that make these services attractive to consumers – that they are instantaneous for the most part, they are free to use, easy to use, and often based on mobile apps – also makes them very attractive to scam artists.

John Breyault

Scammers’ Favorite Payment Methods

John has worked on scams for a while, and he finds it interesting to see how scammers flock to particular payment methods. When he first joined the National Consumers League in 2008, scammers’ favorite way to get paid was Western Union or MoneyGram. These methods were nearly instant, almost irreversible, and ended with the scammer having cash in hand. (Ultimately, that’s what scammers want – cash, merchandise they can turn into cash, or information they can sell for cash.) Then the Federal Trade Commission started cracking down on Western Union and MoneyGram for not doing enough to prevent fraud. It became harder for scammers to get their money that way. So they switched to other methods.

Fraud is an area where there is no lack of innovation on behalf of the scam artist. There’s always something new to warn consumers about.

John Breyault

John still remembers the first time a colleague told him scammers were asking people to pay with iTunes gift cards. His colleague didn’t understand it, and neither did John. But they did some research and found out that it was a way scammers were asking to get paid. Scammers would tell victims to go to a retail store, put hundreds of dollars on a gift card, and then read them the code. This still happens today. If anyone is asking to be paid in gift cards, it’s probably a scam!

Now, though, payment apps are the payment method of choice. Scammers love running Venmo scams, Cash App scams, and other payment app scams for the same reasons they loved Western Union and MoneyGram. It’s almost instant, practically impossible to reverse, and easy to turn into cash.

How Venmo Scams Differ from Credit Card Scams

In a credit card transaction, there are three parties involved: The sending bank, the merchant, and the merchant’s bank. Let’s say John has a Visa credit card issued by Bank of America. He goes to Best Buy to purchase a new TV and swipes his card. Visa tells Bank of America that John wants to give $100 to Best Buy for a TV. Bank of America says that’s fine. Best Buy gets told that it’s okay to give John the TV, and Visa takes $100 from Bank of America and gives it to Best Buy’s bank.

At the end of the day, Best Buy has most of the risk in this transaction. They are the ones paying the transaction fee for Visa to move that money. Say the person using John’s card to buy the TV wasn’t actually John. When he finds the fraud, John can dispute the charge. He would get his money back, and Best Buy would be out that $100.

With payment apps, there are only two parties involved, so in the case of Venmo scams, the sender has all the risk.

With a payment app, there are only two parties in the transaction: The bank that the money is coming from and the bank that the money is going to. There’s no merchant in the middle to take the risk, so all the risk is on the person sending money. Say John gets caught by a Venmo scam and sends $500 to someone pretending to be the IRS. That money goes straight from John’s bank to the scammer’s account and they can immediately turn it into cash. If John finds out it wasn’t really the IRS and calls his bank, they will tell him they can’t do anything. That’s because of a loophole in the law.

The Legal Loophole of Venmo Scams

If a scammer gets your credit card information and uses it to ring up a bunch of charges, you never authorized those transactions. Someone else made them using his card. The Fair Credit Billing Act and the Electronic Funds Transfer Act are two federal laws that say that since you didn’t authorize it, you can’t be held responsible for it. We feel safe using credit cards because we aren’t responsible for the charges if there’s fraud.

With Venmo scams, since you sent the money, it’s considered an authorized transaction. Even though it was sent under false pretenses or for fraudulent purposes, you’re still the one who pressed the button. Since it was technically authorized, it’s not protected by law. Banks don’t any legal requirement to help you, so that money is probably gone. For a consumer, losing $500 to Venmo scams can be the difference between paying rent or not. It’s a much less secure transaction, but scammers love it because you can’t get back the money once it’s sent.

Even if you’re not targeted by a scam, this loophole is bad news for you. If you make a typo and accidentally send money to the wrong person, there’s no way for your bank or the payment app to get it back. The best you can do is send a request that the person you accidentally sent it to give it back. But they have no obligation to do so.

Closing the Legal Loophole

If someone hacks your PayPal, Venmo, Cash App, or Zelle account and sends your money to someone, that is an unauthorized transaction. Your bank is obligated to give your money back. But if a scammer uses social engineering to convince, harass, or scare you into sending them money fraudulently, it’s considered an authorized transaction. Your bank has no legal obligation to help you. Closing that loophole and protecting consumers from Venmo scams and similar fraud is a simple fix.

John and the National Consumers League are working to change laws and close the loophole. The Consumer Financial Protection Bureau has indicated that they are interested in this issue. There’s also a draft of legislation currently being discussed in the House of Representatives on the issue. They are making progress, but the issue likely won’t go away anytime soon.

Is Consumer Education the Answer?

Banks hate the kind of laws that close those loopholes. Insurance on those transactions will cost them money. It would affect a lot of companies’ profit margins. They argue that this shouldn’t be solved by laws. If we just teach people how to avoid falling for Venmo scams, won’t that fix it?

Scamming is a crime that’s run like a business. Some sites on the dark web that sell compromised credit card numbers advertise 24/7 customer service. There are seminars on how to be a better scammer. In most places, being a scammer is low-risk – even if law enforcement starts doing sweeps, it’s very unlikely that they will go to jail. And some call centers do work for legitimate businesses as well as run scams.

Fraud is a problem that we are not going to consumer-educate ourselves out of. It’s going to need stronger consumer protection laws.

