Yes, you might be able to sue a mobile money transfer app like Venmo, Cash App, or Zelle, but likely only on an individual basis in small claims court. If your claim is larger than what the small claims court is dealing with, you will likely need to submit it to a process called arbitration.
While arbitration is supposed to be easy, quick, and less expensive than going to court, in practice it can be complicated and involve many complex legal issues which may depend on the laws of your state. If you are considering arbitrating a claim against a money transfer app, you should strongly consider seeking legal advice from a competent ADR lawyer.
What are money transfer apps?
Sometimes you get stuck in a restaurant and need to share a note with a friend. Few people carry a lot of cash these days, and fewer friends accept credit cards (although with the Square app it might be possible). What are your options?
It turns out you have several. There are different apps to choose from that let you send or receive money (known as peer-to-peer payment) using your mobile device.
Let’s start by identifying and briefly discussing some of the more popular payment services. Next, we’ll talk about some of the pros and cons of using them. Finally, we will conclude with a discussion of how to take action against them in the event of a dispute.
Popular money transfer apps
When it comes to transferring money, there are several options available to you. Some of the more popular apps include:
- Venmo (a corporate cousin of PayPal)
- Square’s Cash app
- Pay Pal
- Apple Pay (for iOS devices)
- Google Pay (for Android devices)
They all work basically the same. You create an account with the app and link at least one bank account, credit card, or debit card to your app account. You choose a username (on Cash App it’s called your $ Cashtag) and provide an email address.
As long as the recipient has an account on the same payment platform, transferring money is easy. All you need to do is enter the amount, choose a payment method (some apps even allow you to transfer bitcoin), and enter the recipient’s username or email address. Then you press the button that sends the money (it can be “send”, “pay”, “transfer” or something like that). Simple.
Zelle is a little different. Unlike other apps that let you link credit card accounts, Zelle transfers money directly from one bank account to another. This allows for almost instant transfers, which we discuss below. Otherwise, money transfer apps have pretty much similar functionality.
Pros and Cons of Money Transfer Apps.
Money transfer apps simplify payments. There are several advantages:
- Contactless payments (which was good during the pandemic)
- Ease of use
- More and more people have accounts to exchange money with
As with everything, however, there are a few downsides. These include:
- For the most part (except notably Zelle) your money may not be available instantly (transactions usually take a few business days to process)
- Both sender and recipient must have an account on the app you want to use
- Most apps limit the amount and frequency of money transfers
- Your account information may be hacked (despite all efforts of the App)
- You can make mistakes (e.g. sending money to the wrong person, sending the wrong amount or being scammed, etc.)
- Most applications (except Apple in particular) can share at least some of your data with third parties
What if you have a conflict with a money transfer app?
As useful as money transfer apps are, you can still run into problems. Suppose you send too much money or send money to the wrong account.
Suppose it is more serious than that. Maybe you pay a bill and the app crashes in the middle of the transaction. You don’t realize payment hasn’t been made until your car has been taken back. What can you do?
Do not go to court
One option is to try to resolve your dispute with the app informally. When you created your account, you had to accept the app user agreement. Each app’s user agreement has a complaints resolution process that you can follow. But start with a call to customer support. You can get the number in the app (it may be listed on the home screen) or on the app’s website.
It might take a while, but it’s cheaper than bringing in a lawyer, and you might be happy with the resolution you get. Who knows? Apps want to do business and have the incentive to keep their customers happy. They may be willing to work with you.
Another choice is to let your bank or your credit card company know that you are disputing the transaction. Most, if not all, will then initiate a fraud investigation, which can ultimately lead to a chargeback. Again, it might take a while, but you can be happy with the result.
In either case, you may have a limited amount of time to report the problem. So check your user agreement and act quickly.
If you’re unhappy with the app, but choose not to fight them, consider filing a complaint with the Better Business Bureau. They might not help you get anything back, but it can be nice to let off steam and can help prevent similar issues from happening again in the future.
If that doesn’t work, try legal action
You may have tried to resolve it informally with the app without success. You might have disputed the transaction with the credit card company, but that doesn’t work either.
You can decide to take legal action against the app. Your rights are defined by your user agreement. These agreements can be very specific.
Legal action: Small Claims Court
Some of these agreements allow you to file a claim, but only in Small Claims Court on an individual basis. This means several things:
- The amount you can recover is limited to the total amount that the small claims court can handle (it ranges from $ 2,500 in a few states to $ 50,000 in a few others, with a lot landing around $ 10,000).
- You generally cannot have your complaints tried in front of a jury
- In some states, you may not be represented by a lawyer
- You cannot combine your claims with those of other people in what is called a class action.
And some of the user agreements even place restrictions on recourse to small claims court. For example, the Venmo User Agreement only lets you take legal action if it’s less than $ 500 and requires you to bring it to New York City, nowhere else. It might be good if you live in New York City, but it might not be worth it if you live in Nebraska.
Legal action: arbitration
Most agreements do not allow you to recover larger sums from the courts. If your dispute involves more than what your small claims court handles or the user agreement allows, you must go through an alternative dispute resolution process called arbitration.
Basically, arbitration involves the parties to a dispute hiring someone (often a former judge) to resolve it for them. Your user agreement will set out the details of how your arbitration will be conducted.
In an arbitration, the parties each tell the arbitrator their side of the story. They submit papers and evidence. The arbitrator hears their arguments and then makes a binding decision. Usually, you cannot appeal.
Some lawyers believe that arbitration is cheaper, simpler and faster than court proceedings. Other lawyers believe it can be as expensive, long and complicated as a trial. It depends on the case. But because the rules and the facts can be complicated, most arbitrations are handled by experienced lawyers.
If you have a conflict with a money transfer app, consider seeing a lawyer
Money transfer apps can be great, but sometimes users run into issues. You can get into a dispute with an app. If you do, try to resolve the issue through the informal processes permitted by your user agreement.
If you are not happy with what they are willing to do for you, you may need to take legal action. Small Claims Court may be an option in some situations, but in many cases your user agreement will require arbitration.
If you are thinking about arbitrating a dispute, you should seriously consider seeking legal advice from an experienced lawyer who can help you better understand what your legal rights are.