On the June 20, the CFPB released its Office of Servicemember “(“OSA”) Affairs Annual Report. This year’s report focuses on the challenges faced by servicemembers and their families when using digital payment apps. As further discussed in a prior post, these digital payment platforms are gaining widespread popularity as substitutes for traditional banking services despite their lack of deposit insurance and lack of information in platform user agreements. The report presented the following findings with respect to servicemember use of digital payment apps:
- A 55% increase in servicemember complaints in 2022, including a 83% increase in complaints stemming specifically from the use of digital payment apps.
- Servicemembers, often having to deploy or move at a moment’s notice, rely heavily on online payment apps to secure housing, new automobiles, or other necessities for them and their families. Frequent relocation and the reliance on these payment make servicemembers more susceptible to identity theft, scams, and fraud.
- In 2022, the FTC saw a 460% increase in complaints about fraudulent activity on payment apps constituting $163.4 million in financial losses seen by U.S. consumers. Servicemembers specifically have been found to be 40% more likely to lose money to scams than the civilian population, with 4 out of 5 servicemembers reporting being the target of fraud or scams directly related to their military benefits.
- When servicemembers report instances of fraud on these apps, they frequently report issues with customer service, the inability of getting timely resolutions, and often see no monetary relief. Financial losses resulting from fraud are a distraction and can limit servicemember’s ability to serve as security clearance can be revoked due to financial vulnerability.
Putting it into Practice: As digital payment apps gain popularity, the CFPB will be continually scrutinizing the impact that such platforms have on servicemembers and their families. Technology companies and traditional financial services companies that offer, or are considering offering, digital payment services can take steps to ensure that their services do not run afoul of current guidance. Such steps are not limited to but include: improving safety and security protocols to prevent fraud on their platforms; improving responsiveness times in the event fraud does occur; and tailoring reimbursement policies to better recognize the experiences of servicemembers.