John Breyault

Yes, we should definitely warn people about scams. But that’s only one tool in the toolbox. Putting all the responsibility on consumers is asking people to fight against sophisticated professional networks of scammers who spent forty hours (or more) a week trying to defraud them. The average person just can’t keep up.

Businesses need to have an incentive to keep their products safe. If payment apps like Venmo don’t take steps to make sure their services aren’t being misused by scammers, we’re going to keep seeing Venmo scams and other payment app scams. Venmo, Zelle, Cash App, and other platforms make money from large numbers of transactions. Their priority right now is more transactions, not secure transactions. If they aren’t motivated to fight back, we’ll never solve the problem.

Warning Signs of Venmo Scams

All scammers are trying to get your money. But with Venmo scams, Cash App scams, and other payment app scams, there’s even more risk because you have no protections. Protect yourself from Venmo scams by watching out for these warning signs.

Asking for Payment Through Apps

If a business or organization asks for payment through a payment app or by putting money on a gift card, that’s a red flag. A real business should have a merchant account set up. You should be able to use a credit card for any legitimate purchase.

A legitimate business should never ask for payment in an unusual way.

John Breyault

Impostor Scams with an Urgent Need

An impostor scam is when the scammer pretends to be someone else. They could pretend to be the IRS, or your grandmother, or someone calling from overseas because a loved one has been in a terrible accident. Whoever they pretend to be, they need you to send money urgently or something terrible will happen. With all the information we (sometimes unintentionally) share online, they can sound very convincing. If someone is pressuring you to send money, stop. Take a breath and think about it. If it’s a genuine situation, a few seconds won’t make a difference. If it’s fake, those few seconds can keep you from becoming a victim.

Paying for Something Sight Unseen

Someone asking you for a down payment on an apartment, vehicle, or anything else before you’ve seen the thing in person is a red flag. If you haven’t seen it, you have no way of knowing if it is really for sale. They could a scammer with some photographs of a car or apartment that doesn’t exist.

You’ve Won a Prize

This isn’t just limited to Venmo scams, but it’s a popular way for scammers to ask for payment. Someone contacts you and says you’ve won a prize. All you have to do is send them some money for taxes. This is a scam. If you’ve legitimately won a prize, you should never have to pay to receive it.

Saying you've won a prize but asking you to send money to receive it is a Venmo scam - don't send it!

Stop, Think, and Ask

Before you send money to a stranger – especially if you feel pressured or rushed – pause. Take a moment to think. Ask a loved one or someone else you trust if it sounds like a scam to them. Do a quick Google search with what they’re telling you and the word “scam” and see if someone else had a similar experience. Data breaches can give scammers lots of information to be convincing. Even if it sounds real, take a moment to think and confirm.

Changing How We Talk about Fraud Victims

John’s colleague Kathy Stokes at AARP did a TED Talk about the way we talk about victims of fraud and scams. Look at some newspaper headlines or websites about a case of fraud. They often say something like, “Local grandma duped out of $10,000.” The headline focuses on the victim and implies they are at least partially at fault.

When we talk about fraud and scams, we often at least partially blame the victim. We ask how they could be so stupid to fall for that. Or we wonder how they were so greedy to go along with it. But the better way to think about it is in terms of criminals committing crimes. Scammers are criminals, and they are stealing from victims.

It’s not just the right thing to do. It can also help victims get help. The National Consumers League advises victims to go to the police. But often, the police say it’s not a police matter, or they don’t have the people to do anything about it, or ask why they did something so stupid. None of that is helpful.

By changing how we talk about victims, we’re really trying to change how we deal with fraud … from blaming the victim to treating it as the multinational organized crime that it actually is.

John Breyault

By blaming the victim for falling for the scam, we limit what we can do about it. It keeps us thinking that scams and fraud are an individual issue and people just need to learn how not to fall for them. But scamming is an organized, businesslike, multinational crime. Considering how much money can be lost to fraud, prosecutors aren’t giving it the resources and priority it should have. Changing how we talk about victims can help.

Protect Yourself from Venmo Scams

You can be proactive about avoiding Venmo scams. John recommends following these precautions to keep yourself safe.

Treat Payment Apps Like Cash

John treats his payment apps like they are cash in his pocket. He only gives the cash in his pocket to friends and family. He definitely doesn’t give cash to someone he’s never met in person. Similarly, he doesn’t use Venmo, Cash App, or anything else to send money to someone he doesn’t know.

Keep the Uses Limited

Payment apps were originally advertised as an easy way to split bar tabs or pay the babysitter. John thinks that’s the best way to do it. Don’t use Venmo to pay bills or purchase products. Anything beyond simple transactions with friends or family is inviting fraud because of the lack of consumer protections.

Only Send Money to People You’ve Met in Person

This is the safest way to use payment apps. Only send money to people who you have met in person and for reasons you knew about in advance. Legitimate businesses will accept money in another way. There are tons of ways for scammers to impersonate other people to try and convince you to send them money. If your babysitter requests Venmo instead of cash or you want to send money to your friend for your half of yesterday’s lunch, that’s fine. Anything else is putting you at risk of Venmo scams.

Learn more about John Breyault’s work at There are over 150 pages of content on fraud and scams of all kinds. Check it out and share with your family and friends. You can also sign up for John’s monthly fraud alert emails, which are often related to recent trends in fraud data. You can find the National Consumers League on Twitter @ncl_tweets, on Instagram @nationalconsumersleague, on Facebook, and on LinkedIn.

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